View all text of Part B [§ 1071 - § 1087-4]
§ 1072a. Federal Student Loan Reserve Fund
(a) Establishment
(b) Investment of funds
(c) Additional depositsAfter 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 percentage amount equal to the complement of the reinsurance percentage in effect when payment under the guaranty agreement was made—
(A) with respect to the defaulted loan pursuant to sections 1078(c)(6)(A) 1
1 See References in Text note below.
and 1078–6(a)(1)(B) of this title; and(B) with respect to a loan that the Secretary has repaid or discharged under section 1087 of this title;
(3) insurance premiums collected from borrowers 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 activity performed prior to October 7, 1998;
(5) 70 percent of amounts received after October 7, 1998, from the Secretary as payment for administrative cost allowances for loans upon which insurance was issued prior to October 7, 1998; and
(6) other receipts as specified in regulations of the Secretary.
(d) Uses of fundsSubject 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
(f) Transition
(1) In general
(2) Special ruleA limited number of guaranty agencies may transfer interest earned on the Federal Fund to the Operating Fund during the first 3 years after October 7, 1998, if the guaranty agency demonstrates to the Secretary that—
(A) the cash flow in the Operating Fund will be negative without the transfer of such interest; and
(B) the transfer of such interest will substantially improve the financial circumstances of the guaranty agency.
(3) Repayment provisions
(4) Prohibition
(5) WaiverThe Secretary may—
(A) waive the requirements of paragraph (3), but only with respect to repayment of interest that was transferred in accordance with paragraph (2); and
(B) waive paragraph (4);
for a guaranty agency, if the Secretary determines that there are extenuating circumstances (such as State constitutional prohibitions) beyond the control of the agency that justify such a waiver.
(6) Extension of repayment period for interest
(A) Extension permittedThe Secretary shall extend the period for repayment of interest that was transferred in accordance with paragraph (2) from 2 years to 5 years if the Secretary determines that—
(i) the cash flow of the Operating Fund will be negative as a result of repayment as required by paragraph (3);
(ii) the repayment of the interest transferred will substantially diminish the financial circumstances of the guaranty agency; and
(iii) the guaranty agency has demonstrated—(I) that the agency is able to repay all transferred funds by the end of the 8th year following the date of establishment of the Operating Fund; and(II) that the agency will be financially sound on the completion of repayment.
(B) Repayment of income on transferred funds
(7) Investment of Federal funds
(8) Special rule
(Pub. L. 89–329, title IV, § 422A, as added Pub. L. 105–244, title IV, § 413(a), Oct. 7, 1998, 112 Stat. 1674; amended Pub. L. 110–315, title IV, § 438(a)(1), Aug. 14, 2008, 122 Stat. 3258.)