20 U.S.C. § 1072 — Advances for reserve funds of State and

Page 395 TITLE 20—EDUCATION § 1072 students to establish multiple year lines of credit with eligible lenders, on the impact of the multiple disburse- ment system on the ability of students and institutions of higher education to meet expenses, and on the cost, efficiency, and impact of the consolidation loan pro- gram established by Pub. L. 99–498, and directed Comp- troller General to make and submit a report to Con- gress on each study not later than two years after Oct. 17, 1986, prior to repeal by Pub. L. 105–332, § 6(a), Oct. 31, 1998, 112 Stat. 3127. § 1072. Advances for reserve funds of State and nonprofit private loan insurance programs (a) Purpose of and authority for advances to re- serve funds (1) Purpose; eligible recipients From sums appropriated pursuant to para- graphs (3) and (4)(A) of section 1071(b) of this title, the Secretary is authorized to make ad- vances to any State with which the Secretary has made an agreement pursuant to section 1078(b) of this title for the purpose of helping to establish or strengthen the reserve fund of the student loan insurance program covered by that agreement. If for any fiscal year a State does not have a student loan insurance program covered by an agreement made pursu- ant to section 1078(b) of this title, and the Sec- retary determines after consultation with the chief executive officer of that State that there is no reasonable likelihood that the State will have such a student loan insurance program for such year, the Secretary may make ad- vances for such year for the same purpose to one or more nonprofit private institutions or organizations with which the Secretary has made an agreement pursuant to section 1078(b) of this title in order to enable students in the State to participate in a program of student loan insurance covered by such an agreement. The Secretary may make advances under this subsection both to a State program (with which he has such an agreement) and to one or more nonprofit private institutions or organi- zations (with which he has such an agreement) in that State if he determines that such ad- vances are necessary in order that students in each eligible institution have access through such institution to a student loan insurance program which meets the requirements of sec- tion 1078(b)(1) of this title. (2) Matching requirement No advance shall be made after June 30, 1968, unless matched by an equal amount from non- Federal sources. Such equal amount may in- clude the unencumbered non-Federal portion of a reserve fund. As used in the preceding sen- tence, the term ‘‘unencumbered non-Federal portion’’ means the amount (determined as of the time immediately preceding the making of the advance) of the reserve fund less the great- er of— (A) the sum of— (i) advances made under this section prior to July 1, 1968; (ii) an amount equal to twice the amount of advances made under this section after June 30, 1968, and before the advance for purposes of which the determination is made; and (iii) the proceeds of earnings on advances made under this section; or (B) any amount which is required to be maintained in such fund pursuant to State law or regulation, or by agreement with lenders, as a reserve against the insurance of outstanding loans. Except as provided in section 1078(c)(9)(E) or (F) of this title, such unencumbered non-Fed- eral portion shall not be subject to recall, re- payment, or recovery by the Secretary. (3) Terms and conditions; repayment Advances pursuant to this subsection shall be upon such terms and conditions (including conditions relating to the time or times of payment) consistent with the requirements of section 1078(b) of this title as the Secretary determines will best carry out the purpose of this section. Advances made by the Secretary under this subsection shall be repaid within such period as the Secretary may deem to be appropriate in each case in the light of the maturity and solvency of the reserve fund for which the advance was made. (b) Limitations on total advances (1) In general The total of the advances from the sums ap- propriated pursuant to paragraph (4)(A) of sec- tion 1071(b) of this title to nonprofit private institutions and organizations for the benefit of students in any State and to such State may not exceed an amount which bears the same ratio to such sums as the population of such State aged 18 to 22, inclusive, bears to the population of all the States aged 18 to 22 inclu- sive, but such advances may otherwise be in such amounts as the Secretary determines will best achieve the purposes for which they are made. The amount available for advances to any State shall not be less than $25,000 and any additional funds needed to meet this re- quirement shall be derived by proportionately reducing (but not below $25,000) the amount available for advances to each of the remain- ing States. (2) Calculation of population For the purpose of this subsection, the popu- lation aged 18 to 22, inclusive, of each State and of all the States shall be determined by the Secretary on the basis of the most recent satisfactory data available to him. (c) Advances for insurance obligations (1) Use for payment of insurance obligations From sums appropriated pursuant to section 1071(b)(4)(B) of this title, the Secretary shall advance to each State which has an agreement with the Secretary under section 1078(c) of this title with respect to a student loan insurance program, an amount determined in accordance with paragraph (2) of this subsection to be used for the purpose of making payments under the State’s insurance obligations under such program. (2) Amount of advances (A) Except as provided in subparagraph (B), the amount to be advanced to each such State Page 396 TITLE 20—EDUCATION § 1072 shall be equal to 10 percent of the principal amount of loans made by lenders and insured by such agency on those loans on which the first payment of principal became due during the fiscal year immediately preceding the fis- cal year in which the advance is made. (B) The amount of any advance determined according to subparagraph (A) of this para- graph shall be reduced by— (i) the amount of any advance or advances made to such State pursuant to this sub- section at an earlier date; and (ii) the amount of the unspent balance of the advances made to a State pursuant to subsection (a). Notwithstanding subparagraph (A) and the preceding sentence of this subparagraph, but subject to subparagraph (D) of this paragraph, the amount of any advance to a State de- scribed in paragraph (5)(A) for the first year of its eligibility under such paragraph, and the amount of any advance to any State described in paragraph (5)(B) for each year of its eligi- bility under such paragraph, shall not be less than $50,000. (C) For the purpose of subparagraph (B), the unspent balance of the advances made to a State pursuant to subsection (a) shall be that portion of the balance of the State’s reserve fund (remaining at the time of the State’s first request for an advance pursuant to this subsection) which bears the same ratio to such balance as the Federal advances made and not returned by such State, pursuant to sub- section (a), bears to the total of all past con- tributions to such reserve funds from all sources (other than interest on investment of any portion of the reserve fund) contributed since the date such State executed an agree- ment pursuant to section 1078(b) of this title. (D) If the sums appropriated for any fiscal year for paying the amounts determined under subparagraphs (A) and (B) are not sufficient to pay such amounts in full, then such amounts shall be reduced— (i) by ratably reducing that portion of the amount allocated to each State which ex- ceeds $50,000; and (ii) if further reduction is required, by equally reducing the $50,000 minimum allo- cation of each State. If additional sums become available for paying such amounts for any fiscal year during which the preceding sentence has been applied, such reduced amounts shall be increased on the same basis as they were reduced. (3) Use of earnings for insurance obligations The earnings, if any, on any investments of advances received pursuant to this subsection must be used for making payments under the State’s insurance obligations. (4) Repayment of advances Advances made by the Secretary under this subsection shall, subject to subsection (d), be repaid within such period as the Secretary may deem to be appropriate and shall be de- posited in the fund established by section 1081 of this title. (5) Limitation on number of advances Except as provided in paragraph (7), ad- vances pursuant to this subsection shall be made to a State— (A) in the case of a State which is actively carrying on a program under an agreement pursuant to section 1078(b) of this title which was entered into before October 12, 1976, upon such date as such State may re- quest, but not before October 1, 1977, and on the same day of each of the 2 succeeding cal- endar years after the date so requested; and (B) in the case of a State which enters into an agreement pursuant to section 1078(b) of this title on or after October 12, 1976, or which is not actively carrying on a program under an agreement pursuant to such sec- tion on such date, upon such date as such State may request, but not before October 1, 1977, and on the same day of each of the 4 succeeding calendar years after the date so requested of the advance. (6) Payment of advances where no State pro- gram (A) If for any fiscal year a State does not have a student loan insurance program cov- ered by an agreement made