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Federal Coordination and Compliance Section

20 USC 1087-2

TITLE 20--EDUCATION

CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE

SUBCHAPTER IV--STUDENT ASSISTANCE

Part B--Federal Family Education Loan Program


Jump to the relevant civil rights provision

Sec. 1087-2. Student Loan Marketing Association

(a) Purpose

The Congress hereby declares that it is the purpose of this section
(1) to establish a private corporation which will be financed by private
capital and which will serve as a secondary market and warehousing
facility for student loans, including loans which are insured by the
Secretary under this part or by a guaranty agency, and which will
provide liquidity for student loan investments; (2) in order to
facilitate secured transactions involving student loans, to provide for
perfection of security interests in student loans either through the
taking of possession or by notice filing; and (3) to assure nationwide
the establishment of adequate loan insurance programs for students, to
provide for an additional program of loan insurance to be covered by
agreements with the Secretary.

(b) Establishment

(1) In general

There is hereby created a body corporate to be known as the
Student Loan Marketing Association (hereinafter referred to as the
``Association''). The Association shall have succession until
dissolved. It shall maintain its principal office in the District of
Columbia and shall be deemed, for purposes of venue and jurisdiction
in civil actions, to be a resident and citizen thereof. Offices may
be established by the Association in such other place or places as
it may deem necessary or appropriate for the conduct of its
business.

(2) Exemption from State and local taxes

The Association, including its franchise, capital, reserves,
surplus, mortgages, or other security holdings, and income shall be
exempt from all taxation now or hereafter imposed by any State,
territory, possession, Commonwealth, or dependency of the United
States, or by the District of Columbia, or by any county,
municipality, or local taxing authority, except that any real
property of the Association shall be subject to State, territorial,
county, municipal, or local taxation to the same extent according to
its value as other real property is taxed.

(3) Appropriations authorized for establishment

There is hereby authorized to be appropriated to the Secretary
$5,000,000 for making advances for the purpose of helping to
establish the Association. Such advances shall be repaid within such
period as the Secretary may deem to be appropriate in light of the
maturity and solvency of the Association. Such advances shall bear
interest at a rate not less than (A) a rate determined by the
Secretary of the Treasury taking into consideration the current
average market yield on outstanding marketable obligations of the
United States with remaining period to maturity comparable to the
maturity of such advances, adjusted to the nearest one-eighth of 1
percent, plus (B) an allowance adequate in the judgment of the
Secretary to cover administrative costs and probable losses.
Repayments of such advances shall be deposited into miscellaneous
receipts of the Treasury.

(c) Board of Directors

(1) Composition of Board; Chairman

(A) The Association shall have a Board of Directors which shall
consist of 21 persons, 7 of whom shall be appointed by the President
and shall be representative of the general public. The remaining 14
directors shall be elected by the common stockholders of the
Association entitled to vote pursuant to subsection (f) of this
section. Commencing with the annual shareholders meeting to be held
in 1993--
(i) 7 of the elected directors shall be affiliated with an
eligible institution; and
(ii) 7 of the elected directors shall be affiliated with an
eligible lender.

(B) The President shall designate 1 of the directors to serve as
Chairman.

(2) Terms of appointed and elected members

The directors appointed by the President shall serve at the
pleasure of the President and until their successors have been
appointed and have qualified. The remaining directors shall each be
elected for a term ending on the date of the next annual meeting of
the common stockholders of the Association, and shall serve until
their successors have been elected and have qualified. Any
appointive seat on the Board which becomes vacant shall be filled by
appointment of the President. Any elective seat on the Board which
becomes vacant after the annual election of the directors shall be
filled by the Board, but only for the unexpired portion of the term.

(3) Affiliated members

For the purpose of this subsection, the references to a director
``affiliated with the eligible institution'' or a director
``affiliated with an eligible lender'' means an individual who is,
or within 5 years of election to the Board has been, an employee,
officer, director, or similar official of--
(A) an eligible institution or an eligible lender;
(B) an association whose members consist primarily of
eligible institutions or eligible lenders; or
(C) a State agency, authority, instrumentality, commission,
or similar institution, the primary purpose of which relates to
educational matters or banking matters.

(4) Meetings and functions of the Board

The Board of Directors shall meet at the call of its Chairman,
but at least semiannually. The Board shall determine the general
policies which shall govern the operations of the Association. The
Chairman of the Board shall, with the approval of the Board, select,
appoint, and compensate qualified persons to fill the offices as may
be provided for in the bylaws, with such functions, powers, and
duties as may be prescribed by the bylaws or by the Board of
Directors, and such persons shall be the officers of the Association
and shall discharge all such functions, powers, and duties.

(d) Authority of Association

(1) In general

The Association is authorized, subject to the provisions of this
section--
(A) pursuant to commitments or otherwise to make advances on
the security of, purchase, or repurchase, service, sell or
resell, offer participations, or pooled interests or otherwise
deal in, at prices and on terms and conditions determined by the
Association, student loans which are insured by the Secretary
under this part or by a guaranty agency;
(B) to buy, sell, hold, underwrite, and otherwise deal in
obligations, if such obligations are issued, for the purpose of
making or purchasing insured loans, by a guaranty agency or by
an eligible lender in a State described in section 1085(d)(1)(D)
or (F) of this title;
(C) to buy, sell, hold, insure, underwrite, and otherwise
deal in obligations issued for the purpose of financing or
refinancing the construction, reconstruction, renovation,
improvement, or purchase at institutions of higher education of
any of the following facilities (including the underlying
property) and materials (including related equipment,
instrumentation, and furnishings) at an eligible institution of
higher education:
(i) educational and training facilities;
(ii) housing for students and faculties, dining halls,
student unions, and facilities specifically designed to
promote fitness and health for students, faculty, and staff
or for physical education courses; and
(iii) library facilities, including the acquisition of
library materials at institutions of higher education;

except that not more than 30 percent of the value of
transactions entered into under this subparagraph shall involve
transactions of the types described in clause (ii);
(D) to undertake a program of loan insurance pursuant to
agreements with the Secretary under section 1078 of this title,
and except with respect to loans under subsection (o) of this
section or under section 1078-3 of this title, the Secretary may
enter into an agreement with the Association for such purpose
only if the Secretary determines that (i) eligible borrowers are
seeking and unable to obtain loans under this part, and (ii) no
guaranty agency is capable of or willing to provide a program of
loan insurance for such borrowers; and
(E) to undertake any other activity which the Board of
Directors of the Association determines to be in furtherance of
the programs of insured student loans authorized under this part
or will otherwise support the credit needs of students, except
that--
(i) in carrying out all such activities the purpose
shall always be to provide secondary market and other
support for lending programs offered by other organizations
and not to replace or compete with such other programs;
(ii) nothing in this subparagraph (E) shall be deemed to
authorize the Association to acquire, own, operate, or
control any bank, savings and loan association, savings bank
or credit union; and
(iii) not later than 30 days prior to the initial
implementation of a program undertaken pursuant to this
subparagraph (E), the Association shall advise the Chairman
and the Ranking Member on the Committee on Labor and Human
Resources of the Senate and the Chairman and the Ranking
Member of the Committee on Education and Labor of the House
of Representatives in writing of its plans to offer such
program and shall provide information relating to the
general terms and conditions of such program.

The Association is further authorized to undertake any activity with
regard to student loans which are not insured or guaranteed as
provided for in this subsection as it may undertake with regard to
insured or guaranteed student loans. Any warehousing advance made on
the security of such loans shall be subject to the provisions of
paragraph (3) of this subsection to the same extent as a warehousing
advance made on the security of insured loans.

