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20 U.S.C. § 1080 — Default of student under Federal loan insurance program
Federal law — U.S. Code and appendices · legal_authorities
**(a) Notice to Secretary and payment of loss** Upon default by the student borrower on any loan covered by Federal loan insurance pursuant to this part, and prior to the commencement of suit or other enforcement proceedings upon security for that loan, 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 the Secretary’s 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. The “amount of the loss” on any loan shall, for the purposes of this subsection and subsection (b), be deemed to be an amount equal to the unpaid balance of the principal amount and accrued interest, including interest accruing from the date of submission of a valid default claim (as determined by the Secretary) to the date on which payment is authorized by the Secretary, reduced to the extent required by [section 1075(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1075/b&num=0&edition=prelim). Such beneficiary shall be required to meet the standards of due diligence in the collection of the loan and shall be required to submit proof that the institution was contacted and other reasonable attempts were made to locate the borrower (when the location of the borrower is unknown) and proof that contact was made with the borrower (when the location is known). The Secretary shall make the determination required to carry out the provisions of this section not later than 90 days after the notification by the insurance beneficiary and shall make payment in full on the amount of the beneficiary’s loss pending comple
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Source file: Laws/federal/codes/united-states-code/title-20/section-1080-default-of-student-under-federal-loan-insurance-program--7ded110300.md
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Source location: Title 20, Chapter 28, § 1080; chapter-028-higher-education-resources-and-student-assistance.md
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**(a) Notice to Secretary and payment of loss** Upon default by the student borrower on any loan covered by Federal loan insurance pursuant to this part, and prior to the commencement of suit or other enforcement proceedings upon security for that loan, 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 the Secretary’s 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. The “amount of the loss” on any loan shall, for the purposes of this subsection and subsection (b), be deemed to be an amount equal to the unpaid balance of the principal amount and accrued interest, including interest accruing from the date of submission of a valid default claim (as determined by the Secretary) to the date on which payment is authorized by the Secretary, reduced to the extent required by [section 1075(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1075/b&num=0&edition=prelim). Such beneficiary shall be required to meet the standards of due diligence in the collection of the loan and shall be required to submit proof that the institution was contacted and other reasonable attempts were made to locate the borrower (when the location of the borrower is unknown) and proof that contact was made with the borrower (when the location is known). The Secretary shall make the determination required to carry out the provisions of this section not later than 90 days after the notification by the insurance beneficiary and shall make payment in full on the amount of the beneficiary’s loss pending completion of the due diligence investigation.
**(b) Effect of payment of loss** Upon payment of the amount of the loss pursuant to subsection (a), the United States shall be subrogated for all of the rights of the holder of the obligation upon the insured loan and shall be entitled to an assignment of the note or other evidence of the insured loan by the insurance beneficiary. If the net recovery made by the Secretary on a loan after deduction of the cost of that recovery (including reasonable administrative costs and collection costs, to the extent set forth in regulations issued by the Secretary) exceeds the amount of the loss, the excess shall be paid over to the insured. The Secretary may, in attempting to make recovery on such loans, contract with private business concerns, State student loan insurance agencies, or State guaranty agencies, for payment for services rendered by such concerns or agencies in assisting the Secretary in making such recovery. Any contract under this subsection entered into by the Secretary shall provide that attempts to make recovery on such loans shall be fair and reasonable, and do not involve harassment, intimidation, false or misleading representations, or unnecessary communications concerning the existence of any such loan to persons other than the student borrower.
**(c) Forbearance not precluded** Nothing in this section or in this part shall be construed to preclude any forbearance for the benefit of the student borrower which may be agreed upon by the parties to the insured loan and approved by the Secretary, or to preclude forbearance by the Secretary in the enforcement of the insured obligation after payment on that insurance. Any forbearance which is approved by the Secretary under this subsection with respect to the repayment of a loan, including a forbearance during default, shall not be considered as indicating that a holder of a federally insured loan has failed to exercise reasonable care and due diligence in the collection of the loan.
**(d) Care and diligence required of holders** Nothing in this section or in this part shall be construed to excuse the holder of a federally insured loan from exercising reasonable care and diligence in the making and collection of loans under the provisions of this part. If the Secretary, after a reasonable notice and opportunity for hearing to an eligible lender, finds that it has substantially failed to exercise such care and diligence or to make the reports and statements required under [section 1078(a)(4) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078/a/4&num=0&edition=prelim) and [section 1079(a)(3) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1079/a/3&num=0&edition=prelim), or to pay the required Federal loan insurance premiums, the Secretary shall disqualify that lender for further Federal insurance on loans granted pursuant to this part until the Secretary is satisfied that its failure has ceased and finds that there is reasonable assurance that the lender will in the future exercise necessary care and diligence or comply with such requirements, as the case may be.