pursuant to sec- tion 1078(b) of this title, and the Secretary de- termines after consultation with the chief ex- ecutive officer of that State that there is no reasonable likelihood that the State will have such a student loan insurance program for such year, the Secretary may make advances pursuant to this subsection for such year for the same purpose to one or more nonprofit pri- vate institutions or organizations with which he has made an agreement pursuant to sub- section (c), as well as subsection (b), of section 1078 of this title and subparagraph (B) of this paragraph in order to enable students in that State to participate in a program of student loan insurance covered by such agreements. (B) The Secretary may enter into an agree- ment with a private nonprofit institution or organization for the purpose of this paragraph under which such institution or organization— (i) agrees to establish within such State at least one office with sufficient staff to han- dle written, electronic, and telephone inquir- ies from students, eligible lenders, and other persons in the State, to encourage maximum commercial lender participation within the State, and to conduct periodic visits to at least the major eligible lenders within the State; (ii) agrees that its insurance will not be denied any student because of his or her choice of eligible institutions; and (iii) certifies that it is neither an eligible institution, nor has any substantial affili- ation with an eligible institution. (7) Emergency advances The Secretary is authorized to make ad- vances, on terms and conditions satisfactory to the Secretary, to a guaranty agency— (A) in accordance with section 1078(j) of this title, in order to ensure that the guar- anty agency shall make loans as the lender- of-last-resort; or Page 397 TITLE 20—EDUCATION § 1072 (B) if the Secretary is seeking to termi- nate the guaranty agency’s agreement, or assuming the guaranty agency’s functions, in accordance with section 1078(c)(9)(F)(v) of this title, in order to assist the agency in meeting its immediate cash needs, ensure the uninterrupted payment of claims, or en- sure that the guaranty agency shall make loans as described in subparagraph (A). (d) Recovery of advances during fiscal years 1988 and 1989 (1) Amount and use of recovered funds Notwithstanding any other provision of this section, advances made by the Secretary under this section shall be repaid in accord- ance with this subsection and shall be depos- ited in the fund established by section 1081 of this title. The Secretary shall, in accordance with the requirements of paragraph (2), re- cover (and so deposit) an amount equal to $75,000,000 during fiscal year 1988 and an amount equal to $35,000,000 for fiscal year 1989. (2) Determination of guaranty agency obliga- tions In determining the amount of advances which shall be repaid by a guaranty agency under paragraph (1), the Secretary— (A) shall consider the solvency and matu- rity of the reserve and insurance funds of the guaranty agency assisted by such advances, as determined by the Comptroller General taking into account the requirements of State law as in effect on October 17, 1986; (B) shall not seek repayment of such ad- vances from any State described in sub- section (c)(5)(B) during any year of its eligi- bility under such subsection; and (C) shall not seek repayment of such ad- vances from any State if such repayment en- cumbers the reserve fund requirement of State law as in effect on October 17, 1986. (e) Correction for errors under reduction of ex- cess cash reserves (1) In general The Secretary shall pay any guaranty agen- cy the amount of reimbursement of claims under section 1078(c)(1) of this title, filed be- tween September 1, 1988, and December 31, 1989, which were previously withheld or can- celed in order to be applied to satisfy such agency’s obligation to eliminate excess cash reserves held by such agency, based on the maximum cash reserve (as described in sub- section (e) of this section as in effect on Sep- tember 1, 1988) permitted at the end of 1986, if such maximum cash reserve was miscalculated because of erroneous financial information provided by such agency to the Secretary and if (A) such erroneous information is verified by an audited financial statement of the re- serve fund, signed by a certified public ac- countant, and (B) such audited financial state- ment is provided to the Secretary prior to January 1, 1993. (2) Amount The amount of reimbursement for claims shall be equal to the amount of reimburse- ment for claims withheld or canceled in order to be applied to such agency’s obligation to eliminate excess cash reserves which exceeds the amount of that which would have been withheld or canceled if the maximum excess cash reserves had been accurately calculated. (f) Refund of cash reserve