20 U.S.C. § 1080 — Default of student under Federal loan in-

Page 479 TITLE 20—EDUCATION § 1080 such supplementary reports and statement during the effective period of the loan agree- ment, upon such forms, at such times, and containing such information as the Secretary may prescribe by or pursuant to regulation. (b) Comprehensive insurance coverage certifi- cate (1) Establishment of system by regulation In lieu of requiring a separate insurance ap- plication and issuing a separate certificate of insurance for each student loan made by an el- igible lender as provided in subsection (a), the Secretary may, in accordance with regulations consistent with section 1074 of this title, issue to any eligible lender applying therefor a cer- tificate of comprehensive insurance coverage which shall, without further action by the Secretary, insure all insurable loans made by that lender, on or after the date of the certifi- cate and before a specified cutoff date, within the limits of an aggregate maximum amount stated in the certificate. Such regulations may provide for conditioning such insurance, with respect to any loan, upon compliance by the lender with such requirements (to be stat- ed or incorporated by reference in the certifi- cate) as in the Secretary’s judgment will best achieve the purpose of this subsection while protecting the United States from the risk of unreasonable loss and promoting the objec- tives of this part, including (but not limited to) provisions as to the reporting of such loans and information relevant thereto to the Sec- retary and as to the payment of initial and other premiums and the effect of default therein, and including provision for confirma- tion by the Secretary from time to time (through endorsement of the certificate) of the coverage of specific new loans by such certifi- cate, which confirmation shall be incontest- able by the Secretary in the absence of fraud or misrepresentation of fact or patent error. (2) Uncovered loans If the holder of a certificate of comprehen- sive insurance coverage issued under this sub- section grants to a student a line of credit ex- tending beyond the cutoff date specified in that certificate, loans or payments thereon made by the holder after that date pursuant to the line of credit shall not be deemed to be in- cluded in the coverage of that certificate ex- cept as may be specifically provided therein; but, subject to the limitations of section 1074 of this title, the Secretary may, in accordance with regulations, make commitments to in- sure such future loans or payments, and such commitments may be honored either as pro- vided in subsection (a) or by inclusion of such insurance on comprehensive coverage under the subsection for the period or periods in which such future loans or payments are made. (c) Charges for Federal insurance The Secretary shall, pursuant to regulations, charge for insurance on each loan under this part a premium in an amount not to exceed one- fourth of 1 percent per year of the unpaid prin- cipal amount of such loan (excluding interest added to principal), payable in advance, at such times and in such manner as may be prescribed by the Secretary. Such regulations may provide that such premium shall not be payable, or if paid shall be refundable, with respect to any pe- riod after default in the payment of principal or interest or after the borrower has died or be- comes totally and permanently disabled, if (1) notice of such default or other event has been duly given, and (2) requests for payment of the loss insured against has been made or the Sec- retary has made such payment on his own mo- tion pursuant to section 1080(a) of this title. (d) Assignability of insurance The rights of an eligible lender arising under insurance evidenced by a certificate of insurance issued to it under this section may be assigned as security by such lender only to another eligi- ble lender, and subject to regulation by the Sec- retary. (e) Consolidation not to affect insurance The consolidation of the obligations of two or more federally insured loans obtained by a stu- dent borrower in any fiscal year into a single ob- ligation evidenced by a single instrument of in- debtedness shall not affect the insurance by the United States. If the loans thus consolidated are covered by separate certificates of insurance issued under subsection (a), the Secretary may upon surrender of the original certificates issue a new certificate of insurance in accordance with that subsection upon the consolidated obli- gation; if they are covered by a single com- prehensive certificate issued under subsection (b), the Secretary may amend that certificate accordingly. (Pub. L. 89–329, title IV, § 429, as added Pub. L. 99–498, title IV, § 402(a), Oct. 17, 1986, 100 Stat. 1395.) Editorial Notes PRIOR PROVISIONS A prior section 1079, Pub. L. 89–329, title IV, § 429, Nov. 8, 1965, 79 Stat. 1243; Pub. L. 94–482, title I, § 127(a), Oct. 12, 1976, 90 Stat. 2123; Pub. L. 96–374, title XIII, § 1391(a)(1), (2), Oct. 3, 1980, 94 Stat. 1503, related to cer- tificates of Federal loan insurance, prior to the general revision of this part by Pub. L. 99–498. § 1080. Default of student under Federal loan in- surance program (a) Notice to Secretary and payment of loss Upon default by the student borrower on any loan covered by Federal loan insurance pursuant to this part, and prior to the commencement of suit or other enforcement proceedings upon se- curity for that loan, the insurance beneficiary shall promptly notify the Secretary, and the Secretary shall if requested (at that time or after further collection efforts) by the bene- ficiary, or may on the Secretary’s own motion, if the insurance is still in effect, pay to the ben- eficiary the amount of the loss sustained by the insured upon that loan as soon as that amount has been determined. The ‘‘amount of the loss’’ on any loan shall, for the purposes of this sub- section and subsection (b), be deemed to be an amount equal to the unpaid balance of the