20 U.S.C. § 1087 — Repayment by Secretary of loans of bank-

Page 509 TITLE 20—EDUCATION § 1087 1 See References in Text note below. tion 3 of Pub. L. 105–244, set out as a note under section 1001 of this title. § 1087. Repayment by Secretary of loans of bank- rupt, deceased, or disabled borrowers; treat- ment of borrowers attending schools that fail to provide a refund, attending closed schools, or falsely certified as eligible to borrow (a) Repayment in full for death and disability (1) In general If a student borrower who has received a loan described in subparagraph (A) or (B) of section 1078(a)(1) of this title dies or becomes permanently and totally disabled (as deter- mined in accordance with regulations of the Secretary), or if a student borrower who has received such a loan is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, has lasted for a continuous period of not less than 60 months, or can be expected to last for a continuous period of not less than 60 months then the Secretary shall discharge the borrower’s liability on the loan by repaying the amount owed on the loan. The Secretary may develop such safeguards as the Secretary determines necessary to prevent fraud and abuse in the discharge of liability under this subsection. Notwithstanding any other provi- sion of this subsection, the Secretary may pro- mulgate regulations to reinstate the obliga- tion of, and resume collection on, loans dis- charged under this subsection in any case in which— (A) a borrower received a discharge of li- ability under this subsection and after the discharge the borrower— (i) receives a loan made, insured, or guaranteed under this subchapter; or (ii) has earned income in excess of the poverty line; or (B) the Secretary determines the rein- statement and resumption to be necessary. (2) Disability determinations A borrower who has been determined by the Secretary of Veterans Affairs to be unemploy- able due to a service-connected condition and who provides documentation of such deter- mination to the Secretary of Education, shall be considered permanently and totally dis- abled for the purpose of discharging such bor- rower’s loans under this subsection, and such borrower shall not be required to present addi- tional documentation for purposes of this sub- section. (3) Automatic income monitoring (A) In general The Secretary shall establish and imple- ment, with respect to any borrower de- scribed in subparagraph (B), procedures to— (i) use return information disclosed under section 6103(l)(13) of title 26, pursu- ant to approval provided under section 1098h of this title, to determine the bor- rower’s continued eligibility for the loan discharge described in subparagraph (B); (ii) allow the borrower, at any time, to opt out of disclosure under such section 6103(l)(13) and instead provide such infor- mation as the Secretary may require to determine the borrower’s continued eligi- bility for such loan discharge; and (iii) provide the borrower with an oppor- tunity to update the return information so disclosed before determination of such bor- rower’s continued eligibility for such loan discharge. (B) Applicability Subparagraph (A) shall apply— (i) to each borrower of a loan that is dis- charged due to the total and permanent disability (within the meaning of this sub- section) of the borrower; and (ii) during the period beginning on the date on which such loan is so discharged and ending on the first day on which such loan may no longer be reinstated. (b) Payment of claims on loans in bankruptcy The Secretary shall pay to the holder of a loan described in section 1078(a)(1)(A) or (B), 1078–1,1 1078–2, 1078–3, or 1078–8 of this title, the amount of the unpaid balance of principal and interest owed on such loan— (1) when the borrower files for relief under chapter 12 or 13 of title 11; (2) when the borrower who has filed for relief under chapter 7 or 11 of such title commences an action for a determination of dischargeability under section 523(a)(8)(B) of such title; or (3) for loans described in section 523(a)(8)(A) of such title, when the borrower files for relief under chapter 7 or 11 of such title. (c) Discharge (1) In general If a borrower who received, on or after Janu- ary 1, 1986, a loan made, insured, or guaran- teed under this part and the student borrower, or the student on whose behalf a parent bor- rowed, is unable to complete the program in which such student is enrolled due to the clo- sure of the institution or if such student’s eli- gibility to borrow under this part was falsely certified by the eligible institution or was falsely certified as a result of a crime of iden- tity theft, or if the institution failed to make a refund of loan proceeds which the institution owed to such student’s lender, then the Sec- retary shall discharge the borrower’s liability on the loan (including interest and collection fees) by repaying the amount owed on the loan and shall subsequently pursue any claim avail- able to such borrower