payments The Secretary shall, within 30 days after July 23, 1992, pay the full amount of payments with- held or canceled under paragraph (3) of this sub- section to any guaranty agency which— (1) was required to eliminate excess cash re- serves, based on the maximum cash reserve (as described in subsection (e) of this section as in effect on September 1, 1988) permitted at the end of 1986; (2) appealed the Secretary’s demand that such agency should eliminate such excess cash reserves and received a waiver of a portion of the amount of such excess cash reserves to be eliminated; (3) had payments under section 1078(c)(1) of this title or section 1078(f) of this title pre- viously withheld or canceled in order to be ap- plied to satisfy such agency’s obligation to eliminate excess cash reserves held by such agency, based on the maximum cash reserve (as described in subsection (e) of this section as in effect on September 1, 1988) permitted at the end of 1986; and (4) according to a Department of Education review that was completed and forwarded to such guaranty agency prior to January 1, 1992, is expected to become insolvent during or be- fore 1996 and the payments withheld or can- celed under paragraph (3) of this subsection are a factor in such agency’s impending insol- vency. (g) Preservation and recovery of guaranty agen- cy reserves (1) Authority to recover funds Notwithstanding any other provision of law, the reserve funds of the guaranty agencies, and any assets purchased with such reserve funds, regardless of who holds or controls the reserves or assets, shall be considered to be the property of the United States to be used in the operation of the program authorized by this part. However, the Secretary may not re- quire the return of all reserve funds of a guar- anty agency to the Secretary unless the Sec- retary determines that such return is in the best interest of the operation of the program authorized by this part, or to ensure the prop- er maintenance of such agency’s funds or as- sets or the orderly termination of the guar- anty agency’s operations and the liquidation of its assets. The reserves shall be maintained by each guaranty agency to pay program ex- penses and contingent liabilities, as author- ized by the Secretary, except that— (A) the Secretary may direct a guaranty agency to return to the Secretary a portion of its reserve fund which the Secretary de- termines is unnecessary to pay the program expenses and contingent liabilities of the guaranty agency; (B) the Secretary may direct the guaranty agency to require the return, to the guar- anty agency or to the Secretary, of any re- Page 398 TITLE 20—EDUCATION § 1072 serve funds or assets held by, or under the control of, any other entity, which the Sec- retary determines are necessary to pay the program expenses and contingent liabilities of the guaranty agency, or which are re- quired for the orderly termination of the guaranty agency’s operations and the liq- uidation of its assets; (C) the Secretary may direct a guaranty agency, or such agency’s officers or direc- tors, to cease any activities involving ex- penditure, use or transfer of the guaranty agency’s reserve funds or assets which the Secretary determines is a misapplication, misuse, or improper expenditure of such funds or assets; and (D) any such determination under subpara- graph (A) or (B) shall be based on standards prescribed by regulations that are developed through negotiated rulemaking and that in- clude procedures for administrative due process. (2) Termination provisions in contracts (A) To ensure that the funds and assets of the guaranty agency are preserved, any con- tract with respect to the administration of a guaranty agency’s reserve funds, or the admin- istration of any assets purchased or acquired with the reserve funds of the guaranty agency, that is entered into or extended by the guar- anty agency, or any other party on behalf of or with the concurrence of the guaranty agen- cy, after August 10, 1993, shall provide that the contract is terminable by the Secretary upon 30 days notice to the contracting parties if the Secretary determines that such contract in- cludes an impermissible transfer of the reserve funds or assets, or is otherwise inconsistent with the terms or purposes of this section. (B) The Secretary may direct a guaranty agency to suspend or cease activities under any contract entered into by or on behalf of such agency after January 1, 1993, if the Sec- retary determines that the misuse or improper expenditure of such guaranty agency’s funds or assets or such contract provides unneces- sary or improper benefits to such agency’s of- ficers or directors. (3) Penalties Violation of any direction issued by the Sec- retary under this subsection may be subject to the penalties described in section 1097 of