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42 U.S.C. § 292g — Risk-based premiums

Federal law — U.S. Code and appendices · legal_authorities

42 U.S.C. § 292g — Risk-based premiums

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Source file: Laws/federal/codes/united-states-code/title-42/section-292g-risk-based-premiums--f5e6ee9ecb.md
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Source location: Title 42, Chapter 6A, § 292g; chapter-6a-public-health-service.md

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**(a) Authority** With respect to a loan made under this subpart on or after January 1, 1993, the Secretary, in accordance with subsection (b), shall assess a risk-based premium on an eligible borrower and, if required under this section, an eligible institution that is based on the default rate of the eligible institution involved (as defined in section 292o of this title). **(b) Assessment of premium** Except as provided in subsection (d)(2), the risk-based premium to be assessed under subsection (a) shall be as follows: (1) **Low-risk rate** — With respect to an eligible borrower seeking to obtain a loan for attendance at an eligible institution that has a default rate of not to exceed five percent, such borrower shall be assessed a risk-based premium in an amount equal to 6 percent of the principal amount of the loan. (2) **Medium-risk rate** (A) *In general* — With respect to an eligible borrower seeking to obtain a loan for attendance at an eligible institution that has a default rate of in excess of five percent but not to exceed 10 percent— (i) such borrower shall be assessed a risk-based premium in an amount equal to 8 percent of the principal amount of the loan; and (ii) such institution shall be assessed a risk-based premium in an amount equal to 5 percent of the principal amount of the loan. (B) *Default management plan* — An institution of the type described in subparagraph (A) shall prepare and submit to the Secretary for approval, an annual default management plan, that shall specify the detailed short-term and long-term procedures that such institution will have in place to minimize defaults on loans to borrowers under this subpart. Under such plan the institution shall, among other measures, provide an exit interview to all borrowers that includes information concerning repayment schedules, loan deferments, forbearance, and the consequences of default. (3) **High-risk rate** (A) *In general* — With respect to an eligible borrower seeking to obtain a loan for attendance at an eligible institution that has a default rate of in excess of 10 percent but not to exceed 20 percent— (i) such borrower shall be assessed a risk-based premium in an amount equal to 8 percent of the principal amount of the loan; and (ii) such institution shall be assessed a risk-based premium in an amount equal to 10 percent of the principal amount of the loan. (B) *Default management plan* — An institution of the type described in subparagraph (A) shall prepare and submit to the Secretary for approval a plan that meets the requirements of paragraph (2)(B). (4) **Ineligibility** — An individual shall not be eligible to obtain a loan under this subpart for attendance at an institution that has a default rate in excess of 20 percent. **(c) Reduction of risk-based premium** Lenders shall reduce by 50 percent the risk-based premium to eligible borrowers if a credit worthy parent or other responsible party co-signs the loan note. **(d) Administrative waivers** (1) **Hearing** — The Secretary shall afford an institution not less than one hearing, and may consider mitigating circumstances, prior to making such institution ineligible for participation in the program under this subpart. (2) **Exceptions** — In carrying out this section with respect to an institution, the Secretary may grant an institution a waiver of requirements of paragraphs (2) through (4) of subsection (b) if the Secretary determines that the default rate for such institution is not an accurate indicator because the volume of the loans under this subpart made by such institution has been insufficient. (3) **Transition for certain institutions** — During the 3-year period beginning on October 13, 1992— (A) subsection (b)(4) shall not apply with respect to any eligible institution that is a Historically Black College or University; and (B) any such institution that has a default rate in excess of 20 percent, and any eligible borrower seeking a loan for attendance at the institution, shall be subject to subsection (b)(3) to the same extent and in the same manner as eligible institutions and borrowers described in such subsection. **(e) Payoff to reduce risk category** An institution may pay off the outstanding principal and interest owed by the borrowers of such institution who have defaulted on loans made under this subpart in order to reduce the risk category of the institution.

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Federal law — U.S. Code and appendices · legal_authorities

42 U.S.C. § 292h — Office for Health Education Assistance Loan Default Reduction

**(a) Establishment** The Secretary shall establish, within the Division of Student Assistance of the Bureau of Health Professions, an office to be known as the Office for Health Education Assistance Loan Default Reduction (in this section referred to as the “Office”). **(b) Purpose and functions** It shall be the purpose of the Office to achieve a reduction in the number and amounts of defaults on loans guaranteed under this subpart. In carrying out such purpose the Office shall— (1) conduct analytical and evaluative studies concerning loans and loan defaults; (2) carry out activities designed to reduce loan defaults; (3) respond to special circumstances that may exist in the financial lending environment that may lead to loan defaults; (4) coordinate with other Federal entities that are involved with student loan programs, including— (A) with respect to the Department of Education, in the development of a single student loan application form, a single student loan deferment form, a single disability form, and a central student loan database; and (B) with respect to the Department of Justice, in the recovery of payments from health professionals who have defaulted on loans guaranteed under this subpart; and (5) provide technical assistance to borrowers, lenders, holders, and institutions concerning deferments and collection activities. **(c) Additional duties** In conjunction with the report submitted under subsection (b), the Office shall— (1) compile, and publish in the Federal Register, a list of the borrowers who are in default under this subpart; and (2) send the report and notices of default with respect to these borrowers to relevant Federal agencies and to schools, school associations, professional and specialty associations, State licensing boar

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Federal law — U.S. Code and appendices · legal_authorities

42 U.S.C. § 292 — Statement of purpose

The purpose of this subpart is to enable the Secretary to provide a Federal program of student loan insurance for students in (and certain former students of) eligible institutions (as defined in section 292o of this title).

