20 U.S.C. § 1085 — Definitions for student loan insurance program

As used in this part: **(a) Eligible institution** (1) **In general** — Except as provided in paragraph (2), the term “eligible institution” means an institution of higher education, as defined in [section 1002 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1002&num=0&edition=prelim), except that, for the purposes of sections 1077(a)(2)(C)(i) and 1078(b)(1)(M)(i) of this title, an eligible institution includes any institution that is within this definition without regard to whether such institution is participating in any program under this subchapter and includes any institution ineligible for participation in any program under this part pursuant to paragraph (2) of this subsection. (2) **Ineligibility based on high default rates** (A) An institution whose cohort default rate is equal to or greater than the threshold percentage specified in subparagraph (B) for each of the three most recent fiscal years for which data are available shall not be eligible to participate in a program under this part for the fiscal year for which the determination is made and for the two succeeding fiscal years, unless, within 30 days of receiving notification from the Secretary of the loss of eligibility under this paragraph, the institution appeals the loss of its eligibility to the Secretary. The Secretary shall issue a decision on any such appeal within 45 days after its submission. Such decision may permit the institution to continue to participate in a program under this part if— (i) the institution demonstrates to the satisfaction of the Secretary that the Secretary’s calculation of its cohort default rate is not accurate, and that recalculation would reduce its cohort default rate for any of the three fiscal years below the threshold percentage specified in subparagraph (B); (ii) there are exceptional mitigating circumstances within the meaning of paragraph (5); or (iii) there are, in the judgment of the Secretary, other exceptional mitigating circumstances that would make the application of this paragraph inequitable. During such appeal, the Secretary may permit the institution to continue to participate in a program under this part. If an institution continues to participate in a program under this part, and the institution’s appeal of the loss of eligibility is unsuccessful, the institution shall be required to pay to the Secretary an amount equal to the amount of interest, special allowance, reinsurance, and any related payments made by the Secretary (or which the Secretary is obligated to make) with respect to loans made under this part to students attending, or planning to attend, that institution during the pendency of such appeal. (B) For purposes of determinations under subparagraph (A), the threshold percentage is— (i) 35 percent for fiscal year 1991 and 1992; (ii) 30 percent for fiscal year 1993; (iii) 25 percent for fiscal year 1994 through fiscal year 2011; and (iv) 30 percent for fiscal year 2012 and any succeeding fiscal year. (C) Until July 1, 1999, this paragraph shall not apply to any institution that is— (i) a part B institution within the meaning of [section 1061(2) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1061/2&num=0&edition=prelim); (ii) a tribally controlled college or university, as defined in [section 1801(a)(4) of title 25](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title25-section1801/a/4&num=0&edition=prelim); or (iii) a Navajo Community College under the Navajo Community College Act. (D) Notwithstanding the first sentence of subparagraph (A), the Secretary shall restore the eligibility to participate in a program under subpart 1 of part A, part B, or part E of an institution that did not appeal its loss of eligibility within 30 days of receiving notification if the Secretary determines, on a case-by-case basis, that the institution’s failure to appeal was substantially justified under the circumstances, and that— (i) the institution made a timely request that the appropriate guaranty agency correct errors in the draft data used to calculate the institution’s cohort default rate; (ii) the guaranty agency did not correct the erroneous data in a timely fashion; and (iii) the institution would have been eligible if the erroneous data had been corrected by the guaranty agency. (3) **Appeals for regulatory relief** — An institution whose cohort default rate, calculated in accordance with subsection (m), is equal to or greater than the threshold percentage specified in paragraph (2)(B)(iv) for any two consecutive fiscal years may, not later than 30 days after the date the institution receives notification from the Secretary, file an appeal demonstrating exceptional mitigating circumstances, as defined in paragraph (5). The Secretary shall issue a decision on any such appeal not later than 45 days after the date of submission of the appeal. If the Secretary determines that the institution demonstrates exceptional mitigating circumstances, the Secretary may not subject the institution to provisional certification based solely on the institution’s cohort default rate. (4) **Appeals based upon allegations of improper loan servicing** — An institution that— (A) is subject to loss of eligibility for the Federal Family Education Loan Program pursuant to paragraph (2)(A) of this subsection; (B) is subject to loss of eligibility for the Federal Supplemental Loans for Students pursuant to section 1078–1(a)(2) 11 See References in Text note below. of this title; or (C) is an institution whose cohort default rate equals or exceeds 20 percent for the most recent year for which data are available; may include in its appeal of such loss or rate a defense based on improper loan servicing (in addition to other defenses). In any such appeal, the Secretary shall take whatever steps are necessary to ensure that such institution has access for a reasonable period of time, not to exceed 30 days, to a representative sample (as determined by the Secretary) of the relevant loan servicing and collection records used by a guaranty agency in determining whether to pay a claim on a defaulted loan or by the Department in determining an institution’s default rate in the loan program under part D of this subchapter. The Secretary shall reduce the institution’s cohort default rate to reflect the percentage of defaulted loans in the representative sample that are required to be excluded pursuant to subsection (m)(1)(B). (5) **Definition of mitigating circumstances** (A) For purposes of this subsection, an institution of higher education shall be treated as having exceptional mitigating circumstances that make application of paragraph (2) inequitable, and that provide for regulatory relief under paragraph (3), if such institution, in the opinion of an independent auditor, meets the following criteria: (i) For a 12-month period that ended during the 6 months immediately preceding the fiscal year for which the cohort of borrowers used to calculate the institution’s cohort default rate is determined, at least two-thirds of the students enrolled on at least a half-time basis at the institution— (I) are eligible to receive a Federal Pell Grant award that is at least equal to one-half the Federal Pell Grant amount, determined under [section 1070a(b)(2)(A) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1070a/b/2/A&num=0&edition=prelim), for which a student would be eligible based on the student’s enrollment status; or (II) have an adjusted gross income that when added with the adjusted gross income of the student’s parents (unless the student is an independent student), of less than the poverty level, as determined by the Department of Health and Human Services. (ii) In the case of an institution of higher education that offers an associate, baccalaureate, graduate or professional degree, 70 percent or more of the institution’s regular students who were initially enrolled on a full-time basis and were scheduled to complete their programs during the same 12-month period described in clause (i)— (I) completed the educational programs in which the students were enrolled; (II) transferred from the institution to a higher level educational program; (III) at the end of the 12-month period, remained enrolled and making satisfactory progress toward completion of the student’s educational programs; or (IV) entered active duty in the Armed Forces of the United States. (iii) (I) In the case of an institution of higher education that does not award a degree described in clause (ii), had a placement rate of 44 percent or more with respect to the institution’s former regular students who— (aa) remained in the program beyond the point the students would have received a 100 percent tuition refund from the institution; (bb) were initially enrolled on at least a half-time basis; and (cc) were originally scheduled, at the time of enrollment, to complete their educational programs during the same 12-month period described in clause (i). (II) The placement rate shall not include students who are still enrolled and making satisfactory progress in the educational programs in which the students were originally enrolled on the date following 12 months after the date of the student’s last date of attendance at the institution. (III) The placement rate is calculated by determining the percentage of all those former regular students who— (aa) are employed, in an occupation for which the institution provided training, on the date following 12 months after the date of their last day of attendance at the institution; (bb) were employed, in an occupation for which the institution provided training, for at least 13 weeks before the date following 12 months after the date of their last day of attendance at the institution; or (cc) entered active duty in the Armed Forces of the United States. (IV) The placement rate shall not include as placements a student or former student for whom the institution is the employer. (B) For purposes of determining a rate of completion and a placement rate under this paragraph, a student is originally scheduled, at the time of enrollment, to complete the educational program on the date when the student will have been enrolled in the program for the amount of time normally required to complete the program. The amount of time normally required to complete the program for a student who is initially enrolled full-time is the period of time specified in the institution’s enrollment contract, catalog, or other materials, for completion of the program by a full-time student. For a student who is initially enrolled less than full-time, the period is the amount of time it would take the student to complete the program if the student remained enrolled at that level of enrollment throughout the program. (6) **Reduction of default rates at certain minority institutions** (A) *Beneficiaries of exception required to establish management plan* — After July 1, 1999, any institution that has a cohort default rate that equals or exceeds 25 percent for each of the three most recent fiscal years for which data are available and that relies on the exception in subparagraph (B) to continue to be an eligible institution shall— (i) submit to the Secretary a default management plan which the Secretary, in the Secretary’s discretion, after consideration of the institution’s history, resources, dollars in default, and targets for default reduction, determines is acceptable and provides reasonable assurance that the institution will, by July 1, 2004, have a cohort default rate that is less than 25 percent; (ii) engage an independent third party (which may be paid with funds received under [section 1059d of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1059d&num=0&edition=prelim) or part B of subchapter III) to provide technical assistance in implementing such default management plan; and (iii) provide to the Secretary, on an annual basis or at such other