(2) Warehousing advances

Any warehousing advance made under paragraph (1)(A) of this
subsection shall be made on the security of (A) insured loans, (B)
marketable obligations and securities issued, guaranteed, or insured
by, the United States, or for which the full faith and credit of the
United States is pledged for the repayment of principal and interest
thereof, or (C) marketable obligations issued, guaranteed, or
insured by any agency, instrumentality, or corporation of the United
States for which the credit of such agency, instrumentality, or
corporation is pledged for the repayment of principal and interest
thereof, in an amount equal to the amount of such advance. The
proceeds of any such advance secured by insured loans shall either
be invested in additional insured loans or the lender shall provide
assurances to the Association that during the period of the
borrowing it will maintain a level of insured loans in its portfolio
not less than the aggregate outstanding balance of such loans held
at the time of the borrowing. The proceeds from any such advance
secured by collateral described in clauses (B) and (C) shall be
invested in additional insured student loans.

(3) Perfection of security interests in student loans

Notwithstanding the provisions of any State law to the contrary,
including the Uniform Commercial Code as in effect in any State, a
security interest in insured student loans created on behalf of the
Association or any eligible lender as defined in section 1085(a) of
this title may be perfected either through the taking of possession
of such loans or by the filing of notice of such security interest
in such loans in the manner provided by such State law for
perfection of security interests in accounts.

(4) Form of securities

Securities issued pursuant to the offering of participations or
pooled interests under paragraph (1) of this subsection may be in
the form of debt obligations, or trust certificates of beneficial
ownership, or both. Student loans set aside pursuant to the offering
of participations or pooled interests shall at all times be adequate
to ensure the timely principal and interest payments on such
securities.

(5) Restrictions on facilities and housing activities

Not less than 75 percent of the aggregate dollar amount of
obligations bought, sold, held, insured, underwritten, and otherwise
supported in accordance with the authority contained in paragraph
(1)(C) shall be obligations which are listed by a nationally
recognized statistical rating organization at a rating below the
second highest rating of such organization.

(e) Advances to lenders that do not discriminate

The Association, pursuant to such criteria as the Board of Directors
may prescribe, shall make advances on security or purchase student loans
pursuant to subsection (d) of this section only after the Association is
assured that the lender (1) does not discriminate by pattern or practice
against any particular class or category of students by requiring that,
as a condition to the receipt of a loan, the student or his family
maintain a business relationship with the lender, except that this
clause shall not apply in the case of a loan made by a credit union,
savings and loan association, mutual savings bank, institution of higher
education, or any other lender with less than $75,000,000 in deposits,
and (2) does not discriminate on the basis of race, sex, color, creed,
or national origin.

(f) Stock of the Association

(1) Voting common stock

The Association shall have voting common stock having such par
value as may be fixed by its Board of Directors from time to time.
Each share of voting common stock shall be entitled to one vote with
rights of cumulative voting at all elections of directors.

(2) Number of shares; transferability

The maximum number of shares of voting common stock that the
Association may issue and have outstanding at any one time shall be
fixed by the Board of Directors from time to time. Any voting common
stock issued shall be fully transferable, except that, as to the
Association, it shall be transferred only on the books of the
Association.

(3) Dividends

To the extent that net income is earned and realized, subject to
subsection (g)(2) of this section, dividends may be declared on
voting common stock by the Board of Directors. Such dividends as may
be declared by the Board of Directors shall be paid to the holders
of outstanding shares of voting common stock, except that no such
dividends shall be payable with respect to any share which has been
called for redemption past the effective date of such call.

(4) Single class of voting common stock

As of the effective date of the Higher Education Amendments of
1992, all of the previously authorized shares of voting common stock
and nonvoting common stock of the Association shall be converted to
shares of a single class of voting common stock on a share-for-share
basis, without any further action on the part of the Association or
any holder. Each outstanding certificate for voting or nonvoting
common stock shall evidence ownership of the same number of shares
of voting stock into which it is converted. All preexisting rights
and obligations with respect to any class of common stock of the
Association shall be deemed to be rights and obligations with
respect to such converted shares.

(g) Preferred stock

(1) Authority of Board

The Association is authorized to issue nonvoting preferred stock
having such par value as may be fixed by its Board of Directors from
time to time. Any preferred share issued shall be freely
transferable, except that, as to the Association, it shall be
transferred only on the books of the Association.

(2) Rights of preferred stock

The holders of the preferred shares shall be entitled to such
rate of cumulative dividends and such shares shall be subject to
such redemption or other conversion provisions as may be provided
for at the time of issuance. No dividends shall be payable on any
share of common stock at any time when any dividend is due on any
share of preferred stock and has not been paid.

(3) Preference on termination of business

In the event of any liquidation, dissolution, or winding up of
the Association's business, the holders of the preferred shares
shall be paid in full at par value thereof, plus all accrued
dividends, before the holders of the common shares receive any
payment.

(h) Debt obligations

(1) Approval by Secretaries of Education and the Treasury

The Association is authorized with the approval of the Secretary
of Education and the Secretary of the Treasury to issue and have
outstanding obligations having such maturities and bearing such rate
or rates of interest as may be determined by the Association. The
authority of the Secretary of Education to approve the issuance of
such obligations is limited to obligations issued by the Association
and guaranteed by the Secretary pursuant to paragraph (2) of this
subsection. Such obligations may be redeemable at the option of the
Association before maturity in such manner as may be stipulated
therein. The Secretary of the Treasury may not direct as a condition
of his approval that any such issuance of obligations by the
Association be made or sold to the Federal Financing Bank. To the
extent that the average outstanding amount of the obligations owned
by the Association pursuant to the authority contained in subsection
(d)(1)(B) and (C) of this section and as to which the income is
exempt from taxation under title 26 does not exceed the average
stockholders' equity of the Association, the interest on obligations
issued under this paragraph shall not be deemed to be interest on
indebtedness incurred or continued to purchase or carry obligations
for the purpose of section 265 of title 26.

(2) Guarantee of debt

The Secretary is authorized, prior to October 1, 1984, to
guarantee payment when due of principal and interest on obligations
issued by the Association in an aggregate amount determined by the
Secretary in consultation with the Secretary of the Treasury.
Nothing in this section shall be construed so as to authorize the
Secretary of Education or the Secretary of the Treasury to limit,
control, or constrain programs of the Association or support of the
Guaranteed Student Loan Program by the Association.

(3) Borrowing authority to meet guarantee obligations

To enable the Secretary to discharge his responsibilities under
guarantees issued by him, he is authorized to issue to the Secretary
of the Treasury notes or other obligations in such forms and
denominations, bearing such maturities, and subject to such terms
and conditions, as may be prescribed by the Secretary with the
approval of the Secretary of the Treasury. Such notes or other
obligations shall bear interest at a rate determined by the
Secretary of the Treasury, taking into consideration the current
average market yield on outstanding marketable obligations of the
United States of comparable maturities during the months preceding
the issuance of the notes or other obligations. The Secretary of the
Treasury is authorized and directed to purchase any notes and other
obligations issued hereunder and for that purpose he is authorized
to use as a public debt transaction the proceeds from the sale of
any securities issued under chapter 31 of title 31, and the purposes
for which securities may be issued under that chapter are extended
to include any purchase of such notes and obligations. The Secretary
of the Treasury may at any time sell any of the notes or other
obligations acquired by him under this subsection. All redemptions,
purchases, and sales by the Secretary of the Treasury of such notes
or other obligations shall be treated as public debt transactions of
the United States. There is authorized to be appropriated to the
Secretary such sums as may be necessary to pay the principal and
interest on the notes or obligations issued by him to the Secretary
of the Treasury.

(4) Action on request for guarantees

Upon receipt of a request from the Association under this
subsection requiring approvals by the Secretary of Education or the
Secretary of the Treasury, the Secretary of Education or the
Secretary of the Treasury shall act promptly either to grant
approval or to advise the Association of the reasons for withholding
approval. In no case shall such an approval be withheld for a period
longer than 60 days unless, prior to the end of such period, the
Secretary of Education and the Secretary of the Treasury submit to
the Congress a detailed explanation of reasons for doing so.

