20 U.S.C. § 1066b — Federal insurance for bonds

Page 305 TITLE 20—EDUCATION § 1066b 1 See References in Text note below. (H) any real property or interest therein underlying facilities described in subpara- graph (A) or (G). (6) The term ‘‘interest’’ includes accredited value or any other payment constituting in- terest on an obligation. (7) The term ‘‘outstanding’’, when used with respect to bonds, shall not include bonds the payment of which shall have been provided for by the irrevocable deposit in trust of obliga- tions maturing as to principal and interest in such amounts and at such times as will ensure the availability of sufficient moneys to make payments on such bonds. (8) The term ‘‘designated bonding authority’’ means the private, for-profit corporation se- lected by the Secretary pursuant to section 1066d(1) of this title for the purpose of issuing taxable capital project construction bonds in furtherance of the purposes of this part. (9) The term ‘‘Advisory Board’’ means the Advisory Board established by section 1066f of this title. (Pub. L. 89–329, title III, § 342, formerly title VII, § 722, as added Pub. L. 102–325, title VII, § 704, July 23, 1992, 106 Stat. 742; renumbered title III, § 342, and amended Pub. L. 105–244, title III, §§ 301(a)(3), (4), (c)(4), 306(a), Oct. 7, 1998, 112 Stat. 1636, 1637, 1646; Pub. L. 110–315, title III, §§ 314(a), 320(1), Aug. 14, 2008, 122 Stat. 3180, 3187.) Editorial Notes CODIFICATION Section was formerly classified to section 1132c–1 of this title prior to renumbering by Pub. L. 105–244. PRIOR PROVISIONS A prior section 342 of Pub. L. 89–329 was classified to section 1067 of this title prior to the general amend- ment of this subchapter by Pub. L. 99–498. AMENDMENTS 2008—Par. (5). Pub. L. 110–315, § 320(1)(A), inserted a comma after ‘‘1066c(b) of this title’’ in introductory provisions. Par. (5)(C). Pub. L. 110–315, § 320(1)(B), substituted ‘‘equipment, technology,’’ for ‘‘equipment tech- nology,,’’. Par. (5)(G). Pub. L. 110–315, § 314(a)(1), substituted ‘‘by an accrediting agency or association recognized by the Secretary under subpart 2 of part H of subchapter IV’’ for ‘‘by a nationally recognized accrediting agency or association’’. Par. (8). Pub. L. 110–315, § 314(a)(2), inserted ‘‘capital project’’ after ‘‘issuing taxable’’. 1998—Par. (3). Pub. L. 105–244, § 301(c)(4)(A), sub- stituted ‘‘section 1066b(b)’’ for ‘‘section 1132c–2(b)’’. Par. (4). Pub. L. 105–244, § 301(c)(4)(B), substituted ‘‘section 1066b’’ for ‘‘section 1132c–2’’. Par. (5). Pub. L. 105–244, § 301(c)(4)(C), substituted ‘‘section 1066c(b)’’ for ‘‘section 1132c–3(b)’’ in introduc- tory provisions. Par. (5)(B). Pub. L. 105–244, § 306(a)(2), added subpar. (B). Former subpar. (B) redesignated (C). Par. (5)(C). Pub. L. 105–244, § 306(a)(1), (3), redesignated subpar. (B) as (C) and inserted ‘‘technology,’’ after ‘‘in- structional equipment’’. Former subpar. (C) redesig- nated (G). Par. (5)(D) to (F). Pub. L. 105–244, § 306(a)(4), added subpars. (D) to (F). Former subpar. (D) redesignated (H). Par. (5)(G). Pub. L. 105–244, § 306(a)(1), redesignated subpar. (C) as (G). Par. (5)(H). Pub. L. 105–244, § 306(a)(1), (5), redesig- nated subpar. (D) as (H) and substituted ‘‘(G)’’ for ‘‘(C)’’. Par. (8). Pub. L. 105–244, § 301(c)(4)(D), substituted ‘‘section 1066d(1)’’ for ‘‘section 1132c–4(1)’’. Par. (9). Pub. L. 105–244, § 301(c)(4)(E), substituted ‘‘section 1066f’’ for ‘‘section 1132c–6’’. 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. § 1066b. Federal insurance for bonds (a) General rule Subject to the limitations in section 1066c of this title, the Secretary is authorized to enter into insurance agreements to provide financial insurance to guarantee the full payment of prin- cipal and interest on qualified bonds upon the conditions set forth in subsections (b), (c) and (d). (b) Responsibilities of designated bonding au- thority The Secretary may not enter into an insur- ance agreement described in subsection (a) un- less the Secretary designates a qualified bonding authority in accordance with sections 1066d(1) and 1066e 1 of this title and the designated bond- ing authority agrees in such agreement to— (1) use the proceeds of the qualified bonds, less costs of issuance not to exceed 2 percent of the