intervals as the Secretary may require, evidence of cohort default rate improvement and successful implementation of such default management plan. (B) *Discretionary eligibility conditioned on improvement* — Notwithstanding the expiration of the exception in paragraph (2)(C), the Secretary may, in the Secretary’s discretion, continue to treat an institution described in subparagraph (A) of this paragraph as an eligible institution for each of the 1-year periods beginning on July 1 of 1999 through 2003, only if the institution submits by the beginning of such period evidence satisfactory to the Secretary that— (i) such institution has complied and is continuing to comply with the requirements of subparagraph (A); and (ii) such institution has made substantial improvement, during each of the preceding 1-year periods, in the institution’s cohort default rate. (7) **Default prevention and assessment of eligibility based on high default rates** (A) *First year* (i) *In general* — An institution whose cohort default rate is equal to or greater than the threshold percentage specified in paragraph (2)(B)(iv) in any fiscal year shall establish a default prevention task force to prepare a plan to— (I) identify the factors causing the institution’s cohort default rate to exceed such threshold; (II) establish measurable objectives and the steps to be taken to improve the institution’s cohort default rate; and (III) specify actions that the institution can take to improve student loan repayment, including appropriate counseling regarding loan repayment options. (ii) *Technical assistance* — Each institution subject to this subparagraph shall submit the plan under clause (i) to the Secretary, who shall review the plan and offer technical assistance to the institution to promote improved student loan repayment. (B) *Second consecutive year* (i) *In general* — An institution whose cohort default rate is equal to or greater than the threshold percentage specified in paragraph (2)(B)(iv) for two consecutive fiscal years, shall require the institution’s default prevention task force established under subparagraph (A) to review and revise the plan required under such subparagraph, and shall submit such revised plan to the Secretary. (ii) *Review by the Secretary* — The Secretary shall review each revised plan submitted in accordance with this subparagraph, and may direct that such plan be amended to include actions, with measurable objectives, that the Secretary determines, based on available data and analyses of student loan defaults, will promote student loan repayment. (8) **Participation rate index** (A) *In general* — An institution that demonstrates to the Secretary that the institution’s participation rate index is equal to or less than 0.0625 for any of the 3 most recent fiscal years for which data is available shall not be subject to paragraph (2). The participation rate index shall be determined by multiplying the institution’s cohort default rate for loans under this part or part D, or weighted average cohort default rate for loans under this part and part D, by the percentage of the institution’s regular students, enrolled on at least a half-time basis, who received a loan made under this part or part D for a 12-month period ending during the 6 months immediately preceding the fiscal year for which the cohort of borrowers used to calculate the institution’s cohort default rate is determined. (B) *Data* — An institution shall provide the Secretary with sufficient data to determine the institution’s participation rate index within 30 days after receiving an initial notification of the institution’s draft cohort default rate. (C) *Notification* — Prior to publication of a final cohort default rate for an institution that provides the data described in subparagraph (B), the Secretary shall notify the institution of the institution’s compliance or noncompliance with subparagraph (A). **(b) , (c) Repealed. Pub. L. 102–325, title IV, § 427(b)(1), (c), July 23, 1992, 106 Stat. 549** **(d) Eligible lender** (1) **In general** — Except as provided in paragraphs (2) through (6), the term “eligible lender” means— (A) a National or State chartered bank, a mutual savings bank, a savings and loan association, a stock savings bank, or a credit union which— (i) is subject to examination and supervision by an agency of the United States or of the State in which its principal place of operation is established, and (ii) does not have as its primary consumer credit function the making or holding of loans made to students under this part unless (I) it is a bank which is wholly owned by a State, or a bank which is subject to examination and supervision by an agency of the United States, makes student loans as a trustee pursuant to an express trust, operated as a lender under this part prior to January 1, 1975, and which meets the requirements of this provision prior to July 23, 1992, (II) it is a single wholly owned subsidiary of a bank holding company which does not have as its primary consumer credit function the making or holding of loans made to students under this part, (III) it is a bank (as defined in [section 1813(a)(1) of title 12](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section1813/a/1&num=0&edition=prelim)) that is a wholly owned subsidiary of a nonprofit foundation, the foundation is described in [section 501(c)(3) of title 26](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section501/c/3&num=0&edition=prelim) and exempt from taxation under section 501(a) of such title, and the bank makes loans under this part only to undergraduate students who are age 22 or younger and has a portfolio of such loans that is not more than $5,000,000, or (IV) it is a National or State chartered bank, or a credit union, with assets of less than $1,000,000,000; (B) a pension fund as defined in the Employee Retirement Income Security Act [[29 U.S.C. 1001](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1001&num=0&edition=prelim) et