prin- cipal amount and accrued interest, including in- Page 480 TITLE 20—EDUCATION § 1080 terest accruing from the date of submission of a valid default claim (as determined by the Sec- retary) to the date on which payment is author- ized by the Secretary, reduced to the extent re- quired by section 1075(b) of this title. Such bene- ficiary shall be required to meet the standards of due diligence in the collection of the loan and shall be required to submit proof that the insti- tution was contacted and other reasonable at- tempts were made to locate the borrower (when the location of the borrower is unknown) and proof that contact was made with the borrower (when the location is known). The Secretary shall make the determination required to carry out the provisions of this section not later than 90 days after the notification by the insurance beneficiary and shall make payment in full on the amount of the beneficiary’s loss pending completion of the due diligence investigation. (b) Effect of payment of loss Upon payment of the amount of the loss pur- suant to subsection (a), the United States shall be subrogated for all of the rights of the holder of the obligation upon the insured loan and shall be entitled to an assignment of the note or other evidence of the insured loan by the insurance beneficiary. If the net recovery made by the Sec- retary on a loan after deduction of the cost of that recovery (including reasonable administra- tive costs and collection costs, to the extent set forth in regulations issued by the Secretary) ex- ceeds the amount of the loss, the excess shall be paid over to the insured. The Secretary may, in attempting to make recovery on such loans, contract with private business concerns, State student loan insurance agencies, or State guar- anty agencies, for payment for services rendered by such concerns or agencies in assisting the Secretary in making such recovery. Any con- tract under this subsection entered into by the Secretary shall provide that attempts to make recovery on such loans shall be fair and reason- able, and do not involve harassment, intimida- tion, false or misleading representations, or un- necessary communications concerning the exist- ence of any such loan to persons other than the student borrower. (c) Forbearance not precluded Nothing in this section or in this part shall be construed to preclude any forbearance for the benefit of the student borrower which may be agreed upon by the parties to the insured loan and approved by the Secretary, or to preclude forbearance by the Secretary in the enforcement of the insured obligation after payment on that insurance. Any forbearance which is approved by the Secretary under this subsection with re- spect to the repayment of a loan, including a forbearance during default, shall not be consid- ered as indicating that a holder of a federally in- sured loan has failed to exercise reasonable care and due diligence in the collection of the loan. (d) Care and diligence required of holders Nothing in this section or in this part shall be construed to excuse the holder of a federally in- sured loan from exercising reasonable care and diligence in the making and collection of loans under the provisions of this part. If the Sec- retary, after a reasonable notice and oppor- tunity for hearing to an eligible lender, finds that it has substantially failed to exercise such care and diligence or to make the reports and statements required under section 1078(a)(4) of this title and section 1079(a)(3) of this title, or to pay the required Federal loan insurance pre- miums, the Secretary shall disqualify that lend- er for further Federal insurance on loans grant- ed pursuant to this part until the Secretary is satisfied that its failure has ceased and finds that there is reasonable assurance that the lend- er will in the future exercise necessary care and diligence or comply with such requirements, as the case may be. (e) Default rate of lenders, holders, and guaranty agencies (1) In general The Secretary shall annually publish a list indicating the cohort default rate (determined in accordance with section 1085(m) of this title) for each originating lender, subsequent holder, and guaranty agency participating in the program assisted under this part and an average cohort default rate for all institutions of higher education within each State. (2) Regulations The Secretary shall prescribe regulations de- signed to prevent an institution from evading the application to that institution of a cohort default rate through the use of such measures as branching, consolidation, change of owner- ship or control, or any similar device. (3) Rate establishment and correction The Secretary shall establish a cohort de- fault rate for lenders, holders, and guaranty agencies (determined consistent with section 1085(m) of this title), except that the rate for lenders, holders, and guaranty agencies shall not reflect any loans issued in accordance with section 1078(j) of this title. The Secretary shall allow institutions, lenders, holders, and guaranty agencies the opportunity to correct such cohort default rate information. (Pub. L. 89–329, title IV, § 430, as added Pub. L. 99–498, title IV, § 402(a), Oct. 17, 1986, 100 Stat. 1397; amended Pub. L. 102–325, title IV, § 423, July 23, 1992, 106 Stat. 543; Pub. L. 105–244, title IV, § 426, Oct. 7, 1998, 112 Stat. 1702.) Editorial Notes PRIOR PROVISIONS A prior section 1080, Pub. L. 89–329, title IV, § 430, Nov. 8, 1965, 79 Stat. 1244; Pub. L. 90–575, title I, § 113(b)(5), Oct. 16, 1968, 82 Stat. 1021; Pub. L. 92–318, title I, § 132B(c), June 23, 1972, 86 Stat. 262; Pub. L. 94–482, title I, § 127(a), Oct. 12, 1976, 90 Stat. 2125; Pub. L. 95–43, § 1(a)(33), June 15, 1977, 91 Stat. 216; Pub. L. 96–374, title IV, §§ 416(a)(1), (b), 422, title XIII, § 1391(a)(1), Oct. 3, 1980, 94 Stat. 1420, 1421, 1432, 1503; Pub. L. 99–272, title XVI, §§ 16014(a)(2), 16022, Apr. 7, 1986, 100 Stat. 341, 349, related to default of student borrowers under Federal loan insurance program, prior to the general revision of this part by Pub. L. 99–498. AMENDMENTS 1998—Subsec. (a). Pub. L. 105–244 inserted ‘‘the insti- tution was contacted and other’’ after ‘‘submit proof that’’ in third sentence. 