against the institution and its affiliates and principals or settle the loan obligation pursuant to the financial re- sponsibility authority under subpart 3 of part H. In the case of a discharge based upon a fail- ure to refund, the amount of the discharge shall not exceed that portion of the loan which should have been refunded. The Secretary shall report to the authorizing committees an- nually as to the dollar amount of loan dis- charges attributable to failures to make re- funds. Page 510 TITLE 20—EDUCATION § 1087 (2) Assignment A borrower whose loan has been discharged pursuant to this subsection shall be deemed to have assigned to the United States the right to a loan refund up to the amount discharged against the institution and its affiliates and principals. (3) Eligibility for additional assistance The period of a student’s attendance at an institution at which the student was unable to complete a course of study due to the closing of the institution shall not be considered for purposes of calculating the student’s period of eligibility for additional assistance under this subchapter. (4) Special rule A borrower whose loan has been discharged pursuant to this subsection shall not be pre- cluded from receiving additional grants, loans, or work assistance under this subchapter for which the borrower would be otherwise eligi- ble (but for the default on such discharged loan). The amount discharged under this sub- section shall be treated the same as loans under section 1087ee(a)(5) of this title. (5) Reporting The Secretary shall report to consumer re- porting agencies with respect to loans which have been discharged pursuant to this sub- section. (d) Repayment of loans to parents If a student on whose behalf a parent has re- ceived a loan described in section 1078–2 of this title dies, then the Secretary shall discharge the borrower’s liability on the loan by repaying the amount owed on the loan. (Pub. L. 89–329, title IV, § 437, as added Pub. L. 99–498, title IV, § 402(a), Oct. 17, 1986, 100 Stat. 1414; amended Pub. L. 102–325, title IV, § 428, July 23, 1992, 106 Stat. 551; Pub. L. 103–208, § 2(c)(63)–(65), Dec. 20, 1993, 107 Stat. 2469; Pub. L. 105–244, title IV, § 431, Oct. 7, 1998, 112 Stat. 1709; Pub. L. 109–171, title VIII, § 8012, Feb. 8, 2006, 120 Stat. 166; Pub. L. 110–315, title I, § 103(b)(7), title IV, §§ 432(b)(4), 437(a), (b), Aug. 14, 2008, 122 Stat. 3089, 3246, 3257, 3258; Pub. L. 111–39, title IV, § 402(e)(1), July 1, 2009, 123 Stat. 1942; Pub. L. 116–91, § 5, Dec. 19, 2019, 133 Stat. 1193.) Editorial Notes REFERENCES IN TEXT Section 1078–1 of this title, referred to in subsec. (b), was repealed by Pub. L. 103–66, title IV, § 4047(b)–(d), Aug. 10, 1993, 107 Stat. 364, eff. July 1, 1994, except with respect to loans provided under that section as it ex- isted prior to Aug. 10, 1993. Subsequently, a new section 1078–1, relating to voluntary flexible agreements with guaranty agencies, was enacted by Pub. L. 105–244, title IV, § 418, Oct. 7, 1998, 112 Stat. 1691. PRIOR PROVISIONS A prior section 1087, Pub. L. 89–329, title IV, § 437, as added Pub. L. 90–575, title I, § 113(a), Oct. 16, 1968, 82 Stat. 1020; amended Pub. L. 92–318, title I, § 132D(a), June 23, 1972, 86 Stat. 263; Pub. L. 94–482, title I, § 127(a), Oct. 12, 1976, 90 Stat. 2133; Pub. L. 96–374, title XIII, § 1391(a)(1), Oct. 3, 1980, 94 Stat. 1503, related to repay- ment of loans by Secretary, prior to the general revi- sion of this part by Pub. L. 99–498. AMENDMENTS 2019—Subsec. (a)(3). Pub. L. 116–91 added par. (3). 2009—Subsec. (a)(1). Pub. L. 111–39 substituted ‘‘Sec- retary), or if’’ for ‘‘Secretary),, or if’’ in introductory provisions and inserted ‘‘the reinstatement and re- sumption to be’’ after ‘‘determines’’ in subpar. (B). 2008—Subsec. (a). Pub. L. 110–315, § 437(a)(3), which di- rected insertion of ‘‘The Secretary may develop such safeguards as the Secretary determines necessary to prevent fraud and abuse in the discharge of liability under this subsection. Notwithstanding any other pro- vision of this subsection, the Secretary may promul- gate regulations to reinstate the obligation of, and re- sume collection on, loans discharged under this sub- section in any case in which— ‘‘(A) a borrower received a discharge of liability under this subsection and after the discharge the bor- rower— ‘‘(i) receives a loan made, insured, or guaranteed under this subchapter; or ‘‘(ii) has earned income in excess of the poverty line; or ‘‘(B) the Secretary determines necessary.’’ at the end of subsec. (a), was executed by making the insertion at the end of par. (1) to reflect the probable intent of Congress, notwithstanding the addition of par. (2) prior to the effective date of this amendment. Pub. L. 110–315, § 437(a)(1), (2), designated existing pro- visions as par. (1), inserted par. (1) heading, and in- serted ‘‘, or if a student borrower who has received such a loan is unable to engage in any substantial gain- ful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, has lasted for a continuous period of not less than 60 months, or can be expected to last for a continuous period of not less than 60 months’’ after ‘‘of the Secretary),’’. Subsec. (a)(2). Pub. L. 110–315, § 437(b), added par. (2). Subsec. (c)(1). Pub. L. 110–315, § 103(b)(7), substituted ‘‘authorizing committees’’ for ‘‘Committee on Edu- cation and the Workforce of the House of Representa- tives and the Committee on Labor and Human Re- sources of the Senate’’. Subsec. (c)(5). Pub. L. 110–315, § 432(b)(4), substituted ‘‘consumer reporting agencies’’ for ‘‘credit bureaus’’. 2006—Pub. L. 109–171, § 8012(1), in section catchline, substituted ‘‘schools that fail to provide a refund, at- tending closed schools, or falsely certified as eligible to borrow’’ for ‘‘closed schools or falsely certified as eligi- ble to borrow’’. Subsec. (c)(1). Pub. L. 109–171, § 8012(2), inserted ‘‘or was falsely certified as a result of a crime of identity theft’’ after ‘‘falsely certified by the eligible institu- tion’’ in first sentence. 1998—Subsec. (c)(1). Pub. L. 105–244 inserted ‘‘or if the institution failed to make a refund of loan proceeds which the institution owed to such student’s lender,’’ after ‘‘falsely certified by the eligible institution,’’ and inserted at end ‘‘In the case of a discharge based upon a failure to refund, the amount of the discharge shall not exceed that portion of the loan which should have been refunded. The Secretary shall report to the Com- mittee on Education and the Workforce of the House of Representatives and the Committee on Labor and Human Resources of the Senate annually as to the dol- lar amount of loan discharges attributable to failures to make refunds.’’ 1993—Subsec. (b). Pub. L. 103–208, § 2(c)(63), amended heading and text of subsec. (b) generally. Prior to amendment, text read as follows: ‘‘If the collection of a loan described in subparagraph (A) or (B) of section 1078(a)(1) of this title or sections 1078–1, 1078–2, 1078–3, or 1078–8 of this title is stayed in any action under title 11, the Secretary shall repay the unpaid balance of principal and interest owed on the loan.’’ Subsec. (c)(1). Pub. L. 103–208, § 2(c)(64), substituted ‘‘If a borrower’’ for ‘‘If a student borrower’’, ‘‘under this part and the student borrower, or the student on whose behalf a parent borrowed, is unable’’ for ‘‘under Page 511 TITLE 20—EDUCATION § 1087 this part is unable’’, and ‘‘in which such student is en- rolled’’ for ‘‘in which the borrower is enrolled’’. Subsec. (c)(4). Pub. L. 103–208, § 2(c)(65), inserted at end ‘‘The amount discharged under this subsection shall be treated the same as loans under section 1087ee(a)(5) of this title.’’ 1992—Pub. L. 102–325 amended section generally, sub- stituting subsecs. (a) to (d) for former subsecs. (a) and (b) which related to repayment by Secretary of loans of bankrupt, deceased, or disabled borrowers. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2009 AMENDMENT Pub. L. 111–39, title IV, § 402(e)(2), July 1, 2009, 123 Stat. 1943, provided that: ‘‘The amendments made by paragraph (1) [amending this section] shall be effective as if enacted as part of the amendments in section 437(a) of the Higher Education Opportunity Act (Public Law 110–315) [amending this section], and shall take ef- fect on July 1, 2010.’’ EFFECTIVE DATE OF 2008 AMENDMENT Pub. L. 110–315, title IV, § 437(c), Aug. 14, 2008, 122 Stat. 3258, provided that: ‘‘The amendments made by subsection (a) [amending this section] shall take effect on July 1, 2010.’’ EFFECTIVE DATE OF 2006 AMENDMENT Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title. EFFECTIVE DATE OF 1998 AMENDMENT Amendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see sec- tion 3 of Pub. L. 105–244, set out as a note under section 1001 of this title. 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 1051 of this title. Executive Documents DISCHARGING THE FEDERAL STUDENT LOAN DEBT OF TOTALLY AND PERMANENTLY DISABLED VETERANS Memorandum of President of the United States, Aug. 21, 2019, 84 F.R. 44677, provided: Memorandum for the Secretary of Education [and] the Secretary of Veterans Affairs Since our Founding, the United States has been blessed with men and women willing to serve in defense of our Nation and our ideals. Many of those answering the call to serve make the ultimate sacrifice for their country, and many others carry physical and emotional scars for the rest of their lives. The Higher Education Act of 1965 [20 U.S.C. 1001 et seq.], as amended by the Higher Education Opportunity Act in 2008 and other acts (Higher Education Act), hon- ors veterans who are totally and permanently disabled as a result of their service to the Nation by providing for the discharge of their Federal student loan debt. Borrowers who have been determined by the Secretary of Veterans Affairs to be unemployable due to a serv- ice-connected condition and who provide documenta- tion of that determination to the Secretary of