principal amount thereof, to make loans to eligible institutions or for deposit into an escrow account for repayment of the bonds; (2) provide in each loan agreement with re- spect to a loan that not less than 95 percent of the proceeds of the loan will be used— (A) to finance the repair, renovation, and, in exceptional cases, construction or acqui- sition, of a capital project; or (B) to refinance an obligation the proceeds of which were used to finance the repair, renovation, and, in exceptional cases, con- struction or acquisition, of a capital project; (3)(A) charge such interest on loans, and pro- vide for such a schedule of repayments of loans, as will, upon the timely repayment of the loans, provide adequate and timely funds for the payment of principal and interest on the bonds; and (B) require that any payment on a loan ex- pected to be necessary to make a payment of principal and interest on the bonds be due not less than 60 days prior to the date of the pay- ment on the bonds for which such loan pay- ment is expected to be needed; (4) prior to the making of any loan, provide for a credit review of the institution receiving the loan and assure the Secretary that, on the basis of such credit review, it is reasonable to anticipate that the institution receiving the loan will be able to repay the loan in a timely manner pursuant to the terms thereof; (5) provide in each loan agreement with re- spect to a loan that, if a delinquency on such Page 306 TITLE 20—EDUCATION § 1066b loan results in a funding under the insurance agreement, the institution obligated on such loan shall repay the Secretary, upon terms to be determined by the Secretary, for such fund- ing; (6) assign any loans to the Secretary, upon the demand of the Secretary, if a delinquency on such loan has required a funding under the insurance agreement; (7) in the event of a delinquency on a loan, engage in such collection efforts as the Sec- retary shall require for a period of not less than 45 days prior to requesting a funding under the insurance agreement; (8) establish an escrow account— (A) into which each eligible institution shall deposit 5 percent of the proceeds of any loan made under this part, with each eligible institution required to maintain in the es- crow account an amount equal to 5 percent of the outstanding principal of all loans made to such institution under this part; and (B) the balance of which— (i) shall be available to the Secretary to pay principal and interest on the bonds in the event of delinquency in loan repay- ment; and (ii) shall be used to return to an eligible institution an amount equal to any re- maining portion of such institution’s 5 per- cent deposit of loan proceeds within 120 days following scheduled repayment of such institution’s loan; (9) provide in each loan agreement with re- spect to a loan that, if a delinquency on such loan results in amounts being withdrawn from the escrow account to pay principal and inter- est on bonds, subsequent payments on such loan shall be available to replenish such es- crow account; (10) comply with the limitations set forth in section 1066c of this title; (11) make loans only to eligible institutions under this part in accordance with conditions prescribed by the Secretary to ensure that loans are fairly allocated among as many eli- gible institutions as possible, consistent with making loans of amounts that will permit cap- ital projects of sufficient size and scope to sig- nificantly contribute to the educational pro- gram of the eligible institutions; and (12) limit loan collateralization, with respect to any loan made under this part, to 100 per- cent of the loan amount, except as otherwise required by the Secretary. (c) Additional agreement provisions Any insurance agreement described in sub- section (a) of this section shall provide as fol- lows: (1) The payment of principal and interest on bonds shall be insured by the Secretary until such time as such bonds have been retired or canceled. (2) The Federal liability for delinquencies and default for bonds guaranteed under this part shall only become effective upon the ex- haustion of all the funds held in the escrow ac- count described in subsection (b)(8). (3) The Secretary shall create a letter of credit authorizing