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Federal law — U.S. Code and appendices · legal_authorities

42 U.S.C. § 292e — Certificate of loan insurance; effective date of insurance

**(a) In general** (1) **Authority for issuance of certificate** — If, upon application by an eligible lender, made upon such form, containing such information, and supported by such evidence as the Secretary may require, and otherwise in conformity with this section, the Secretary finds that the applicant has made a loan to an eligible borrower which is insurable under the provisions of this subpart, he may issue to the applicant a certificate of insurance covering the loan and setting forth the amount and terms of the insurance. (2) **Effective date of insurance** — Insurance evidenced by a certificate of insurance pursuant to subsection (a)(1) shall become effective upon the date of issuance of the certificate, except that the Secretary is authorized, in accordance with regulations, to issue commitments with respect to proposed loans, or with respect to lines (or proposed lines) of credit, submitted by eligible lenders, and in that event, upon compliance with subsection (a)(1) by the lender, the certificate of insurance may be issued effective as of the date when any loan, or any payment by the lender pursuant to a line of credit, to be covered by such insurance is made to a student described in [section 292d(a)(1) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title42-section292d/a/1&num=0&edition=prelim). Such insurance shall cease to be effective upon 60 days’ default by the lender in the payment of any installment of the premiums payable pursuant to [section 292g of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title42-section292g&num=0&edition=prelim). (3) **Certain agreements for lenders** — An application submitted pursuant to subsection (a)(1) shall contain— (A) an agreement by the applicant to pay

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Federal law — U.S. Code and appendices · legal_authorities

42 U.S.C. § 292f — Default of borrower

**(a) Conditions for payment to beneficiary** (1) **In general** — Upon default by the borrower on any loan covered by Federal loan insurance pursuant to this subpart, and after a substantial collection effort (including, subject to subsection (h), commencement and prosecution of an action) as determined under regulations of the Secretary, the insurance beneficiary shall promptly notify the Secretary and the Secretary shall, if requested (at that time or after further collection efforts) by the beneficiary, or may on his own motion, if the insurance is still in effect, pay to the beneficiary the amount of the loss sustained by the insured upon that loan as soon as that amount has been determined, except that, if the insurance beneficiary including any servicer of the loan is not designated for “exceptional performance”, as set forth in paragraph (2), the Secretary shall pay to the beneficiary a sum equal to 98 percent of the amount of the loss sustained by the insured upon that loan. (2) **Exceptional performance** (A) *Authority* — Where the Secretary determines that an eligible lender, holder, or servicer has a compliance performance rating that equals or exceeds 97 percent, the Secretary shall designate that eligible lender, holder, or servicer, as the case may be, for exceptional performance. (B) *Compliance performance rating* — For purposes of subparagraph (A), a compliance performance rating is determined with respect to compliance with due diligence in the disbursement, servicing, and collection of loans under this subpart for each year for which the determination is made. Such rating shall be equal to the percentage of all due diligence requirements applicable to each loan, on average, as established by the Secretary, with respect to loans serviced duri

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Federal law — U.S. Code and appendices · legal_authorities

42 U.S.C. § 292g — Risk-based premiums

Page 998 TITLE 42—THE PUBLIC HEALTH AND WELFARE § 292g (1) read as follows: ‘‘after the expiration of the five- year period beginning on the first date, as specified in subparagraphs (B) and (C) of section 292d(a)(2) of this title, when repayment of such loan is required;’’. Subsec. (j). Pub. L. 103–43, § 2014(a)(2)(B), added sub- sec. (j). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1998 AMENDMENT Pub. L. 105–392, title I, § 142(c), Nov. 13, 1998, 112 Stat. 3581, provided that: ‘‘The amendments made by sub- sections (a) and (b) [amending this section] shall apply with respect to loans submitted to the Secretary for payment on or after the first day of the sixth month that begins after the date of enactment of this Act [Nov. 13, 1998].’’ Pub. L. 105–392, title I, § 144(b), Nov. 13, 1998, 112 Stat. 3581, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to any loan insured under the authority of subpart I of part A of title VII of the Public Health Service Act (42 U.S.C. 292 et seq.) that is listed or scheduled by the debtor in a case under title XI, United States Code [Title 11, Bankruptcy], filed— ‘‘(1) on or after the date of enactment of this Act [Nov. 13, 1998]; or ‘‘(2) prior to such date of enactment in which a dis- charge has not been granted.’’ § 292g. Risk-based premiums (a) Authority With respect to a loan made under this sub- part on or after January 1, 1993, the Secretary, in accordance with subsection (b), shall assess a risk-based premium on an eligible borrower and, if required under this section, an eligible insti- tution that is based on the default rate of the el- igible institution involved (as defined in section 292o of this title). (b) Assessment of premium Except as

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