this title. (4) Availability of funds Any funds that are returned or otherwise re- covered by the Secretary pursuant to this sub- section shall be available for expenditure for expenses pursuant to section 1087h of this title. (h) Recall of reserves; limitations on use of re- serve funds and assets (1) In general Notwithstanding any other provision of law, the Secretary shall, except as otherwise pro- vided in this subsection, recall $1,000,000,000 from the reserve funds held by guaranty agen- cies on September 1, 2002. (2) Deposit Funds recalled by the Secretary under this subsection shall be deposited in the Treasury. (3) Required share The Secretary shall require each guaranty agency to return reserve funds under para- graph (1) based on the agency’s required share of recalled reserve funds held by guaranty agencies as of September 30, 1996. For purposes of this paragraph, a guaranty agency’s re- quired share of recalled reserve funds shall be determined as follows: (A) The Secretary shall compute each guaranty agency’s reserve ratio by dividing (i) the amount held in the agency’s reserve funds as of September 30, 1996 (but reflecting later accounting or auditing adjustments ap- proved by the Secretary), by (ii) the original principal amount of all loans for which the agency has an outstanding insurance obliga- tion as of such date, including amounts of outstanding loans transferred to the agency from another guaranty agency. (B) If the reserve ratio of any guaranty agency as computed under subparagraph (A) exceeds 2.0 percent, the agency’s required share shall include so much of the amounts held in the agency’s reserve funds as exceed a reserve ratio of 2.0 percent. (C) If any additional amount is required to be recalled under paragraph (1) (after de- ducting the total of the required shares cal- culated under subparagraph (B)), such addi- tional amount shall be obtained by imposing on each guaranty agency an equal percent- age reduction in the amount of the agency’s reserve funds remaining after deduction of the amount recalled under subparagraph (B), except that such percentage reduction under this subparagraph shall not result in the agency’s reserve ratio being reduced below 0.58 percent. The equal percentage reduction shall be the percentage obtained by divid- ing— (i) the additional amount required to be recalled (after deducting the total of the required shares calculated under subpara- graph (B)), by (ii) the total amount of all such agen- cies’ reserve funds remaining (after deduc- tion of the required shares calculated under such subparagraph). (D) If any additional amount is required to be recalled under paragraph (1) (after de- ducting the total of the required shares cal- culated under subparagraphs (B) and (C)), such additional amount shall be obtained by imposing on each guaranty agency with a re- serve ratio (after deducting the required shares calculated under such subparagraphs) in excess of 0.58 percent an equal percentage reduction in the amount of the agency’s re- serve funds remaining (after such deduction) that exceed a reserve ratio of 0.58 percent. The equal percentage reduction shall be the percentage obtained by dividing— (i) the additional amount to be recalled under paragraph (1) (after deducting the amount recalled under subparagraphs (B) and (C)), by Page 399 TITLE 20—EDUCATION § 1072 (ii) the total amount of all such agen- cies’ reserve funds remaining (after deduc- tion of the required shares calculated under such subparagraphs) that exceed a reserve ratio of 0.58 percent. (4) Restricted accounts required (A) In general Within 90 days after the beginning of each of the fiscal years 1998 through 2002, each guaranty agency shall transfer a portion of the agency’s required share determined under paragraph (3) to a restricted account established by the agency that is of a type selected by the agency with the approval of the Secretary. Funds transferred to such re- stricted accounts shall be invested in obliga- tions issued or guaranteed by the United States or in other similarly low-risk securi- ties. (B) Requirement A guaranty agency shall not use the funds in such a restricted account for any purpose without the express written permission of the Secretary, except that a guaranty agen- cy may use the earnings from such re- stricted account for default reduction activi- ties. (C) Installments In each of fiscal years 1998 through 2002, each guaranty agency shall transfer the agency’s required share to such restricted account in 5 equal annual installments, ex- cept that— (i) a guaranty agency that has a reserve ratio (as computed under subparagraph (3)(A)) equal to or less than 1.10 percent may transfer the agency’s required share to such account in 4 equal installments be- ginning in fiscal year 1999; and (ii) a guaranty agency may