the Department of the Treasury to disburse funds to the designated bonding authority or its assignee. (4) The letter of credit shall be drawn upon in the amount determined by paragraph (5) of this subsection upon the certification of the designated bonding authority to the Secretary or the Secretary’s designee that there is a de- linquency on 1 or more loans and there are in- sufficient funds available from loan repay- ments and the escrow account to make a scheduled payment of principal and interest on the bonds. (5) Upon receipt by the Secretary or the Sec- retary’s designee of the certification described in paragraph (4) of this subsection, the des- ignated bonding authority may draw a funding under the letter of credit in an amount equal to— (A) the amount required to make the next scheduled payment of principal and interest on the bonds, less (B) the amount available to the designated bonding authority from loan repayments and the escrow account. (6) All funds provided under the letter of credit shall be paid to the designated bonding authority within 2 business days following re- ceipt of the certification described in para- graph (4). (d) Full faith and credit provisions Subject to subsection (c)(1) the full faith and credit of the United States is pledged to the pay- ment of all funds which may be required to be paid under the provisions of this section. (e) Sale of qualified bonds Notwithstanding any other provision of law, a qualified bond guaranteed under this part may be sold to any party that offers terms that the Secretary determines are in the best interest of the eligible institution. (Pub. L. 89–329, title III, § 343, formerly title VII, § 723, as added Pub. L. 102–325, title VII, § 704, July 23, 1992, 106 Stat. 743; amended Pub. L. 103–382, title III, § 360C, Oct. 20, 1994, 108 Stat. 3972; renumbered title III, § 343, and amended Pub. L. 105–244, title III, §§ 301(a)(3), (4), (c)(5), 306(b), Oct. 7, 1998, 112 Stat. 1636, 1637, 1646; Pub. L. 110–315, title III, §§ 314(b), 320(2), Aug. 14, 2008, 122 Stat. 3181, 3187.) Editorial Notes REFERENCES IN TEXT Section 1066e of this title, referred to in subsec. (b), was repealed by Pub. L. 105–244, title III, § 306(d), Oct. 7, 1998, 112 Stat. 1647. CODIFICATION Section was formerly classified to section 1132c–2 of this title prior to renumbering by Pub. L. 105–244. PRIOR PROVISIONS A prior section 343 of Pub. L. 89–329 was classified to section 1068 of this title prior to the general amend- ment of this subchapter by Pub. L. 99–498. AMENDMENTS 2008—Subsec. (b)(8)(B)(ii). Pub. L. 110–315, § 314(b)(1)(B), inserted ‘‘within 120 days’’ after ‘‘loan proceeds’’. Page 307 TITLE 20—EDUCATION § 1066d Pub. L. 110–315, § 314(b)(1)(A), which directed the sub- stitution of ‘‘5’’ for ‘‘10’’, could not be executed because ‘‘10’’ did not appear subsequent to amendment by Pub. L. 105–244, § 306(b)(1). See 1998 Amendment note below. Subsec. (b)(12). Pub. L. 110–315, § 314(b)(2)–(4), added par. (12). Subsec. (e). Pub. L. 110–315, § 320(2), inserted heading. 1998—Subsec. (a). Pub. L. 105–244, § 301(c)(5)(A), sub- stituted ‘‘section 1066c’’ for ‘‘section 1132c–3’’. Subsec. (b). Pub. L. 105–244, § 301(c)(5)(B)(i), sub- stituted ‘‘sections 1066d(1) and 1066e’’ for ‘‘sections 1132c–4(1) and 1132c–5’’ in introductory provisions. Subsec. (b)(8). Pub. L. 105–244, § 306(b)(1), substituted ‘‘5 percent’’ for ‘‘10 percent’’ wherever appearing. Subsec. (b)(10). Pub. L. 105–244, § 301(c)(5)(B)(ii), sub- stituted ‘‘section 1066c’’ for ‘‘section 1132c–3’’. Subsec. (d). Pub. L. 105–244, § 301(c)(5)(B)(iii), made technical amendment to reference in original act which appears in text as reference to subsection (c)(1) of this section. Subsec. (e). Pub. L. 105–244, § 306(b)(2), added subsec. (e). 1994—Subsec. (b)(8)(A). Pub. L. 103–382, § 360C(1)(A), in- serted before semicolon ‘‘, with each eligible institu- tion required to maintain in the escrow account an amount equal to 10 percent of the outstanding principal of all loans made to such institution under this part’’. Subsec. (b)(8)(B)(ii). Pub. L. 103–382, § 360C(1)(B), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: ‘‘when all bonds under this part are re- tired or canceled, shall be divided among the eligible institutions making deposits into such account on the basis of the amount of each such institution’s de- posit;’’. Subsec. (b)(11). Pub. L. 103–382, § 360C(2), substituted ‘‘conditions’’ for ‘‘regulations’’. 