(5) Authority of Treasury to purchase debt

The Secretary of the Treasury is authorized to purchase any
obligations issued by the Association pursuant to this subsection as
now or hereafter in force, and for such purpose the Secretary of the
Treasury is authorized to use as a public debt transaction the
proceeds of the sale of any securities hereafter issued under
chapter 31 of title 31, as now or hereafter in force, and the
purposes for which securities may be issued under chapter 31 of
title 31, as now or hereafter in force are extended to include such
purchases. The Secretary of the Treasury shall not at any time
purchase any obligations under this subsection if such purchase
would increase the aggregate principal amount of his then
outstanding holdings of such obligations under this subsection to an
amount greater than $1,000,000,000. Each purchase of obligations by
the Secretary of the Treasury under this subsection shall be upon
such terms and conditions as to yield a return at a rate determined
by the Secretary of the Treasury, taking into consideration the
current average rate on outstanding marketable obligations of the
United States of comparable maturities as of the last day of the
month preceding the making of such purchase. The Secretary of the
Treasury may, at any time, sell, upon such terms and conditions and
at such price or prices as he shall determine, any of the
obligations acquired by him under this subsection. All redemptions,
purchases, and sales by the Secretary of the Treasury of such
obligations under this subsection shall be treated as public debt
transactions of the United States.

(6) Sale of debt to Federal Financing Bank

Notwithstanding any other provision of law the Association is
authorized to sell or issue obligations on the security of student
loans, the payment of interest or principal of which has at any time
been guaranteed under section 1078 or 1079 of this title, to the
Federal Financing Bank.

(7) Offset fee

(A) The Association shall pay to the Secretary, on a monthly
basis, an offset fee calculated on an annual basis in an amount
equal to 0.30 percent of the principal amount of each loan made,
insured or guaranteed under this part that the Association holds
(except for loans made pursuant to section 1078-3 of this title,
subsection (o) of this section, or subsection (q) of this section)
and that was acquired on or after August 10, 1993.
(B) If the Secretary determines that the Association has
substantially failed to comply with subsection (q) of this section,
subparagraph (A) shall be applied by substituting ``1.0 percent''
for ``0.3 percent''.
(C) The Secretary shall deposit all fees collected pursuant to
this paragraph into the insurance fund established in section 1081
of this title.

(i) General corporate powers

The Association shall have power--
(1) to sue and be sued, complain and defend, in its corporate
name and through its own counsel;
(2) to adopt, alter, and use the corporate seal, which shall be
judicially noticed;
(3) to adopt, amend, and repeal by its Board of Directors,
bylaws, rules, and regulations as may be necessary for the conduct
of its business;
(4) to conduct its business, carry on its operations, and have
officers and exercise the power granted by this section in any State
without regard to any qualification or similar statute in any State;
(5) to lease, purchase, or otherwise acquire, own, hold,
improve, use, or otherwise deal in and with any property, real,
personal, or mixed, or any interest therein, wherever situated;
(6) to accept gifts or donations of services, or of property,
real, personal, or mixed, tangible or intangible, in aid of any of
the purposes of the Association;
(7) to sell, convey, mortgage, pledge, lease, exchange, and
otherwise dispose of its property and assets;
(8) to appoint such officers, attorneys, employees, and agents
as may be required, to determine their qualifications, to define
their duties, to fix their salaries, require bonds for them, and fix
the penalty thereof; and
(9) to enter into contracts, to execute instruments, to incur
liabilities, and to do all things as are necessary or incidental to
the proper management of its affairs and the proper conduct of its
business.

(j) Accounting, auditing, and reporting

The accounts of the Association shall be audited annually. Such
audits shall be conducted in accordance with generally accepted auditing
standards by independent certified public accountants or by independent
licensed public accountants, licensed on or before December 31, 1970,
who are certified or licensed by a regulatory authority of a State or
other political subdivision of the United States, except that
independent public accountants licensed to practice by such regulatory
authority after December 31, 1970, and persons who, although not so
certified or licensed, meet, in the opinion of the Secretary, standards
of education and experience representative of the highest standards
prescribed by the licensing authorities of the several States which
provide for the continuing licensing of public accountants and which are
prescribed by the Secretary in appropriate regulations may perform such
audits until December 31, 1975. A report of each such audit shall be
furnished to the Secretary of the Treasury. The audit shall be conducted
at the place or places where the accounts are normally kept. The
representatives of the Secretary shall have access to all books,
accounts, financial records, reports, files, and all other papers,
things, or property belonging to or in use by the Association and
necessary to facilitate the audit, and they shall be afforded full
facilities for verifying transactions with the balances or securities
held by depositaries, fiscal agents, and custodians.

(k) Report on audits by Treasury

A report of each such audit for a fiscal year shall be made by the
Secretary of the Treasury to the President and to the Congress not later
than 6 months following the close of such fiscal year. The report shall
set forth the scope of the audit and shall include a statement (showing
intercorporate relations) of assets and liabilities, capital and surplus
or deficit; a statement of surplus or deficit analysis; a statement of
income and expense; a statement of sources and application of funds; and
such comments and information as may be deemed necessary to keep the
President and the Congress informed of the operations and financial
condition of the Association, together with such recommendations with
respect thereto as the Secretary may deem advisable, including a report
of any impairment of capital or lack of sufficient capital noted in the
audit. A copy of each report shall be furnished to the Secretary, and to
the Association.

(l) Lawful investment instruments; effect of and exemptions from other
laws

All obligations issued by the Association including those made under
subsection (d)(4) of this section shall be lawful investments, and may
be accepted as security for all fiduciary, trust, and public funds, the
investment or deposit of which shall be under authority or control of
the United States or of any officer or officers thereof. All stock and
obligations issued by the Association pursuant to this section shall be
deemed to be exempt securities within the meaning of laws administered
by the Securities and Exchange Commission, to the same extent as
securities which are direct obligations of, or obligations guaranteed as
to principal or interest by, the United States. The Association shall,
for the purposes of section 355(2) of title 12, be deemed to be an
agency of the United States. The obligations of the Association shall be
deemed to be obligations of the United States for the purpose of section
3124 of title 31. For the purpose of the distribution of its property
pursuant to section 726 of title 11, the Association shall be deemed a
person within the meaning of such title. The priority established in
favor of the United States by section 3713 of title 31 shall not
establish a priority over the indebtedness of the Association issued or
incurred on or before September 30, 1992. The Federal Reserve Banks are
authorized to act as depositaries, custodians, or fiscal agents, or a
combination thereof, for the Association in the general performance of
its powers under this section.

(m) Preparation of obligations

In order to furnish obligations for delivery by the Association, the
Secretary of the Treasury is authorized to prepare such obligations in
such form as the Board of Directors may approve, such obligations when
prepared to be held in the Treasury subject to delivery upon order by
the Association. The engraved plates, dies, bed pieces, and so forth,
executed in connection therewith shall remain in the custody of the
Secretary of the Treasury. The Association shall reimburse the Secretary
of the Treasury for any expenditures made in the preparation, custody,
and delivery of such obligations. The Secretary of the Treasury is
authorized to promulgate regulations on behalf of the Association so
that the Association may utilize the book-entry system of the Federal
Reserve Banks.

(n) Report on operations and activities

The Association shall, as soon as practicable after the end of each
fiscal year, transmit to the President and the Congress a report of the
Association's operations and activities, including a report with respect
to all facilities transactions, during each year.

(o) Loan consolidations

(1) In general

The Association or its designated agent may, upon request of a
borrower, consolidate loans received under this subchapter and part
C of subchapter I of chapter 34 of title 42 in accordance with
section 1078-3 of this title.

(2) Use of existing agencies as agent

The Association in making loans pursuant to this subsection in
any State served by a guaranty agency or an eligible lender in a
State described in section 1085(d)(1)(D) or (F) of this title may
designate as its agent such agency or lender to perform such
functions as the Association determines appropriate. Any agreements
made pursuant to this subparagraph shall be on such terms and
conditions as agreed upon by the Association and such agency or
lender.