seq.]; (C) an insurance company which is subject to examination and supervision by an agency of the United States or a State; (D) in any State, a single agency of the State or a single nonprofit private agency designated by the State; (E) an eligible institution which meets the requirements of paragraphs (2) through (5) of this subsection; (F) for purposes only of purchasing and holding loans made by other lenders under this part, the Student Loan Marketing Association or the Holding Company of the Student Loan Marketing Association, including any subsidiary of the Holding Company, created pursuant to [section 1087–3 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1087-3&num=0&edition=prelim), or an agency of any State functioning as a secondary market; (G) for purposes of making loans under sections 1078–2(d) and 1078–3 of this title, the Student Loan Marketing Association or the Holding Company of the Student Loan Marketing Association, including any subsidiary of the Holding Company, created pursuant to [section 1087–3 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1087-3&num=0&edition=prelim); (H) for purposes of making loans under sections 1078(h) 1 and 1078(j) of this title, a guaranty agency; (I) a Rural Rehabilitation Corporation, or its successor agency, which has received Federal funds under Public Law 499, Eighty-first Congress (64 Stat. 98 (1950)); (J) for purpose of making loans under [section 1078–3 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078-3&num=0&edition=prelim), any nonprofit private agency functioning in any State as a secondary market; and (K) a consumer finance company subsidiary of a national bank which, as of October 7, 1998, through one or more subsidiaries: (i) acts as a small business lending company, as determined under regulations of the Small Business Administration under section 120.470 of title 13, Code of Federal Regulations (as such section is in effect on October 7, 1998); and (ii) participates in the program authorized by this part pursuant to subparagraph (C), provided the national bank and all of the bank’s direct and indirect subsidiaries taken together as a whole, do not have, as their primary consumer credit function, the making or holding of loans made to students under this part. (2) **Requirements for eligible institutions** (A) *In general* — To be an eligible lender under this part, an eligible institution— (i) shall employ at least one person whose full-time responsibilities are limited to the administration of programs of financial aid for students attending such institution; (ii) shall not be a home study school; (iii) shall not— (I) make a loan to any undergraduate student; (II) make a loan other than a loan under section 1078 or 1078–8 of this title to a graduate or professional student; or (III) make a loan to a borrower who is not enrolled at that institution; (iv) shall award any contract for financing, servicing, or administration of loans under this subchapter on a competitive basis; (v) shall offer loans that carry an origination fee or an interest rate, or both, that are less than such fee or rate authorized under the provisions of this subchapter; (vi) shall not have a cohort default rate (as defined in subsection (m)) greater than 10 percent; (vii) shall, for any year for which the institution engages in activities as an eligible lender, provide for a compliance audit conducted in accordance with [section 1078(b)(1)(U)(iii)(I) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078/b/1/U/iii/I&num=0&edition=prelim), and the regulations thereunder, and submit the results of such audit to the Secretary; (viii) shall use any proceeds from special allowance payments and interest payments from borrowers, interest subsidies received from the Department of Education, and any proceeds from the sale or other disposition of loans, for need-based grant programs; and (ix) shall have met the requirements of subparagraphs (A) through (F) of this paragraph as in effect on the day before February 8, 2006, and made loans under this part, on or before April 1, 2006. (B) *Administrative expenses* — An eligible lender under subparagraph (A) shall be permitted to use a portion of the proceeds described in subparagraph (A)(viii) for reasonable and direct administrative expenses. (C) *Supplement, not supplant* — An eligible lender under subparagraph (A) shall ensure that the proceeds described in subparagraph (A)(viii) are used to supplement, and not to supplant, non-Federal funds that would otherwise be used for need-based grant programs. (3) **Disqualification for high default rates** — The term “eligible lender” does not include any eligible institution in any fiscal year immediately after the fiscal year in which the Secretary determines, after notice and opportunity for a hearing, that for each of 2 consecutive years, 15 percent or more of the total amount of such loans as are described in [section 1078(a)(1) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078/a/1&num=0&edition=prelim) made by the institution with respect to students at that institution and repayable in each such year, are in default, as defined in subsection (m). (4) **Waiver of disqualification** — Whenever the Secretary determines that— (A) there is reasonable possibility that an eligible institution may, within 1 year after a determination is made under paragraph (3), improve the collection of loans described in [section 1078(a)(1) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078/a/1&num=0&edition=prelim), so that the application of paragraph (3) would be a hardship to that institution, or (B) the termination of the lender’s status under paragraph (3) would be a hardship to the present or for prospective students of the eligible institution, after considering the management of that institution, the ability of that institution to improve the collection of loans, the opportunities that institution offers to economically disadvantaged students, and