**(e) Default rate of lenders, holders, and guaranty agencies**
(1) **In general** — The Secretary shall annually publish a list indicating the cohort default rate (determined in accordance with [section 1085(m) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1085/m&num=0&edition=prelim)) for each originating lender, subsequent holder, and guaranty agency participating in the program assisted under this part and an average cohort default rate for all institutions of higher education within each State.
(2) **Regulations** — The Secretary shall prescribe regulations designed to prevent an institution from evading the application to that institution of a cohort default rate through the use of such measures as branching, consolidation, change of ownership or control, or any similar device.
(3) **Rate establishment and correction** — The Secretary shall establish a cohort default rate for lenders, holders, and guaranty agencies (determined consistent with [section 1085(m) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1085/m&num=0&edition=prelim)), except that the rate for lenders, holders, and guaranty agencies shall not reflect any loans issued in accordance with [section 1078(j) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078/j&num=0&edition=prelim). The Secretary shall allow institutions, lenders, holders, and guaranty agencies the opportunity to correct such cohort default rate information.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Institution of higher education** For purposes of this chapter, other than subchapter IV, the term “institution of higher education” means an educational institution in any State that—
(1) admits as regular students only persons having a certificate of graduation from a school providing secondary education, or the recognized equivalent of such a certificate, or persons who meet the requirements of [section 1091(d) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1091/d&num=0&edition=prelim);
(2) is legally authorized within such State to provide a program of education beyond secondary education;
(3) provides an educational program for which the institution awards a bachelor’s degree or provides not less than a 2-year program that is acceptable for full credit toward such a degree, or awards a degree that is acceptable for admission to a graduate or professional degree program, subject to review and approval by the Secretary;
(4) is a public or other nonprofit institution; and
(5) is accredited by a nationally recognized accrediting agency or association, or if not so accredited, is an institution that has been granted preaccreditation status by such an agency or association that has been recognized by the Secretary for the granting of preaccreditation status, and the Secretary has determined that there is satisfactory assurance that the institution will meet the accreditation standards of such an agency or association within a reasonable time.
**(b) Additional institutions included** For purposes of this chapter, other than subchapter IV, the term “institution of higher education” also includes—
(1) any school that provides not less than a 1-year program of training to prepare students for gainful employment in a re
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Annual and aggregate limits**
(1) **Annual limits**
(A) The total of loans made to a student in any academic year or its equivalent (as determined by the Secretary) which may be covered by Federal loan insurance under this part may not exceed—
(i) in the case of a student at an eligible institution who has not successfully completed the first year of a program of undergraduate education—
(I) $3,500, if such student is enrolled in a program whose length is at least one academic year in length (as determined under [section 1088 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1088&num=0&edition=prelim)); and
(II) if such student is enrolled in a program of undergraduate education which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as the length of such program measured in semester, trimester, quarter, or clock hours bears to one academic year;
(ii) in the case of a student at an eligible institution who has successfully completed such first year but has not successfully completed the remainder of a program of undergraduate education—
(I) $4,500; or
(II) if such student is enrolled in a program of undergraduate education, the remainder of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year;
(iii) in the case of a student at an eligible institution who has successfully completed the first and second years
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Federal law — U.S. Code and appendices · legal_authorities
Page 479
TITLE 20—EDUCATION
§ 1080
such supplementary reports and statement
during the effective period of the loan agree-
ment, upon such forms, at such times, and
containing such information as the Secretary
may prescribe by or pursuant to regulation.
(b) Comprehensive insurance coverage certifi-
cate
(1) Establishment of system by regulation
In lieu of requiring a separate insurance ap-
plication and issuing a separate certificate of
insurance for each student loan made by an el-
igible lender as provided in subsection (a), the
Secretary may, in accordance with regulations
consistent with section 1074 of this title, issue
to any eligible lender applying therefor a cer-
tificate of comprehensive insurance coverage
which shall, without further action by the
Secretary, insure all insurable loans made by
that lender, on or after the date of the certifi-
cate and before a specified cutoff date, within
the limits of an aggregate maximum amount
stated in the certificate. Such regulations
may provide for conditioning such insurance,
with respect to any loan, upon compliance by
the lender with such requirements (to be stat-
ed or incorporated by reference in the certifi-
cate) as in the Secretary’s judgment will best
achieve the purpose of this subsection while
protecting the United States from the risk of
unreasonable loss and promoting the objec-
tives of this part, including (but not limited
to) provisions as to the reporting of such loans
and information relevant thereto to the Sec-
retary and as to the payment of initial and
other premiums and the effect of default
therein, and including provision for confirma-
tion by the Secretary from time to time
(through endorsement of the certificate) of the
coverage of specific new loans by such certifi-
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