(p) Advances for direct loans by guaranty agencies

(1) In general

The Association shall make advances in each fiscal year from
amounts available to it to each guaranty agency and eligible lender
described in subsection 1078(h)(1) of this title which has an
agreement with the Association which sets forth that advances are
necessary to enable such agency or lender to make student loans in
accordance with section 1078(h) of this title and that such advances
will be repaid to the Association in accordance with such terms and
conditions as may be set forth in the agreement and agreed to by the
Association and such agency or lender. Advances made under this
subsection shall not be subject to subsection (d)(2) of this
section.

(2) Limitation

No advance may be made under this subsection unless the guaranty
agency or lender makes an application to the Association, which
shall be accompanied by such information as the Association
determines to be reasonably necessary.

(q) Lender-of-last-resort

(1) Action at request of Secretary

(A) Whenever the Secretary determines that eligible borrowers
are seeking and are unable to obtain loans under this part, the
Association or its designated agent shall, not later than 90 days
after August 10, 1993, begin making loans to such eligible borrowers
in accordance with this subsection at the request of the Secretary.
The Secretary may request that the Association make loans to
borrowers within a geographic area or for the benefit of students
attending institutions of higher education that certify, in
accordance with standards established by the Secretary, that their
students are seeking and unable to obtain loans.
(B) Loans made pursuant to this subsection shall be insurable by
the Secretary under section 1079 of this title with a certificate of
comprehensive insurance coverage provided for under section
1079(b)(1) of this title or by a guaranty agency under paragraph
(2)(A) of this subsection.

(2) Issuance and coverage of loans

(A) Whenever the Secretary, after consultation with, and with
the agreement of, representatives of the guaranty agency in a State,
or an eligible lender in a State described in section 1085(d)(1)(D)
of this title, determines that a substantial portion of eligible
borrowers in such State or within an area of such State are seeking
and are unable to obtain loans under this part, the Association or
its designated agent shall begin making such loans to borrowers in
such State or within an area of such State in accordance with this
subsection at the request of the Secretary.
(B) Loans made pursuant to this subsection shall be insurable by
the agency identified in subparagraph (A) having an agreement
pursuant to section 1078(b) of this title. For loans insured by such
agency, the agency shall provide the Association with a certificate
of comprehensive insurance coverage, if the Association and the
agency have mutually agreed upon a means to determine that the
agency has not already guaranteed a loan under this part to a
student which would cause a subsequent loan made by the Association
to be in violation of any provision under this part.

(3) Termination of lending

The Association or its designated agent shall cease making loans
under this subsection at such time as the Secretary determines that
the conditions which caused the implementation of this subsection
have ceased to exist.

(r) Safety and soundness of Association

(1) Reports by the Association

The Association shall promptly furnish to the Secretary of
Education and Secretary of the Treasury copies of all--
(A) periodic financial reports publicly distributed by the
Association;
(B) reports concerning the Association that are received by
the Association and prepared by nationally recognized
statistical rating organizations; and
(C)(i) financial statements of the Association within 45
days of the end of each fiscal quarter; and
(ii) reports setting forth the calculation of the capital
ratio of the Association within 45 days of the end of each
fiscal quarter.

(2) Audit by Secretary of the Treasury

(A) The Secretary of the Treasury may--
(i) appoint auditors or examiners to conduct audits of the
Association from time to time to determine the condition of the
Association for the purpose of assessing the Association's
financial safety and soundness and to determine whether the
requirements of this section and section 1087-3 of this title
are being met; and
(ii) obtain the services of such experts as the Secretary of
the Treasury determines necessary and appropriate, as authorized
by section 3109 of title 5, to assist in determining the
condition of the Association for the purpose of assessing the
Association's financial safety and soundness, and to determine
whether the requirements of this section and section 1087-3 of
this title are being met.

(B) Each auditor appointed under this paragraph shall conduct an
audit of the Association to the extent requested by the Secretary of
the Treasury and shall prepare and submit a report to the Secretary
of the Treasury concerning the results of such audit. A copy of such
report shall be furnished to the Association and the Secretary of
Education on the date on which it is delivered to the Secretary of
the Treasury.
(C) The Association shall provide full and prompt access to the
Secretary of the Treasury to its books and records and other
information requested by the Secretary of the Treasury.
(D) Annual assessment.--
(i) In general.--For each fiscal year beginning on or after
October 1, 1996, the Secretary of the Treasury may establish and
collect from the Association an assessment (or assessments) in
amounts sufficient to provide for reasonable costs and expenses
of carrying out the duties of the Secretary of the Treasury
under this section and section 1087-3 of this title during such
fiscal year. In no event may the total amount so assessed
exceed, for any fiscal year, $800,000, adjusted for each fiscal
year ending after September 30, 1997, by the ratio of the
Consumer Price Index for All Urban Consumers (issued by the
Bureau of Labor Statistics) for the final month of the fiscal
year preceding the fiscal year for which the assessment is made
to the Consumer Price Index for All Urban Consumers for
September 1997.
(ii) Deposit.--Amounts collected from assessments under this
subparagraph shall be deposited in an account within the
Treasury of the United States as designated by the Secretary of
the Treasury for that purpose. The Secretary of the Treasury is
authorized and directed to pay out of any funds available in
such account the reasonable costs and expenses of carrying out
the duties of the Secretary of the Treasury under this section
and section 1087-3 of this title. None of the funds deposited
into such account shall be available for any purpose other than
making payments for such costs and expenses.

(E) Obligation to obtain, maintain, and report information.--
(i) In general.--The Association shall obtain such
information and make and keep such records as the Secretary of
the Treasury may from time to time prescribe concerning--
(I) the financial risk to the Association resulting from
the activities of any associated person, to the extent such
activities are reasonably likely to have a material impact
on the financial condition of the Association, including the
Association's capital ratio, the Association's liquidity, or
the Association's ability to conduct and finance the
Association's operations; and
(II) the Association's policies, procedures, and systems
for monitoring and controlling any such financial risk.

(ii) Summary reports.--The Secretary of the Treasury may
require summary reports of such information to be filed no more
frequently than quarterly. If, as a result of adverse market
conditions or based on reports provided pursuant to this
subparagraph or other available information, the Secretary of
the Treasury has concerns regarding the financial or operational
condition of the Association, the Secretary of the Treasury may,
notwithstanding the preceding sentence and clause (i), require
the Association to make reports concerning the activities of any
associated person, whose business activities are reasonably
likely to have a material impact on the financial or operational
condition of the Association.
(iii) Definition.--For purposes of this subparagraph, the
term ``associated person'' means any person, other than a
natural person, directly or indirectly controlling, controlled
by, or under common control with the Association.

(3) Monitoring of safety and soundness

The Secretary of the Treasury shall conduct such studies as may
be necessary to monitor the financial safety and soundness of the
Association. In the event that the Secretary of the Treasury
determines that the financial safety and soundness of the
Association is at risk, the Secretary of the Treasury shall inform
the Chairman and ranking minority member of the Committee on Labor
and Human Resources of the Senate, the Chairman and ranking minority
member of the Committee on Education and Labor of the House of
Representatives, and the Secretary of Education of such
determination and identify any corrective actions that should be
taken to ensure the safety and soundness of the Association.

(4) Capital standard

If the capital ratio is less than 2 percent and is greater than
or equal to 1.75 percent at the end of the Association's most recent
calendar quarter the Association shall, within 60 days of such
occurrence, submit to the Secretary of the Treasury a capital
restoration plan, in reasonable detail, that the Association
believes is adequate to cause the capital ratio to equal or exceed 2
percent within 36 months.

(5) Capital restoration plan

(A) Submission, approval, and implementation

The Secretary of the Treasury and the Association shall
consult with respect to any capital restoration plan submitted
pursuant to paragraph (4) and the Secretary of the Treasury
shall approve such plan (or a modification thereof accepted by
the Association) or disapprove such plan within 30 days after
such plan is first submitted to the Secretary of the Treasury by
the Association, unless the Association and Secretary of the
Treasury mutually agree to a longer consideration period. If the
Secretary of the Treasury approves a capital restoration plan
(including a modification of a plan accepted by the
Association), the Association shall forthwith proceed with
diligence to implement such plan to the best of its ability.