1992—Subsec. (e). Pub. L. 102–325 added subsec. (e). Page 481 TITLE 20—EDUCATION § 1080a 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. STUDY OF FRAUD-BASED DEFENSES Pub. L. 102–325, title XIV, § 1403, July 23, 1992, 106 Stat. 817, directed Secretary of Education to conduct a study of impact of fraud-based defenses on Federal Family Education Loan Program and to submit a re- port to Congress on the study not later than 19 months after July 23, 1992, prior to repeal by Pub. L. 105–332, § 6(b)(2), Oct. 31, 1998, 112 Stat. 3128. § 1080a. Reports to consumer reporting agencies and institutions of higher education (a) Agreements to exchange information For the purpose of promoting responsible re- payment of loans covered by Federal loan insur- ance pursuant to this part or covered by a guar- anty agreement pursuant to section 1078 of this title, the Secretary and each guaranty agency, eligible lender, and subsequent holder shall enter into an agreement with each consumer re- porting agency to exchange information con- cerning student borrowers, in accordance with the requirements of this section. For the pur- pose of assisting such consumer reporting agen- cies in complying with the Fair Credit Report- ing Act [15 U.S.C. 1681 et seq.], such agreements may provide for timely response by the Sec- retary (concerning loans covered by Federal loan insurance) or by a guaranty agency, eligi- ble lender, or subsequent holder (concerning loans covered by a guaranty agreement), or to requests from such consumer reporting agencies for responses to objections raised by borrowers. Subject to the requirements of subsection (c), such agreements shall require the Secretary or the guaranty agency, eligible lender, or subse- quent holder, as appropriate, to disclose to such consumer reporting agencies, with respect to any loan under this part that has not been re- paid by the borrower— (1) that the loan is an education loan (as such term is defined in section 1019 of this title); (2) the total amount of loans made to any borrower under this part and the remaining balance of the loans; (3) information concerning the repayment status of the loan for inclusion in the file of the borrower, except that nothing in this sub- section shall be construed to affect any other- wise applicable provision of the Fair Credit Reporting Act (15 U.S.C. 1681 et seq.); (4) information concerning the date of any default on the loan and the collection of the loan, including information concerning the re- payment status of any defaulted loan on which the Secretary has made a payment pursuant to section 1080(a) of this title or the guaranty agency has made a payment to the previous holder of the loan; and (5) the date of cancellation of the note upon completion of repayment by the borrower of the loan or payment by the Secretary pursu- ant to section 1087 of this title. (b) Additional information Such agreements may also provide for the dis- closure by such consumer reporting agencies to the Secretary or a guaranty agency, whichever insures or guarantees a loan, upon receipt of a notice under subsection (a)(4) that such a loan is in default, of information concerning the bor- rower’s location or other information which may assist the Secretary, the guaranty agency, the eligible lender, or the subsequent holder in collecting the loan. (c) Contents of agreements Agreements entered into pursuant to this sec- tion shall contain such provisions as may be necessary to ensure that— (1) no information is disclosed by the Sec- retary or the guaranty agency, eligible lender, or subsequent holder unless its accuracy and completeness have been verified and the Sec- retary or the guaranty agency has determined that disclosure would accomplish the purpose of this section; (2) as to any information so disclosed, such consumer reporting agencies will be promptly notified of, and will promptly record, any change submitted by the Secretary, the guar- anty agency, eligible lender, or subsequent holder with respect to such information, or any objections by the borrower with respect to any such information, as required by section 611 of the Fair Credit Reporting Act (15 U.S.C. 1681i); (3) no use will be made of any such informa- tion which would result in the use of collec- tion practices with respect to such a borrower that are not fair and reasonable or that in- volve harassment, intimidation, false or mis- leading representations, or unnecessary com- munication concerning the existence of such loan or concerning any such information; and (4) with regard to notices of default under subsection (a)(4) of this section, except for dis- closures made to obtain the borrower’s loca- tion, the Secretary, or the guaranty agency, eligible lender, or subsequent holder which- ever is applicable (A) shall not disclose any such information until the borrower has been notified that such information will be dis- closed to consumer reporting agencies unless the borrower enters into repayment of his or her loan, but (B) shall, if the borrower has not entered into repayment within a reasonable period of time, but not less than 30 days, from the date such notice has been sent to the bor- rower, disclose the information required by this subsection. (d) Contractor status of participants A guaranty agency, eligible lender, or subse- quent holder or consumer reporting agency which discloses or receives information under this section shall not be considered a Govern- ment contractor within the meaning of section 552a of title 5. (e) Disclosure to institutions The Secretary and each guaranty agency, eli- gible lender, and subsequent holder of a loan are authorized to disclose information described in subsections (a) and (b) concerning student bor- rowers to the eligible institutions such bor-