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. § 1066c. Limitations on Federal insurance for bonds issued by designated bonding author- ity (a) Limit on amount At no time shall the aggregate principal amount of outstanding bonds insured under this part together with any accrued unpaid interest thereon exceed $1,100,000,000, of which— (1) not more than $733,333,333 shall be used for loans to eligible institutions that are pri- vate historically Black colleges and univer- sities; and (2) not more than $366,666,667 shall be used for loans to eligible institutions which are his- torically Black public colleges and univer- sities. For purposes of paragraphs (1) and (2), Lincoln University of Pennsylvania is an historically Black public institution. No institution of high- er education that has received assistance under section 123 of this title shall be eligible to re- ceive assistance under this part. (b) Limitation on credit authority The authority of the Secretary to issue letters of credit and insurance under this part is effec- tive only to the extent provided in advance by appropriations Acts. (c) Religious activity prohibition No loan may be made under this part for any educational program, activity or service related to sectarian instruction or religious worship or provided by a school or department of divinity or to an institution in which a substantial por- tion of its functions is subsumed in a religious mission. (d) Discrimination prohibition No loan may be made to an institution under this part if the institution discriminates on ac- count of race, color, religion, national origin, sex (to the extent provided in title IX of the Education Amendments of 1972 [20 U.S.C. 1681 et seq.]), or disabling condition; except that the prohibition with respect to religion shall not apply to an institution which is controlled by or which is closely identified with the tenets of a particular religious organization if the applica- tion of this section would not be consistent with the religious tenets of such organization. (Pub. L. 89–329, title III, § 344, formerly title VII, § 724, as added Pub. L. 102–325, title VII, § 704, July 23, 1992, 106 Stat. 745; renumbered title III, § 344, Pub. L. 105–244, title III, § 301(a)(3), (4), Oct. 7, 1998, 112 Stat. 1636; Pub. L. 110–315, title III, § 314(c), Aug. 14, 2008, 122 Stat. 3181.) Editorial Notes REFERENCES IN TEXT The Education Amendments of 1972, referred to in subsec. (d), is Pub. L. 92–318, June 23, 1972, 86 Stat. 235. Title IX of the Act, known as the Patsy Takemoto Mink Equal Opportunity in Education Act, is classified principally to chapter 38 (§ 1681 et seq.) of this title. For complete classification of title IX to the Code, see Short Title note set out under section 1681 of this title and Tables. CODIFICATION Section was formerly classified to section 1132c–3 of this title prior to renumbering by Pub. L. 105–244. PRIOR PROVISIONS A prior section 344 of Pub. L. 89–329 was classified to section 1069 of this title prior to the general amend- ment of this subchapter by Pub. L. 99–498. AMENDMENTS 2008—Subsec. (a). Pub. L. 110–315, § 314(c)(1), sub- stituted ‘‘$1,100,000,000’’ for ‘‘$375,000,000’’ in introduc- tory provisions. Subsec. (a)(1). Pub. L. 110–315, § 314(c)(2), substituted ‘‘$733,333,333’’ for ‘‘$250,000,000’’. Subsec. (a)(2). Pub. L. 110–315, § 314(c)(3), substituted ‘‘$366,666,667’’ for ‘‘$125,000,000’’. § 1066d. Authority of Secretary In the performance of, and with respect to, the functions vested in the Secretary by this part, the Secretary— (1) shall, within 120 days of August 14, 2008, publish in the Federal Register a notice and request for proposals for any private for-profit organization or entity wishing to serve as the designated bonding authority under this part, which notice shall— (A) specify the time and manner for sub- mission of proposals; and (B) specify any information, qualifica- tions, criteria, or standards the Secretary determines to be necessary to evaluate the financial capacity and administrative capa- bility of any applicant to carry out the re-