(B) Disapproval

If the Secretary of the Treasury does not approve a capital
restoration plan as provided in subparagraph (A), then not later
than the earlier of the date the Secretary of the Treasury
disapproves of such plan by written notice to the Association or
the expiration of the 30-day consideration period referred to in
subparagraph (A) (as such period may have been extended by
mutual agreement), the Secretary of the Treasury shall submit
the Association's capital restoration plan, in the form most
recently proposed to the Secretary of the Treasury by the
Association, together with a report on the Secretary of the
Treasury's reasons for disapproval of such plan and an
alternative capital restoration plan, to the Chairman and
ranking minority member of the Senate Committee on Labor and
Human Resources and to the Chairman and ranking minority member
of the House Committee on Education and Labor. A copy of such
submission simultaneously shall be sent to the Association and
the Secretary of Education by the Secretary of the Treasury.

(C) Association implementation and response

Upon receipt of the submission by the Association, the
Association shall forthwith proceed with diligence to implement
the most recently proposed capital restoration plan of the
Association. The Association, within 30 days after receipt from
the Secretary of the Treasury of such submission, shall submit
to such Chairmen and ranking minority members a written response
to such submission, setting out fully the nature and extent of
the Association's agreement or the disagreement with the
Secretary of the Treasury with respect to the capital
restoration plan submitted to the Secretary of the Treasury and
any findings of the Secretary of the Treasury.

(6) Substantial capital ratio reduction

(A) Additional plan required

If the capital ratio is less than 1.75 percent and is
greater than or equal to 1 percent at the end of the
Association's most recent calendar quarter, the Association
shall submit to the Secretary of the Treasury within 60 days
after such occurrence a capital restoration plan (or an
appropriate modification of any plan previously submitted or
approved under paragraph (4)) to increase promptly its capital
ratio to equal or exceed 1.75 percent. The Secretary of the
Treasury and the Association shall consult with respect to any
plan or modified plan submitted pursuant to this paragraph. The
Secretary of the Treasury shall approve such plan or modified
plan (or a modification thereof accepted by the Association) or
disapprove such plan or modified plan within 30 days after such
plan or modified plan is first submitted to the Secretary of the
Treasury by the Association, unless the Association and
Secretary of the Treasury mutually agree to a longer
consideration period. If the Secretary of the Treasury approves
a plan or modified plan (including a modification of a plan
accepted by the Association), the Association shall forthwith
proceed with diligence to implement such plan or modified plan
to the best of the Association's ability.

(B) Disapproval

If the Secretary of the Treasury disapproves a capital
restoration plan or modified plan submitted pursuant to
subparagraph (A), then, not later than the earlier of the date
the Secretary of the Treasury disapproves of such plan or
modified plan (by written notice to the Association) or the
expiration of the 30-day consideration period described in
subparagraph (A) (as such period may have been extended by
mutual agreement), the Secretary of the Treasury shall prepare
and submit an alternative capital restoration plan, together
with a report on his reasons for disapproval of the
Association's plan or modified plan, to the Chairman and ranking
minority member of the Committee on Labor and Human Resources of
the Senate and to the Chairman and ranking minority member of
the Committee on Education and Labor of the House of
Representatives. A copy of such submission simultaneously shall
be sent to the Association and the Secretary of Education by the
Secretary of the Treasury. The Association, within 5 days after
receipt from the Secretary of the Treasury of such submission,
shall submit to the Chairmen and ranking minority members of
such Committees, and the Secretary of the Treasury, a written
response to such submission, setting out fully the nature and
extent of the Association's agreement or disagreement with the
Secretary of the Treasury with respect to the disapproved plan
and the alternative plan of the Secretary of the Treasury and
any findings of the Secretary of the Treasury.

(C) Review by Congress; Association implementation

Congress shall have 60 legislative days after the date on
which Congress receives the alternative plan under subparagraph
(B) from the Secretary of the Treasury to review such plan. If
Congress does not take statutory action with respect to any such
plan within such 60-day period, the Association shall
immediately proceed with diligence to implement the alternative
capital restoration plan of the Secretary of the Treasury under
subparagraph (B). If Congress is out of session when any such
alternative plan is received, such 60-day period shall begin on
the first day of the next session of Congress.

(7) Actions by Secretary of the Treasury

If the capital ratio of the Association does not equal or exceed
1.75 percent at the end of the Association's most recent calendar
quarter, the Secretary of the Treasury may, until the capital ratio
equals or exceeds 1.75 percent, take any one or more of the
following actions:

(A) Limit increase in liabilities

Limit any increase in, or order the reduction of, any
liabilities of the Association, except as necessary to fund
student loan purchases and warehousing advances.

(B) Restrict growth

Restrict or eliminate growth of the Association's assets,
other than student loans purchases and warehousing advances.

(C) Restrict distributions

Restrict the Association from making any capital
distribution.

(D) Require issuance of new capital

Require the Association to issue new capital in any form and
in any amount sufficient to restore at least a 1.75 percent
capital ratio.

(E) Limit executive compensation

Prohibit the Association from increasing for any executive
officer any compensation including bonuses at a rate exceeding
that officer's average rate of compensation during the previous
12 calendar months and prohibiting the Board from adopting any
new employment severance contracts.

(8) Critical capital standard

(A) If the capital ratio is less than 1 percent at the end of
the Association's most recent calendar quarter and the Association
has already submitted a capital restoration plan to the Secretary of
the Treasury pursuant to paragraph (4) or (6)(A), the Association
shall forthwith proceed with diligence to implement the most
recently proposed plan with such modifications as the Secretary of
the Treasury determines are necessary to cause the capital ratio to
equal or exceed 2 percent within 60 months.
(B) If the capital ratio is less than 1 percent at the end of
the Association's most recent calendar quarter and the Association
has not submitted a capital restoration plan to the Secretary of the
Treasury pursuant to paragraph (4) or (6)(A), the Association
shall--
(i) within 14 days of such occurrence submit a capital
restoration plan to the Secretary of the Treasury which the
Association believes is adequate to cause the capital ratio to
equal or exceed 2 percent within 60 months; and
(ii) forthwith proceed with diligence to implement such plan
with such modifications as the Secretary of the Treasury
determines are necessary to cause the capital ratio to equal or
exceed 2 percent within 60 months.

(C) Immediately upon a determination under subparagraph (A) or
(B) to implement a capital restoration plan, the Secretary of the
Treasury shall submit the capital restoration plan to be implemented
to the Chairman and ranking minority member of the Committee on
Labor and Human Resources of the Senate, the Chairman and ranking
minority member of the Committee on Education and Labor of the House
of Representatives, and the Secretary of Education.

(9) Additional reports to committees

The Association shall submit a copy of its capital restoration
plan, modifications proposed to the Secretary of the Treasury, and
proposed modifications received from the Secretary of the Treasury
to the Congressional Budget Office and General Accounting Office
upon their submission to the Secretary of the Treasury or receipt
from the Secretary of the Treasury. Notwithstanding any other
provision of law, the Congressional Budget Office and General
Accounting Office shall maintain the confidentiality of information
received pursuant to the previous sentence. In the event that the
Secretary of the Treasury does not approve a capital restoration
plan as provided in paragraph (5)(A) or (6)(A), or in the event that
a capital restoration plan is modified by the Secretary of the
Treasury pursuant to paragraph (6)(B) or (8), the Congressional
Budget Office and General Accounting Office shall each submit a
report within 30 days of the Secretary of the Treasury's submission
to the Chairmen and ranking minority members as required in
paragraphs (5)(B), (6)(B), and (8)(C) to such Chairmen and ranking
members--
(A) analyzing the financial condition of the Association;
(B) analyzing the capital restoration plan and reasons for
disapproval of the plan contained in the Secretary of the
Treasury's submission made pursuant to paragraph (5)(B), or the
capital restoration plan proposed by the Association and the
modifications made by the Secretary of the Treasury pursuant to
paragraph (6)(B) or (8);
(C) analyzing the impact of the capital restoration plan and
reasons for disapproval of the plan contained in the Secretary
of the Treasury's submission made pursuant to paragraph (5)(B),
or the impact of the capital restoration plan proposed by the
Association and the modifications made by the Secretary of the
Treasury pursuant to paragraph (6)(B) or (8), and analyzing the
impact of the recommendations made pursuant to subparagraph (D)
of this paragraph, on--
(i) the ability of the Association to fulfill its
purpose and authorized activities as provided in this
section, and
(ii) the operation of the student loan programs; and

(D) recommending steps which the Association should take to
increase its capital ratio without impairing its ability to
perform its purpose and authorized activities as provided in
this section.