other related factors, the Secretary shall waive the provisions of paragraph (3) with respect to that institution. Any determination required under this paragraph shall be made by the Secretary prior to the termination of an eligible institution as a lender under the exception of paragraph (3). Whenever the Secretary grants a waiver pursuant to this paragraph, the Secretary shall provide technical assistance to the institution concerned in order to improve the collection rate of such loans. (5) **Disqualification for use of certain incentives** — The term “eligible lender” does not include any lender that the Secretary determines, after notice and opportunity for a hearing, has— (A) offered, directly or indirectly, points, premiums, payments (including payments for referrals and for processing or finder fees), prizes, stock or other securities, travel, entertainment expenses, tuition payment or reimbursement, the provision of information technology equipment at below-market value, additional financial aid funds, or other inducements, to any institution of higher education, any employee of an institution of higher education, or any individual or entity in order to secure applicants for loans under this part; (B) conducted unsolicited mailings, by postal or electronic means, of student loan application forms to students enrolled in secondary schools or postsecondary institutions, or to family members of such students, except that applications may be mailed, by postal or electronic means, to students or borrowers who have previously received loans under this part from such lender; (C) entered into any type of consulting arrangement, or other contract to provide services to a lender, with an employee who is employed in the financial aid office of an institution of higher education, or who otherwise has responsibilities with respect to student loans or other financial aid of the institution; (D) compensated an employee who is employed in the financial aid office of an institution of higher education, or who otherwise has responsibilities with respect to student loans or other financial aid of the institution, and who is serving on an advisory board, commission, or group established by a lender or group of lenders for providing such service, except that the eligible lender may reimburse such employee for reasonable expenses incurred in providing such service; (E) performed for an institution of higher education any function that such institution of higher education is required to perform under this title, except that a lender shall be permitted to perform functions on behalf of such institution in accordance with section 1092(b) or 1092(l) of this title; (F) paid, on behalf of an institution of higher education, another person to perform any function that such institution of higher education is required to perform under this subchapter, except that a lender shall be permitted to perform functions on behalf of such institution in accordance with section 1092(b) or 1092(l) of this title; (G) provided payments or other benefits to a student at an institution of higher education to act as the lender’s representative to secure applications under this subchapter from individual prospective borrowers, unless such student— (i) is also employed by the lender for other purposes; and (ii) made all appropriate disclosures regarding such employment; (H) offered, directly or indirectly, loans under this part as an inducement to a prospective borrower to purchase a policy of insurance or other product; or (I) engaged in fraudulent or misleading advertising. It shall not be a violation of this paragraph for a lender to provide technical assistance to institutions of higher education comparable to the kinds of technical assistance provided to institutions of higher education by the Department. (6) **Rebate fee requirement** — To be an eligible lender under this part, an eligible lender shall pay rebate fees in accordance with [section 1078–3(f) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078–3/f&num=0&edition=prelim). (7) **Eligible lender trustees** — Notwithstanding any other provision of this subsection, an eligible lender may not make or hold a loan under this part as trustee for an institution of higher education, or for an organization affiliated with an institution of higher education, unless— (A) the eligible lender is serving as trustee for that institution or organization as of September 30, 2006, under a contract that was originally entered into before September 30, 2006, and that continues in effect or is renewed after September 30, 2006; and (B) the institution or organization, and the eligible lender, with respect to its duties as trustee, each comply on and after January 1, 2007, with the requirements of paragraph (2), except that— (i) the requirements of clauses (i), (ii), (vi), and (viii) of paragraph (2)(A) shall, subject to clause (ii) of this subparagraph, only apply to the institution (including both an institution for which the lender serves as trustee and an institution affiliated with an organization for which the lender serves as trustee); (ii) in the case of an organization affiliated with an institution— (I) the requirements of clauses (iii) and (v) of paragraph (2)(A) shall apply to the organization; and (II) the requirements of clause (viii) of paragraph (2)(A) shall apply to the institution or the organization (or both), if the institution or organization receives (directly or indirectly) the proceeds described in such clause; (iii) the requirements of clauses (iv) and (ix) of paragraph (2)(A) shall not apply to the eligible lender, institution, or organization; and (iv) the eligible lender, institution, and organization shall ensure that the loans made or held by the eligible lender as trustee for the institution or organization, as the case may be, are included in a compliance audit in accordance with clause (vii) of paragraph (2)(A). (8) **School as lender program audit** — Each