transfer such required share to such account in accord- ance with such other payment schedules as are approved by the Secretary. (5) Shortage If, on September 1, 2002, the total amount in the restricted accounts described in paragraph (4) is less than the amount the Secretary is re- quired to recall under paragraph (1), the Sec- retary shall require the return of the amount of the shortage from other reserve funds held by guaranty agencies under procedures estab- lished by the Secretary. The Secretary shall first attempt to obtain the amount of such shortage from each guaranty agency that failed to transfer the agency’s required share to the agency’s restricted account in accord- ance with paragraph (4). (6) Enforcement (A) In general The Secretary may take such reasonable measures, and require such information, as may be necessary to ensure that guaranty agencies comply with the requirements of this subsection. (B) Prohibition If the Secretary determines that a guar- anty agency has failed to transfer to a re- stricted account any portion of the agency’s required share under this subsection, the agency may not receive any other funds under this part until the Secretary deter- mines that the agency has so transferred the agency’s required share. (C) Waiver The Secretary may waive the require- ments of subparagraph (B) for a guaranty agency described in such subparagraph if the Secretary determines that there are extenu- ating circumstances beyond the control of the agency that justify such waiver. (7) Limitation (A) Restriction on other authority The Secretary shall not have any author- ity to direct a guaranty agency to return re- serve funds under subsection (g)(1)(A) during the period from August 5, 1997, through Sep- tember 30, 2002. (B) Use of termination collections Any reserve funds directed by the Sec- retary to be returned to the Secretary under subsection (g)(1)(B) during such period that do not exceed a guaranty agency’s required share of recalled reserve funds under para- graph (3)— (i) shall be used to satisfy the agency’s required share of recalled reserve funds; and (ii) shall be deposited in the restricted account established by the agency under paragraph (4), without regard to whether such funds exceed the next installment re- quired under such paragraph. (C) Use of sanctions collections Any reserve funds directed by the Sec- retary to be returned to the Secretary under subsection (g)(1)(C) during such period that do not exceed a guaranty agency’s next in- stallment under paragraph (4)— (i) shall be used to satisfy the agency’s next installment; and (ii) shall be deposited in the restricted account established by the agency under paragraph (4). (D) Balance available to Secretary Any reserve funds directed by the Sec- retary to be returned to the Secretary under subparagraph (B) or (C) of subsection (g)(1) that remain after satisfaction of the require- ments of subparagraphs (B) and (C) of this paragraph shall be deposited in the Treas- ury. (8) Definitions For the purposes of this subsection: (A) Default reduction activities The term ‘‘default reduction activities’’ means activities to reduce student loan de- faults that improve, strengthen, and expand default prevention activities, such as— (i) establishing a program of partial loan cancellation to reward disadvantaged bor- rowers for good repayment histories with their lenders; (ii) establishing a financial and debt management counseling program for high- Page 400 TITLE 20—EDUCATION § 1072 risk borrowers that provides long-term training (beginning prior to the first dis- bursement of the borrower’s first student loan and continuing through the comple- tion of the borrower’s program of edu- cation or training) in budgeting and other aspects of financial management, includ- ing debt management; (iii) establishing a program of placement counseling to assist high-risk borrowers in identifying employment or additional training opportunities; and (iv) developing public service announce- ments that would detail consequences of student loan default and provide informa- tion regarding a toll-free telephone num- ber established by the guaranty agency for use by borrowers seeking assistance in avoiding default. (B) Reserve funds The term ‘‘reserve funds’’ when used with respect to a guaranty agency— (i) includes any reserve funds in cash or liquid assets held by the guaranty agency, or held by, or under the control of, any other entity; and (ii) does not include buildings, equip- ment, or other nonliquid assets. (i) Additional recall of reserves (1) In general Notwithstanding any other provision of law and subject to paragraph (4), the Secretary shall recall, from reserve funds held in the Federal Student Loan Reserve Funds estab- lished under section 1072a of this title by guar- anty agencies— (A) $85,000,000 