(10) Review by Secretary of Education

The Secretary of Education shall review the Secretary of the
Treasury's submission required pursuant to paragraph (5)(B), (6)(B),
or (8) and shall submit a report within 30 days to the Chairman and
ranking minority member of the Senate Committee on Labor and Human
Resources and to the Chairman and ranking minority member of the
House Committee on Education and Labor--
(A) describing any administrative or legislative provisions
governing the student loan programs which contributed to the
decline in the Association's capital ratio; and
(B) recommending administrative and legislative changes in
the student loan programs to maintain the orderly operation of
such programs and to enable the Association to fulfill its
purpose and authorized activities consistent with the capital
ratio specified in paragraph (4).

(11) Safe harbor

The Association shall be deemed in compliance with the capital
ratios described in paragraphs (4) and (6)(A) if the Association is
rated in 1 of the 2 highest full rating categories (such categories
to be determined without regard to designations within categories)
by 2 nationally recognized statistical rating organizations,
determined without regard to the Association's status as a federally
chartered corporation.

(12) Treatment of confidential information

Notwithstanding any other provision of law, the Secretary of the
Treasury, the Secretary of Education, the Congressional Budget
Office, and the General Accounting Office shall not disclose any
information treated as confidential by the Association or the
Association's associated persons and obtained pursuant to this
subsection. Nothing in this paragraph shall authorize the Secretary
of the Treasury, the Secretary of Education, the Congressional
Budget Office, and the General Accounting Office to withhold
information from Congress, or prevent the Secretary of Education,
the Congressional Budget Office, and the General Accounting Office
from complying with a request for information from any other Federal
department or agency requesting the information for purposes within
the scope of its jurisdiction, or complying with an order of a court
of the United States in an action brought by the United States. For
purposes of section 552 of title 5, this paragraph shall be
considered a statute described in subsection (b)(3) of such section
552.

(13) Enforcement of safety and soundness requirements

The Secretary of Education or the Secretary of the Treasury, as
appropriate, may request that the Attorney General bring an action
in the United States District Court for the District of Columbia for
the enforcement of any provision of this section, or may, under the
direction or control of the Attorney General, bring such an action.
Such court shall have jurisdiction and power to order and require
compliance with this section.

(14) Actions by Secretary

(A) In general

For any fiscal quarter ending after January 1, 2000, the
Association shall have a capital ratio of at least 2.25 percent.
The Secretary of the Treasury may, whenever such capital ratio
is not met, take any one or more of the actions described in
paragraph (7), except that--
(i) the capital ratio to be restored pursuant to
paragraph (7)(D) shall be 2.25 percent; and
(ii) if the relevant capital ratio is in excess of or
equal to 2 percent for such quarter, the Secretary of the
Treasury shall defer taking any of the actions set forth in
paragraph (7) until the next succeeding quarter and may then
proceed with any such action only if the capital ratio of
the Association remains below 2.25 percent.

(B) Applicability

The provisions of paragraphs (4), (5), (6), (8), (9), (10),
and (11) shall be of no further application to the Association
for any period after January 1, 2000.

(15) Definitions

As used in this subsection:
(A) The term ``nationally recognized statistical rating
organization'' means any entity recognized as such by the
Securities and Exchange Commission.
(B) The term ``capital ratio'' means the ratio of total
stockholders' equity, as shown on the Association's most recent
quarterly consolidated balance sheet prepared in the ordinary
course of its business, to the sum of--
(i) the total assets of the Association, as shown on the
balance sheet prepared in the ordinary course of its
business; and
(ii) 50 percent of the credit equivalent amount of the
following off-balance sheet items of the Association as of
the date of such balance sheet--
(I) all financial standby letters of credit and
other irrevocable guarantees of the repayment of
financial obligations of others; and
(II) all interest rate contracts and exchange rate
contracts, including interest exchange agreements,
floor, cap, and collar agreements and similar
arrangements.

For purposes of this subparagraph, the calculation of the credit
equivalent amount of the items set forth in clause (ii) of this
subparagraph, the netting of such items and eliminations for the
purpose of avoidance of double-counting of such items shall be
made in accordance with the measures for computing credit
conversion factors for off-balance sheet items for capital
maintenance purposes established for commercial banks from time
to time by the Federal Reserve Board, but without regard to any
risk weighting provisions in such measures.
(C) The term ``legislative days'' means only days on which
either House of Congress is in session.

(16) Dividends

The Association may pay dividends in the form of cash or noncash
distributions so long as at the time of the declaration of such
dividends, after giving effect to the payment of such dividends as
of the date of such declaration by the Board of Directors of the
Association, the Association's capital would be in compliance with
the capital standards set forth in this section.

(17) Certification prior to payment of dividend

Prior to the payment of any dividend under paragraph (16), the
Association shall certify to the Secretary of the Treasury that the
payment of the dividend will be made in compliance with paragraph
(16) and shall provide copies of all calculations needed to make
such certification.

(s) Charter sunset

(1) Application of provisions

This subsection applies beginning 18 months and one day after
September 30, 1996, if no reorganization of the Association occurs
in accordance with the provisions of section 1087-3 of this title.

(2) Sunset plan

(A) Plan submission by the Association

Not later than July 1, 2007, the Association shall submit to
the Secretary of the Treasury and to the Chairman and Ranking
Member of the Committee on Labor and Human Resources of the
Senate and the Chairman and Ranking Member of the Committee on
Economic and Educational Opportunities of the House of
Representatives, a detailed plan for the orderly winding up, by
July 1, 2013, of business activities conducted pursuant to the
charter set forth in this section. Such plan shall--
(i) ensure that the Association will have adequate
assets to transfer to a trust, as provided in this
subsection, to ensure full payment of remaining obligations
of the Association in accordance with the terms of such
obligations;
(ii) provide that all assets not used to pay liabilities
shall be distributed to shareholders as provided in this
subsection; and
(iii) provide that the operations of the Association
shall remain separate and distinct from that of any entity
to which the assets of the Association are transferred.

(B) Amendment of the plan by the Association

The Association shall from time to time amend such plan to
reflect changed circumstances, and submit such amendments to the
Secretary of the Treasury and to the Chairman and Ranking
Minority Member of the Committee on Labor and Human Resources of
the Senate and Chairman and Ranking Minority Member of the
Committee on Economic and Educational Opportunities of the House
of Representatives. In no case may any amendment extend the date
for full implementation of the plan beyond the dissolution date
provided in paragraph (3).

(C) Plan monitoring

The Secretary of the Treasury shall monitor the
Association's compliance with the plan and shall continue to
review the plan (including any amendments thereto).

(D) Amendment of the plan by the Secretary of the Treasury

The Secretary of the Treasury may require the Association to
amend the plan (including any amendments to the plan), if the
Secretary of the Treasury deems such amendments necessary to
ensure full payment of all obligations of the Association.

(E) Implementation by the Association

The Association shall promptly implement the plan (including
any amendments to the plan, whether such amendments are made by
the Association or are required to be made by the Secretary of
the Treasury).