Edu- cation are entitled to the discharge of such debt. For the last decade, veterans seeking loan discharges have been required to submit an application to the Sec- retary of Education with proof of their disabilities ob- tained from the Department of Veterans Affairs. The process has been overly complicated and difficult, and prevented too many of our veterans from receiving the relief for which they are eligible. This has inflicted sig- nificant hardship and serious harm on these veterans and has frustrated the intent of the Congress that their Federal student loan debt be discharged. Only half of the approximately 50,000 totally and per- manently disabled veterans who currently qualify for the discharge of their Federal student loan debt have availed themselves of the benefits provided to them by the Higher Education Act. This has created a serious and critical problem for disabled veterans, who must deal with the day-to-day consequences of their service- connected injuries, and for our military, as readiness and recruitment suffer when we do not take care of our veterans. There is a pressing need to quickly and effec- tively resolve this problem. Therefore, my Administra- tion will take prompt action to ensure that all totally and permanently disabled veterans are able to obtain, with minimal burden, the Federal student loan debt discharges to which they are legally entitled. Accordingly, by the authority vested in me as Presi- dent by the Constitution and the laws of the United States of America, and to express the gratitude of our Nation for the service of our totally and permanently disabled veterans, I hereby direct the following: SECTION 1. Policy. It shall be the policy of the Federal Government to facilitate—in a manner that is quick, efficient, and minimally burdensome—the discharge of Federal student loan debt for totally and permanently disabled veterans. SEC. 2. Directive to the Secretaries of Education and Vet- erans Affairs. (a) The Secretary of Education is hereby directed to develop as soon as practicable a process, consistent with applicable law, to facilitate the swift and effective discharge of the Federal student loan debt of totally and permanently disabled veterans pursuant to section 437 of the Higher Education Act, 20 U.S.C. 1087; section 455 of the Higher Education Act, 20 U.S.C. 1087e; and section 464 of the Higher Education Act, 20 U.S.C. 1087dd. To the maximum extent feasible and con- sistent with applicable law, the process developed by the Secretary of Education should account for and make use of disability determinations made available to the Secretary of Education by the Department of Veterans Affairs. (b) The Secretaries of Education and Veterans Affairs (Secretaries) shall take appropriate action to imple- ment the policy set forth in section 1 of this memo- randum as expeditiously as possible. To that end, the Secretaries shall consider all pathways for the Depart- ment of Veterans Affairs to share disability determina- tions with the Department of Education, so that vet- erans may be relieved of the burdensome administra- tive impediments to Federal student loan debt dis- charge. SEC. 3. Definitions. As used in this memorandum: (a) the term ‘‘Federal student loan debt’’ means li- ability to repay Federal Family Education Loan (FFEL) Program loans, William D. Ford Federal Direct Loan (Direct Loan) Program loans, and Federal Per- kins Loans. (b) the term ‘‘discharge’’ means discharge of FFEL Program loans and Direct Loan Program loans and can- cellation of Federal Perkins Loans. SEC. 4. General Provisions. (a) Nothing in this memo- randum shall be construed to impair or otherwise af- fect: (i) the authority granted by law to an executive de- partment or agency, or the head thereof; or (ii) the functions of the Director of the Office of Man- agement and Budget relating to budgetary, administra- tive, or legislative proposals. (b) This memorandum shall be implemented con- sistent with applicable law and subject to the avail- ability of appropriations. (c) This memorandum is not intended to, and does not, create any right or benefit, substantive or proce- dural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person. Page 512 TITLE 20—EDUCATION § 1087–0 (d) The Secretary of Education is hereby authorized and directed to publish this memorandum in the Fed- eral Register. DONALD J. TRUMP. § 1087–0. Repealed. Pub. L. 105–244, title IV, § 432, Oct. 7, 1998, 112 Stat. 1710 Section, Pub. L. 89–329, title IV, § 437A, as added Pub. L. 102–325, title IV, § 429, July 23, 1992, 106 Stat. 552; amended Pub. L. 103–208, § 2(c)(66)–(68), Dec. 20, 1993, 107 Stat. 2469, related to debt management options. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal effective Oct. 1, 1998, except as otherwise pro- vided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as an Effective Date of 1998 Amendment note under section 1001 of this title. § 1087–1. Special allowances (a) Findings In order to assure (1) that the limitation on in- terest payments or other conditions (or both) on loans made or insured under this part, do not impede or threaten to impede the carrying out of the purposes of this part or do not cause the return to holders of loans to be less than equi- table, (2) that incentive payments on such loans are paid promptly to eligible lenders, and (3) that appropriate consideration of relative ad- ministrative costs and money market conditions is made in setting the quarterly rate of such payments, the Congress finds it necessary to es- tablish an improved method for the determina- tion of the quarterly rate of the special allow- ances on such loans, and to provide for a thor- ough, expeditious, and objective examination of alternative methods for the determination of the quarterly rate of such allowances. (b) Computation and payment (1) Quarterly payment based on unpaid bal- ance A special allowance shall be paid for each of the 3-month periods ending March 31, June 30, September 30, and December 31 of every year and the amount of such allowance paid to any holder with respect to any 3-month period shall be a percentage of the average unpaid balance of principal (not including unearned interest added to principal) of all eligible loans held by such holder during such period. (2) Rate of special allowance (A) Subject to subparagraphs (B), (C), (D), (E), (F), (G), (H), and (I) and paragraph (4), the special allowance paid pursuant to this sub- section on loans shall be computed (i) by de- termining the average of the bond equivalent rates of 91-day Treasury bills auctioned for such 3-month period, (ii) by subtracting the applicable interest rate on such loans from such average, (iii) by adding 3.10 percent to the resultant percent, and (iv) by dividing the resultant percent by 4. If such computation produces a number less than zero, such loans shall be subject to section 1077a(i) of this title. (B)(i) The quarterly rate of the special al- lowance for holders of loans which were made or purchased with funds obtained by the hold- er from the issuance of obligations, the in- come from which is exempt from taxation under title 26 shall be one-half the quarterly rate of the special allowance established under subparagraph (A), except that, in determining the rate for the purpose of this clause, sub- paragraph (A)(iii) shall be applied by sub- stituting ‘‘3.5 percent’’ for ‘‘3.10 percent’’. Such rate shall also apply to holders of loans which were made or purchased with funds ob- tained by the holder from collections or de- fault reimbursements on, or interests or other income pertaining to, eligible loans made or purchased with funds described in the pre- ceding sentence of this subparagraph or from income on the investment of such funds. This subparagraph shall not apply to loans which were made or insured prior to October 1, 1980. (ii) The quarterly rate of the special allow- ance set under clause (i) of this subparagraph shall not be less than 9.5 percent minus the ap- plicable interest rate on such loans, divided by 4. (iii) No special allowance may be paid under this subparagraph unless the issuer of such ob- ligations complies with subsection (d) of this section. (iv) Notwithstanding clauses (i) and (ii), the quarterly rate of the special allowance for holders of loans which are financed with funds obtained by the holder from the issuance of obligations originally issued on or after Octo- ber 1, 1993, or refunded after September 30, 2004, the income from which is excluded from gross income under title 26, shall be the quar- terly rate of the special allowance established under subparagraph (A), (E), (F), (G), (H), or (I) as the case may be. Such rate shall also apply to holders of loans which were made or pur- chased with funds obtained by the holder from collections or default reimbursements on, or interest or other income pertaining to, eligible loans made or purchased with funds described in the preceding sentence of this subparagraph or from income on the investment of such funds. (v) Notwithstanding clauses (i) and (ii), the quarterly rate of the special allowance shall be the rate determined under subparagraph (A), (E), (F), (G), (H), or (I) of this paragraph, or paragraph (4), as the case may be, for a holder of loans that— (I) were made or purchased with funds— (aa) obtained from the issuance of obli- gations the income from which is excluded from gross income under title 26 and which obligations were originally issued before October 1, 1993; or (bb) obtained from collections or default reimbursements on, or interest or other in- come pertaining to, eligible loans made or purchased with funds described in division (aa), or from income on the investment of such funds; and (II) are— (aa) financed by such an obligation that, after September 30, 2004, has matured or been retired or defeased; (bb) refinanced after September 30, 2004, with funds obtained from a source other than funds described in subclause (I) of this clause; or