in fiscal year 2002; (B) $82,500,000 in fiscal year 2006; and (C) $82,500,000 in fiscal year 2007. (2) Deposit Funds recalled by the Secretary under this subsection shall be deposited in the Treasury. (3) Required share The Secretary shall require each guaranty agency to return reserve funds under para- graph (1) on the basis of the agency’s required share. For purposes of this paragraph, a guar- anty agency’s required share shall be deter- mined as follows: (A) Equal percentage The Secretary shall require each guaranty agency to return an amount representing an equal percentage reduction in the amount of reserve funds held by the agency on Sep- tember 30, 1996. (B) Calculation The equal percentage reduction shall be the percentage obtained by dividing— (i) $250,000,000, by (ii) the total amount of all guaranty agencies’ reserve funds held on September 30, 1996, less any amounts subject to recall under subsection (h). (C) Special rule Notwithstanding subparagraphs (A) and (B), the percentage reduction under subpara- graph (B) shall not result in the depletion of the reserve funds of any agency which charges the 1.0 percent insurance premium pursuant to section 1078(b)(1)(H) of this title below an amount equal to the amount of lender claim payments paid during the 90 days prior to the date of the return under this subsection. If any additional amount is required to be returned after deducting the total of the required shares under subpara- graph (B) and as a result of the preceding sentence, such additional amount shall be obtained by imposing on each guaranty agency to which the preceding sentence does not apply, an equal percentage reduction in the amount of the agency’s remaining re- serve funds. (4) Offset of required shares If any guaranty agency returns to the Sec- retary any reserve funds in excess of the amount required under this subsection or sub- section (h), the total amount required to be re- turned under paragraph (1) shall be reduced by the amount of such excess reserve funds re- turned. (5) Definition of reserve funds The term ‘‘reserve funds’’ when used with re- spect to a guaranty agency— (A) includes any reserve funds in cash or liquid assets held by the guaranty agency, or held by, or under the control of, any other entity; and (B) does not include buildings, equipment, or other nonliquid assets. (Pub. L. 89–329, title IV, § 422, as added Pub. L. 99–498, title IV, § 402(a), Oct. 17, 1986, 100 Stat. 1354; amended Pub. L. 100–203, title III, §§ 3001(a), 3002(a), Dec. 22, 1987, 101 Stat. 1330–36, 1330–38; Pub. L. 102–325, title IV, §§ 412, 416(p)(8), July 23, 1992, 106 Stat. 511, 527; Pub. L. 103–66, title IV, §§ 4041(a), (2)(A), 4042, Aug. 10, 1993, 107 Stat. 354, 357; Pub. L. 103–208, § 2(c)(1), Dec. 20, 1993, 107 Stat. 2460; Pub. L. 105–33, title VI, § 6101(a), Aug. 5, 1997, 111 Stat. 648; Pub. L. 105–244, title IV, § 412, Oct. 7, 1998, 112 Stat. 1673.) Editorial Notes CODIFICATION Amendment by Pub. L. 103–208 (which was effective as if included in Pub. L. 102–325) was executed to this sec- tion as amended by Pub. L. 102–325 and Pub. L. 103–66, to reflect the probable intent of Congress. PRIOR PROVISIONS A prior section 1072, Pub. L. 89–329, title IV, § 422, Nov. 8, 1965, 79 Stat. 1236; Pub. L. 89–752, § 11, Nov. 3, 1966, 80 Stat. 1243; Pub. L. 90–575, title I, § 114(b), (c), Oct. 16, 1968, 82 Stat. 1021, 1022; Pub. L. 94–482, title I, § 127(a), Oct. 12, 1976, 90 Stat. 2100; Pub. L. 95–43, § 1(a)(11)–(13), June 15, 1977, 91 Stat. 213, 214; Pub. L. 95–561, title XIII, § 1322(a), Nov. 1, 1978, 92 Stat. 2363; Pub. L. 96–374, title XIII, § 1391(a)(1), Oct. 3, 1980, 94 Stat. 1503; Pub. L. 99–272, title XVI, § 16011, Apr. 7, 1986, 100 Stat. 339, au- thorized advances to establish or strengthen reserve funds of State and nonprofit private loan insurance programs, prior to the general revision of this part by Pub. L. 99–498. AMENDMENTS 1998—Subsec. (a)(2). Pub. L. 105–244, § 412(1), sub- stituted ‘‘section 1078(c)(9)(E)’’ for ‘‘section 1078(c)(10)(E)’’ in concluding provisions. Page 401 TITLE 20—EDUCATION § 1072a 1 See References in Text note below. Subsec. (c)(6)(B)(i). Pub. L. 105–244, § 412(2)(A), sub- stituted ‘‘written, electronic,’’ for ‘‘written’’. Subsec. (c)(7)(A). Pub. L. 105–244, § 412(2)(B), struck out ‘‘during the transition from the Federal Family Education Loan Program under this part to the Federal Direct Student Loan Program under part D of this sub- chapter’’ after ‘‘lender-of-last-resort’’. Subsec. (c)(7)(B). Pub. L. 105–244, § 412(2)(C), sub- stituted ‘‘section 1078(c)(9)(F)(v)’’ for ‘‘section 1078(c)(10)(F)(v)’’. Subsec. (g)(1). Pub. L. 105–244, § 412(3), struck out ‘‘or the program authorized by part D of this subchapter’’ after ‘‘program authorized by this part’’ in first and second sentences. Subsec. (i). Pub. L. 105–244, § 412(4), added subsec. (i). 