(3) Dissolution of the Association

The Association shall dissolve and the Association's separate
existence shall terminate on July 1, 2013, after discharge of all
outstanding debt obligations and liquidation pursuant to this
subsection. The Association may dissolve pursuant to this subsection
prior to such date by notifying the Secretary of Education and the
Secretary of the Treasury of the Association's intention to
dissolve, unless within 60 days of receipt of such notice the
Secretary of Education notifies the Association that the Association
continues to be needed to serve as a lender of last resort pursuant
to subsection (q) of this section or continues to be needed to
purchase loans under an agreement with the Secretary described in
paragraph (4)(A). On the dissolution date, the Association shall
take the following actions:

(A) Establishment of a trust

The Association shall, under the terms of an irrevocable
trust agreement in form and substance satisfactory to the
Secretary of the Treasury, the Association, and the appointed
trustee, irrevocably transfer all remaining obligations of the
Association to a trust and irrevocably deposit or cause to be
deposited into such trust, to be held as trust funds solely for
the benefit of holders of the remaining obligations, money or
direct noncallable obligations of the United States or any
agency thereof for which payment the full faith and credit of
the United States is pledged, maturing as to principal and
interest in such amounts and at such times as are determined by
the Secretary of the Treasury to be sufficient, without
consideration of any significant reinvestment of such interest,
to pay the principal of, and interest on, the remaining
obligations in accordance with their terms.

(B) Use of trust assets

All money, obligations, or financial assets deposited into
the trust pursuant to this subsection shall be applied by the
trustee to the payment of the remaining obligations assumed by
the trust. Upon the fulfillment of the trustee's duties under
the trust, any remaining assets of the trust shall be
transferred to the persons who, at the time of the dissolution,
were the shareholders of the Association, or to the legal
successors or assigns of such persons.

(C) Obligations not transferred to the trust

The Association shall make proper provision for all other
obligations of the Association, including the repurchase or
redemption, or the making of proper provision for the repurchase
or redemption, of any preferred stock of the Association
outstanding.

(D) Transfer of remaining assets

After compliance with subparagraphs (A) and (C), the
Association shall transfer to the shareholders of the
Association any remaining assets of the Association.

(4) Restrictions relating to winding up

(A) Restrictions on new business activity or acquisition of
assets by the Association

(i) In general

Beginning on July 1, 2009, the Association shall not
engage in any new business activities or acquire any
additional program assets (including acquiring assets
pursuant to contractual commitments) described in subsection
(d) of this section other than in connection with the
Association--
(I) serving as a lender of last resort pursuant to
subsection (q) of this section; and
(II) purchasing loans insured under this part, if
the Secretary, with the approval of the Secretary of the
Treasury, enters into an agreement with the Association
for the continuation or resumption of the Association's
secondary market purchase program because the Secretary
determines there is inadequate liquidity for loans made
under this part.
(ii) Agreement

The Secretary is authorized to enter into an agreement
described in subclause (II) of clause (i) with the
Association covering such secondary market activities. Any
agreement entered into under such subclause shall cover a
period of 12 months, but may be renewed if the Secretary
determines that liquidity remains inadequate. The fee
provided under subsection (h)(7) of this section shall not
apply to loans acquired under any such agreement with the
Secretary.

(B) Issuance of debt obligations during the wind up period;
attributes of debt obligations

The Association shall not issue debt obligations which
mature later than July 1, 2013, except in connection with
serving as a lender of last resort pursuant to subsection (q) of
this section or with purchasing loans under an agreement with
the Secretary as described in subparagraph (A). Nothing in this
subsection shall modify the attributes accorded the debt
obligations of the Association by this section, regardless of
whether such debt obligations are transferred to a trust in
accordance with paragraph (3).

(C) Use of Association name

The Association may not transfer or permit the use of the
name ``Student Loan Marketing Association'', ``Sallie Mae'', or
any variation thereof, to or by any entity other than a
subsidiary of the Association.

(Pub. L. 89-329, title IV, Sec. 439, as added Pub. L. 99-498, title IV,
Sec. 402(a), Oct. 17, 1986, 100 Stat. 1418; amended Pub. L. 100-50,
Sec. 10(dd), June 3, 1987, 101 Stat. 347; Pub. L. 100-369, Sec. 7(c),
July 18, 1988, 102 Stat. 837; Pub. L. 102-325, title IV, Sec. 431, July
23, 1992, 106 Stat. 554; Pub. L. 103-66, title IV, Secs. 4041(c), 4104,
Aug. 10, 1993, 107 Stat. 356, 367; Pub. L. 103-208, Sec. 2(c)(69), Dec.
20, 1993, 107 Stat. 2470; Pub. L. 103-382, title III, Sec. 358, Oct. 20,
1994, 108 Stat. 3968; Pub. L. 104-208, div. A, title I, Sec. 101(e)
[title VI, Sec. 602(b)(2)-(4), (c)], Sept. 30, 1996, 110 Stat. 3009-233,
3009-284 to 3009-286.)

Repeal of Section

Pub. L. 104-208, div. A, title I, Sec. 101(e) [title VI,
Sec. 602(d)], Sept. 30, 1996, 110 Stat. 3009-233, 3009-289, provided
that this section is repealed effective one year after date on which
all obligations of trust established under section 1087-3(d)(1) of
this title have been extinguished, if reorganization occurs in
accordance with section 1087-3 of this title; or date on which all
obligations of trust established under subsec. (s)(3)(A) of this
section have been extinguished, if reorganization does not occur in
accordance with section 1087-3 of this title.

References in Text

For the effective date of the Higher Education Amendments of 1992,
referred to in subsec. (f)(4), see section 2 of Pub. L. 102-325, set out
as an Effective Date of 1992 Amendment note under section 1001 of this
title.

Codification

In subsec. (h)(3) and (5), ``chapter 31 of title 31'' substituted
for ``the Second Liberty Bond Act, as amended'' and ``the Second Liberty
Bond Act'', and ``that chapter'' substituted for ``that Act, as
amended'', on authority of Pub. L. 97-258, Sec. 4(b), Sept. 13, 1982, 96
Stat. 1067, the first section of which enacted Title 31, Money and
Finance.


Prior Provisions

A prior section 1087-2, Pub. L. 89-329, title IV, Sec. 439, as added
Pub. L. 92-318, title I, Sec. 133(a), June 23, 1972, 86 Stat. 265;
amended Pub. L. 94-273, Sec. 3(9), Apr. 21, 1976, 90 Stat. 376; Pub. L.
94-482, title I, Sec. 127(a), Oct. 12, 1976, 90 Stat. 2136; Pub. L. 95-
43, Sec. 1(a)(38), June 15, 1977, 91 Stat. 217; Pub. L. 96-374, title
IV, Sec. 421(a)-(e)(1), title XIII, Sec. 1391(a)(1), (3), Oct. 3, 1980,
94 Stat. 1427-1430, 1503; Pub. L. 97-35, title V, Sec. 538, Aug. 13,
1981, 95 Stat. 457; Pub. L. 97-115, Sec. 18, Dec. 29, 1981, 95 Stat.
1610; Pub. L. 97-301, Sec. 14, Oct. 13, 1982, 96 Stat. 1405; Pub. L. 98-
79, Secs. 2, 8, Aug. 15, 1983, 97 Stat. 476, 483; Pub. L. 99-272, title
XVI, Secs. 16017(b)(4), 16018(a)(3), Apr. 7, 1986, 100 Stat. 347, 348,
established the Student Loan Marketing Association, prior to the general
revision of this part by Pub. L. 99-498.