institution serving as an eligible lender under paragraph (1)(E), and each eligible lender serving as a trustee for an institution of higher education or an organization affiliated with an institution of higher education, shall annually complete and submit to the Secretary a compliance audit to determine whether— (A) the institution or lender is using all proceeds from special allowance payments and interest payments from borrowers, interest subsidies received from the Department, and any proceeds from the sale or other disposition of loans, for need-based grant programs, in accordance with paragraph (2)(A)(viii); (B) the institution or lender is using not more than a reasonable portion of the proceeds described in paragraph (2)(A)(viii) for direct administrative expenses; and (C) the institution or lender is ensuring that the proceeds described in paragraph (2)(A)(viii) are being used to supplement, and not to supplant, Federal and non-Federal funds that would otherwise be used for need-based grant programs. **(e) Line of credit** The term “line of credit” means an arrangement or agreement between the lender and the borrower whereby a loan is paid out by the lender to the borrower in annual installments, or whereby the lender agrees to make, in addition to the initial loan, additional loans in subsequent years. **(f) Due diligence** The term “due diligence” requires the utilization by a lender, in the servicing and collection of loans insured under this part, of servicing and collection practices at least as extensive and forceful as those generally practiced by financial institutions for the collection of consumer loans. **(g) , (h) Repealed. Pub. L. 102–325, title IV, § 427(f), July 23, 1992, 106 Stat. 550** **(i) Holder** The term “holder” means an eligible lender who owns a loan. **(j) Guaranty agency** The term “guaranty agency” means any State or nonprofit private institution or organization with which the Secretary has an agreement under [section 1078(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078/b&num=0&edition=prelim). **(k) Insurance beneficiary** The term “insurance beneficiary” means the insured or its authorized representative assigned in accordance with [section 1079(d) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1079/d&num=0&edition=prelim). **(l) Default** Except as provided in subsection (m), the term “default” includes only such defaults as have existed for (1) 270 days in the case of a loan which is repayable in monthly installments, or (2) 330 days in the case of a loan which is repayable in less frequent installments. **(m) Cohort default rate** (1) **In general** (A) Except as provided in paragraph (2), the term “cohort default rate” means, for any fiscal year in which 30 or more current and former students at the institution enter repayment on loans under section 1078, 1078–1,1 or 1078–8 of this title received for attendance at the institution, the percentage of those current and former students who enter repayment on such loans (or on the portion of a loan made under [section 1078–3 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078-3&num=0&edition=prelim) that is used to repay any such loans) received for attendance at that institution in that fiscal year who default before the end of the second fiscal year following the fiscal year in which the students entered repayment. The Secretary shall require that each guaranty agency that has insured loans for current or former students of the institution afford such institution a reasonable opportunity (as specified by the Secretary) to review and correct errors in the information required to be provided to the Secretary by the guaranty agency for the purposes of calculating a cohort default rate for such institution, prior to the calculation of such rate. (B) In determining the number of students who default before the end of such second fiscal year, the Secretary shall include only loans for which the Secretary or a guaranty agency has paid claims for insurance. In considering appeals with respect to cohort default rates pursuant to subsection (a)(3), the Secretary shall exclude, from the calculation of the number of students who entered repayment and from the calculation of the number of students who default, any loans which, due to improper servicing or collection, would, as demonstrated by the evidence submitted in support of the institution’s timely appeal to the Secretary, result in an inaccurate or incomplete calculation of such cohort default rate. (C) For any fiscal year in which fewer than 30 of the institution’s current and former students enter repayment, the term “cohort default rate” means the percentage of such current and former students who entered repayment on such loans (or on the portion of a loan made under [section 1078–3 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078-3&num=0&edition=prelim) that is used to repay any such loans) in any of the three most recent fiscal years, who default before the end of the second fiscal year following the year in which they entered repayment. (2) **Special rules** (A) In the case of a student who has attended and borrowed at more than one school, the student (and such student’s subsequent repayment or default) is attributed to each school for attendance at which the student received a loan that entered repayment in the fiscal year. (B) A loan on which a payment is made by the school, such school’s owner, agent, contractor, employee, or any other entity or individual affiliated with such school, in order to avoid default by the borrower, is considered as in default for purposes of this subsection. (C) Any loan which has been rehabilitated before the end of the second fiscal year following the year in which the loan entered repayment is not considered as in default for purposes of this subsection. The Secretary may require guaranty agencies to collect data with respect to defaulted loans in a manner that will permit the identification of any