1997—Subsec. (h). Pub. L. 105–33 added subsec. (h). 1993—Subsec. (c)(7). Pub. L. 103–66, § 4041(a)(2)(A), sub- stituted ‘‘to a guaranty agency—’’ and subpars. (A) and (B) for ‘‘to a guaranty agency in accordance with sec- tion 1078(c)(10)(F)(v) of this title in order to assist the agency in meeting its immediate cash needs and ensure the uninterrupted payment of default claims by lend- ers.’’ Subsec. (c)(7)(B). Pub. L. 103–208 substituted a period for semicolon at end. See Codification note above. Subsec. (g). Pub. L. 103–66, § 4042, added subsec. (g). 1992—Subsec. (a)(2). Pub. L. 102–325, § 412(1), inserted at end ‘‘Except as provided in section 1078(c)(10)(E) or (F) of this title, such unencumbered non-Federal por- tion shall not be subject to recall, repayment, or recov- ery by the Secretary.’’ Subsec. (c)(5), (7). Pub. L. 102–325, § 416(p)(8), sub- stituted ‘‘Except as provided in paragraph (7), ad- vances’’ for ‘‘Advances’’ in par. (5) and added par. (7). Subsecs. (e), (f). Pub. L. 102–325, § 412(2), added sub- secs. (e) and (f). 1987—Subsec. (e). Pub. L. 100–203, § 3002(a), struck out subsec. (e) which related to reduction of excess cash re- serves. Pub. L. 100–203, § 3001(a), added subsec. (e). Statutory Notes and Related Subsidiaries 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. EFFECTIVE DATE OF 1987 AMENDMENT Pub. L. 100–203, title III, § 3002(a), Dec. 22, 1987, 101 Stat. 1330–38, provided that the amendment made by that section is effective Sept. 30, 1989. § 1072a. Federal Student Loan Reserve Fund (a) Establishment Each guaranty agency shall, not later than 60 days after October 7, 1998, deposit all funds, se- curities, and other liquid assets contained in the reserve fund established pursuant to section 1072 of this title into a Federal Student Loan Re- serve Fund (in this section and section 1072b of this title referred to as the ‘‘Federal Fund’’), which shall be an account of a type selected by the agency, with the approval of the Secretary. (b) Investment of funds Funds transferred to the Federal Fund shall be invested in obligations issued or guaranteed by the United States or a State, or in other simi- larly low-risk securities selected by the guar- anty agency, with the approval of the Secretary. Earnings from the Federal Fund shall be the sole property of the Federal Government. (c) Additional deposits After the establishment of the Federal Fund, a guaranty agency shall deposit into the Federal Fund— (1) all amounts received from the Secretary as payment of reinsurance on loans pursuant to section 1078(c)(1) of this title; (2) from amounts collected on behalf of the obligation of a defaulted borrower, a percent- age amount equal to the complement of the reinsurance percentage in effect when pay- ment under the guaranty agreement was made— (A) with respect to the defaulted loan pur- suant to sections 1078(c)(6)(A) 1 and 1078–6(a)(1)(B) of this title; and (B) with respect to a loan that the Sec- retary has repaid or discharged under sec- tion 1087 of this title; (3) insurance premiums collected from bor- rowers pursuant to sections 1078(b)(1)(H) and 1078–8(h) of this title; (4) all amounts received from the Secretary as payment for supplemental preclaims activ- ity performed prior to October 7, 1998; (5) 70 percent of amounts received after Oc- tober 7, 1998, from the Secretary as payment for administrative cost allowances for loans upon which insurance was issued prior to Oc- tober 7, 1998; and (6) other receipts as specified in regulations of the Secretary. (d) Uses of funds Subject to subsection (f), the Federal Fund may only be used by a guaranty agency— (1) to pay lender claims pursuant to sections 1078(b)(1)(G), 1078(j), and 1087 of this title; and (2) to pay into the Agency Operating Fund established pursuant to section 1072b of this title (in this section and section 1072b of this title referred to as the ‘‘Operating Fund’’) a default aversion fee in accordance with section 1078(l) of this title. (e) Ownership of Federal Fund The Federal Fund, and any nonliquid asset (such as a building or equipment) developed or purchased by the guaranty agency in whole or in part with Federal reserve funds, regardless of who holds or controls the Federal reserve funds or such asset, shall be considered to be the prop- erty of the United States, prorated based on the percentage of such asset developed or purchased with Federal reserve funds, which property shall be used in the operation of the program author- ized by this part, as provided in subsection (d). The Secretary may restrict or regulate the use of such asset only to the extent necessary to reasonably protect the Secretary’s prorated share of the value of such asset. The Secretary may direct a guaranty agency, or such agency’s officers or directors, to cease any activity in-