Amendments

1996--Subsec. (r)(1)(C). Pub. L. 104-208, Sec. 101(e) [title VI,
Sec. 602(b)(3)(A)], added subpar. (C).
Subsec. (r)(2)(A)(i), (ii). Pub. L. 104-208, Sec. 101(e) [title VI,
Sec. 602(b)(3)(B)(i)], added cls. (i) and (ii) and struck out former
cls. (i) and (ii) which read as follows:
``(i) appoint auditors to conduct audits of the Association from
time to time to determine the condition of the Association for the
purpose of assessing its financial safety and soundness; and
``(ii) enter into contracts to obtain the services of such technical
experts as the Secretary of the Treasury determines necessary and
appropriate to provide technical assistance to any auditor appointed
under this paragraph.''
Subsec. (r)(2)(D). Pub. L. 104-208, Sec. 101(e) [title VI,
Sec. 602(b)(3)(B)(ii)], added subpar. (D).
Subsec. (r)(2)(E). Pub. L. 104-208, Sec. 101(e) [title VI,
Sec. 602(b)(4)(A)], added subpar. (E).
Subsec. (r)(12). Pub. L. 104-208, Sec. 101(e) [title VI,
Sec. 602(b)(2)(A)], inserted ``or the Association's associated persons''
after ``by the Association'' in first sentence.
Subsec. (r)(13). Pub. L. 104-208, Sec. 101(e) [title VI,
Sec. 602(b)(2)(B), (C)], added par. (13) and redesignated former par.
(13) as (15).
Subsec. (r)(14). Pub. L. 104-208, Sec. 101(e) [title VI,
Sec. 602(b)(3)(C)], added par. (14).
Subsec. (r)(15). Pub. L. 104-208, Sec. 101(e) [title VI,
Sec. 602(b)(2)(B)], redesignated par. (13) as (15).
Subsec. (r)(16), (17). Pub. L. 104-208, Sec. 101(e), [title VI,
Sec. 602(b)(4)(B)], added pars. (16) and (17).
Subsec. (s). Pub. L. 104-208, Sec. 101(e) [title VI, Sec. 602(c)],
added subsec. (s).
1994--Subsec. (d)(1)(C). Pub. L. 103-382, Sec. 358(1)(A), (D),
inserted ``(including related equipment, instrumentation, and
furnishings)'' after ``materials'' in introductory provisions and
substituted ``30 percent'' for ``15 percent'' and ``types'' for ``type''
in concluding provisions.
Subsec. (d)(1)(C)(ii). Pub. L. 103-382, Sec. 358(1)(B), substituted
``, dining halls, student unions, and facilities specifically designed
to promote fitness and health for students, faculty, and staff or for
physical education courses; and'' for the semicolon.
Subsec. (d)(1)(C)(iii), (iv). Pub. L. 103-382, Sec. 358(1)(C), (E),
struck out ``and'' after the semicolon in cl. (iii) and struck out cl.
(iv) which read as follows: ``related equipment, instrumentation, and
furnishings for facilities and materials described in clause (i) or
(iii);''.
Subsec. (n). Pub. L. 103-382, Sec. 358(2), substituted ``a report of
the Association's operations and activities, including a report with
respect to all facilities transactions, during each year'' for ``a
report of its operations and activities during each year''.
1993--Subsec. (h)(7). Pub. L. 103-66, Sec. 4104, added par. (7).
Subsec. (q). Pub. L. 103-66, Sec. 4041(c), amended subsec. (q)
generally, substituting present provisions for substantially similar
former provisions.
Subsec. (r)(12). Pub. L. 103-208 substituted ``section 552'' for
``section 522''.
1992--Subsec. (c). Pub. L. 102-325, Sec. 431(a), amended subsec. (c)
generally, substituting present provisions consisting of pars. (1) to
(4) for former provisions which provided for: in par. (1), Board
membership; in par. (2), interim Board; in par. (3), regular Board; in
par. (4), succession of regular Board; in par. (5), terms of appointed
and elected members; and in par. (6), meetings and functions of Board.
Subsec. (d)(1)(C). Pub. L. 102-325, Sec. 431(b), amended subpar. (C)
generally. Prior to amendment, subpar. (C) read as follows: ``to buy,
sell, hold, insure, underwrite, and otherwise deal in obligations issued
for the purpose of financing or refinancing the construction,
reconstruction, renovation, or purchase of educational and training
facilities and housing for students and faculties (including the
underlying real property), and related equipment, instrumentation, and
furnishings;''.
Subsec. (d)(5). Pub. L. 102-325, Sec. 431(c), substituted ``second
highest rating'' for ``third highest rating''.
Subsec. (f). Pub. L. 102-325, Sec. 431(d), amended subsec. (f)
generally, substituting present provisions consisting of pars. (1) to
(4) for former provisions which provided for: in par. (1), common stock
to insured lenders and eligible institutions only; in par. (2), voting
rights; in par. (3), number of shares and transferability; in par. (4),
dividends; and in par. (5), nonvoting common stock.
Subsec. (r). Pub. L. 102-325, Sec. 431(e), added subsec. (r).
1988--Subsec. (h)(1). Pub. L. 100-369 substituted ``Internal Revenue
Code of 1986'' for ``Internal Revenue Code of 1954'' in two places,
which for purposes of codification was translated as ``title 26'' thus
requiring no change in text.
1987--Subsec. (d)(1)(E)(iii). Pub. L. 100-50 inserted ``Labor and''
before ``Human Resources''.

Change of Name

Committee on Education and Labor of House of Representatives treated
as referring to Committee on Economic and Educational Opportunities of
House of Representatives by section 1(a) of Pub. L. 104-14, set out as a
note preceding section 21 of Title 2, The Congress. Committee on
Economic and Educational Opportunities of House of Representatives
changed to Committee on Education and the Workforce of House of
Representatives by House Resolution No. 5, One Hundred Fifth Congress,
Jan. 7, 1997.


Effective Date of 1996 Amendment

Section 101(e) [title VI, Sec. 602(d)(2)] of div. A of Pub. L. 104-
208 provided that: ``The repeals made by paragraph (1) [repealing this
section and section 1087-3 of this title] shall be effective one year
after--
``(A) the date on which all of the obligations of the trust
established under section 440(d)(1) of the Higher Education Act of
1965 [20 U.S.C. 1087-3(d)(1)] (as added by subsection (a)) have been
extinguished, if a reorganization occurs in accordance with section
440 of such Act; or
``(B) the date on which all of the obligations of the trust
established under subsection [sic] 439(s)(3)(A) of such Act [20
U.S.C. 1087-2(s)(3)(A)] (as added by subsection (c)) have been
extinguished, if a reorganization does not occur in accordance with
section 440 of such Act.''


Effective Date of 1993 Amendment

Amendment by Pub. L. 103-208 effective as if included in the Higher
Education Amendments of 1992, Pub. L. 102-325, except as otherwise
provided, see section 5(a) of Pub. L. 103-208, set out as a note under
section 1003 of this title.


Effective Date of 1992 Amendment

Amendment by Pub. L. 102-325 effective July 23, 1992, except that
changes in subsec. (d)(1), relating to facilities loans, applicable with
respect to applications received on or after July 1, 1992, see section
432 of Pub. L. 102-325, set out as a note under section 1078 of this
title.


Effective Date of 1987 Amendment

Amendment by Pub. L. 100-50 effective as if enacted as part of the
Higher Education Amendments of 1986, Pub. L. 99-498, see section 27 of
Pub. L. 100-50, set out as a note under section 1001 of this title.


Use of Association Names Upon Dissolution; Enforcement

Section 101(e) [title VI, Sec. 602(e), (f)] of div. A of Pub. L.
104-208 provided that:
``(e) Association Names.--Upon dissolution in accordance with
section 439(s) of the Higher Education Act of 1965 (20 U.S.C. 1087-
2[(s)]), the names `Student Loan Marketing Association', `Sallie Mae',
and any variations thereof may not be used by any entity engaged in any
business similar to the business conducted pursuant to section 439 of
such Act (as such section was in effect on the date of enactment of this
Act [Sept. 30, 1996]) without the approval of the Secretary of the
Treasury.
``(f) Right to Enforce.--The Secretary of Education or the Secretary
of the Treasury, as appropriate, may request that the Attorney General
bring an action in the United States District Court for the District of
Columbia for the enforcement of any provision of subsection (e), or may,
under the direction or control of the Attorney General, bring such an
action. Such court shall have jurisdiction and power to order and
require compliance with subsection (e).''

Section Referred to in Other Sections

This section is referred to in sections 1078, 1085, 1087-1, 1087-3,
1092a of this title.


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This page was last updated on November 13, 2000

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Contact
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