defaulted loan for which (i) the borrower is currently making payments and has made not less than 6 consecutive on-time payments by the end of such second fiscal year, and (ii) a guaranty agency has renewed the borrower’s subchapter IV eligibility as provided in [section 1078–6(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078–6/b&num=0&edition=prelim). (D) For the purposes of this subsection, a loan made in accordance with section 1078–1 1 of this title (or the portion of a loan made under [section 1078–3 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078-3&num=0&edition=prelim) that is used to repay a loan made under section 1078–1 1 of this title) shall not be considered to enter repayment until after the borrower has ceased to be enrolled in a course of study leading to a degree or certificate at an eligible institution on at least a half-time basis (as determined by the institution) and ceased to be in a period of forbearance based on such enrollment. Each eligible lender of a loan made under section 1078–1 1 of this title (or a loan made under [section 1078–3 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078-3&num=0&edition=prelim) a portion of which is used to repay a loan made under section 1078–1 1 of this title) shall provide the guaranty agency with the information necessary to determine when the loan entered repayment for purposes of this subsection, and the guaranty agency shall provide such information to the Secretary. (3) **Regulations to prevent evasions** — The Secretary shall prescribe regulations designed to prevent an institution from evading the application to that institution of a default rate determination under this subsection through the use of such measures as branching, consolidation, change of ownership or control, or any similar device. (4) **Collection and reporting of cohort default rates and life of cohort default rates** (A) The Secretary shall publish not less often than once every fiscal year a report showing cohort default data and life of cohort default rates for each category of institution, including: (i) four-year public institutions; (ii) four-year private nonprofit institutions; (iii) two-year public institutions; (iv) two-year private nonprofit institutions; (v) four-year proprietary institutions; (vi) two-year proprietary institutions; and (vii) less than two-year proprietary institutions. For purposes of this subparagraph, for any fiscal year in which one or more current and former students at an institution enter repayment on loans under section 1078, 1078–2, or 1078–8 of this title, received for attendance at the institution, the Secretary shall publish the percentage of those current and former students who enter repayment on such loans (or on the portion of a loan made under [section 1078–3 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078-3&num=0&edition=prelim) that is used to repay any such loans) received for attendance at the institution in that fiscal year who default before the end of each succeeding fiscal year. (B) The Secretary may designate such additional subcategories within the categories specified in subparagraph (A) as the Secretary deems appropriate. (C) The Secretary shall publish not less often than once every fiscal year a report showing default data for each institution for which a cohort default rate is calculated under this subsection. (D) The Secretary shall publish the report described in subparagraph (C) by September 30 of each year. **(n) Repealed. Pub. L. 102–325, title IV, § 427(f), July 23, 1992, 106 Stat. 550** **(o) Economic hardship** (1) **In general** — For purposes of this part and part E, a borrower shall be considered to have an economic hardship if— (A) such borrower is working full-time and is earning an amount which does not exceed the greater of— (i) the minimum wage rate described in [section 206 of title 29](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section206&num=0&edition=prelim); or (ii) an amount equal to 150 percent of the poverty line applicable to the borrower’s family size as determined in accordance with [section 9902(2) of title 42](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title42-section9902/2&num=0&edition=prelim); or (B) such borrower meets such other criteria as are established by the Secretary by regulation in accordance with paragraph (2). (2) **Considerations** — In establishing criteria for purposes of paragraph (1)(B), the Secretary shall consider the borrower’s income and debt-to-income ratio as primary factors. **(p) Eligible not-for-profit holder** (1) **Definition** — Subject to the limitations in paragraph (2) and the prohibition in paragraph (3), the term “eligible not-for-profit holder” means an eligible lender under subsection (d) (except for an eligible lender described in subsection (d)(1)(E)) that requests a special allowance payment under [section 1087–1(b)(2)(I)(vi)(II) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1087–1/b/2/I/vi/II&num=0&edition=prelim) or a payment under [section 1141 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1141&num=0&edition=prelim) and that is— (A) a State, or a political subdivision, authority, agency, or other instrumentality thereof, including such entities that are eligible to issue bonds described in section 1.103–1 of title 26, Code of Federal Regulations, or [section 144(b) of title 26](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section144/b&num=0&edition=prelim); (B) an entity described in section 150(d)(2) of such title that has not made the election described in section 150(d)(3) of such title; (C) an entity described in section 501(c)(3) of such title; or (D) acting as a trustee on behalf of a State, political subdivision, authority, agency, instrumentality, or other entity described in subparagraph (A), (B), or (C), regardless of whether such State, political subdivision, authority, agency, instrumentality, or other entity is an eligible lender under subsection (d). (2) **Limitations** (A) *Existing on September 27, 2007* (i) *In general* — An eligible lender shall not be an eligible not-for-profit holder under this chapter unless such lender— (I) was a State, political subdivision, authority, agency, instrumentality, or other entity described in paragraph (1)(A), (B), or (C) that was, on September 27, 2007, acting as an eligible lender under subsection (d) (other than an eligible lender described in subsection (d)(1)(E)); or (II) is acting as a trustee on behalf of a State, political subdivision, authority, agency, instrumentality, or other entity described in subparagraph (A), (B), or (C) of paragraph (1), regardless of whether such State, political subdivision, authority, agency, instrumentality, or other entity is an eligible lender under subsection (d), and such State, political subdivision, authority, agency, instrumentality, or other entity, on September 27, 2007, was the sole beneficial owner of a loan eligible for any special allowance payment under [section 1087–1 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1087-1&num=0&edition=prelim). (ii) *Exception* — Notwithstanding clause (i), a State may elect, in accordance with regulations of the Secretary, to waive the requirements of this subparagraph for a new not-for-profit holder determined by the State to be necessary to carry out a public purpose of such State, except that a State may not make such election with respect the 22 So in original. Probably should be “with respect to the”. requirements of clause (i)(II). (B) *No for-profit ownership or control* (i) *In general* — No State, political subdivision, authority, agency, instrumentality, or other entity described in paragraph (1)(A), (B), or (C) shall be an eligible not-for-profit holder under this chapter if such State, political subdivision, authority, agency, instrumentality, or other entity is owned or controlled, in whole or in part, by a for-profit entity. (ii) *Trustees* — A trustee described in paragraph (1)(D) shall not be an eligible not-for-profit holder under this chapter with respect to a State, political subdivision, authority, agency, instrumentality, or other entity described in subparagraph (A), (B), or (C) of paragraph (1), regardless of whether such State, political subdivision, authority, agency, instrumentality, or other entity is an eligible lender under subsection (d), if such State, political subdivision, authority, agency, instrumentality, or other entity is owned or controlled, in whole or in part, by a for-profit entity. (C) *Sole ownership of loans and income* — No State, political subdivision, authority, agency, instrumentality, trustee, or other entity described in paragraph (1)(A), (B), (C), or (D) shall be an eligible not-for-profit holder under this chapter with respect to any loan, or income from any loan, unless— (i) such State, political subdivision, authority, agency, instrumentality, or other entity is the sole beneficial owner of such loan and the income from such loan; or (ii) such trustee holds the loan on behalf of a State, political subdivision, authority, agency, instrumentality, or other entity described in subparagraph (A), (B), or (C) of paragraph (1), regardless of whether such State, political subdivision, authority, agency, instrumentality, or other entity is an eligible lender under subsection (d), and such State, political subdivision, authority, agency, instrumentality, or other entity is the sole beneficial owner of such loan and the income from such loan. (D) *Trustee compensation limitations* — A trustee described in paragraph (1)(D) shall not receive compensation as consideration for acting as an eligible lender on behalf of a State, political subdivision, authority, agency, instrumentality, or other entity described in subparagraph (A), (B), or (C) of paragraph (1), regardless of whether such State, political subdivision, authority, agency, instrumentality, or other entity is an eligible lender under subsection (d), in excess of reasonable and customary fees. (E) *Rule of construction* — For purposes of subparagraphs (A), (B), (C), and (D) of this paragraph, a State, political subdivision, authority, agency, instrumentality, or other entity described in subparagraph (A), (B), or (C) of paragraph (1), regardless of whether such State, political subdivision, authority, agency, instrumentality, or other entity is an eligible lender under subsection (d), shall not— (i) be deemed to be owned or controlled, in whole or in part, by a for-profit entity; or (ii) lose its status as the sole owner of a beneficial interest in a loan and the income from a loan, by such State, political subdivision, authority, agency, instrumentality, or other entity, or by the trustee described in paragraph (1)(D), granting a security interest in, or otherwise pledging as collateral, such loan, or the income from such loan, to secure a debt obligation for which such State, political subdivision, authority, agency, instrumentality, or other entity is the issuer of the debt obligation. (3) **Prohibition** — In the case of a loan for which the special allowance payment is calculated under [section 1087–1(b)(2)(I)(vi)(II) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1087–1/b/2/I/vi/II&num=0&edition=prelim) and that is sold by the eligible not-for-profit holder holding the loan to an entity that is not an eligible not-for-profit holder under this chapter, the special allowance payment for such loan shall, beginning on the date of the sale, no longer be calculated under [section 1087–1(b)(2)(I)(vi)(II) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1087–1/b/2/I/vi/II&num=0&edition=prelim) and shall be calculated under [section 1087–1(b)(2)(I)(vi)(I) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1087–1/b/2/I/vi/I&num=0&edition=prelim) instead. (4) **Regulations** — Not later than 1 year after September 27, 2007, the Secretary shall promulgate regulations in accordance with the provisions of this subsection.