20 U.S.C. § 1082 — Legal powers and responsibilities

Page 483 TITLE 20—EDUCATION § 1082 nection with operations under this part, any ex- cess advances under section 1072 of this title, and any other moneys, property, or assets de- rived by the Secretary from operations in con- nection with this section, shall be deposited in the fund. All payments in connection with the default of loans insured by the Secretary under this part, or in connection with such guaranty agreements shall be paid from the fund. Moneys in the fund not needed for current operations under this section may be invested in bonds or other obligations guaranteed as to principal and interest by the United States. (b) Borrowing authority If at any time the moneys in the fund are in- sufficient to make payments in connection with the default of any loan insured by the Secretary under this part, or in connection with any guar- anty agreement made under section 1078(c) of this title, the Secretary is authorized, to the ex- tent provided in advance by appropriations Acts, to issue to the Secretary of the Treasury notes or other obligations in such forms and denomi- nations, bearing such maturities, and subject to such terms and conditions as may be prescribed by the Secretary with the approval of the Sec- retary of the Treasury. Such notes or other obli- gations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States of comparable maturities during the month preceding the issuance of the notes or other obligations. The Secretary of the Treasury is authorized and directed to purchase any notes and other obligations issued hereunder and for that purpose is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31, and the purposes for which securities may be issued under that chapter, are extended to in- clude any purchase of such notes and obliga- tions. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired under this subsection. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States. Sums borrowed under the sub- section shall be deposited in the fund and re- demption of such notes and obligations shall be made by the Secretary from such fund. (Pub. L. 89–329, title IV, § 431, as added Pub. L. 99–498, title IV, § 402(a), Oct. 17, 1986, 100 Stat. 1400; amended Pub. L. 100–50, § 10(w), June 3, 1987, 101 Stat. 346.) Editorial Notes CODIFICATION In subsec. (b), ‘‘chapter 31 of title 31’’ and ‘‘that chap- ter’’ substituted for ‘‘the Second Liberty Bond Act, as amended’’ and ‘‘that Act, as amended’’, respectively, on authority of Pub. L. 97–258, § 4(b), Sept. 13, 1982, 96 Stat. 1067, the first section of which enacted Title 31, Money and Finance. PRIOR PROVISIONS A prior section 1081, Pub. L. 89–329, title IV, § 431, Nov. 8, 1965, 79 Stat. 1245; Pub. L. 90–460, § 3(c), Aug. 3, 1968, 82 Stat. 638; Pub. L. 94–482, title I, § 127(a), Oct. 12, 1976, 90 Stat. 2126; Pub. L. 96–374, title XIII, § 1391(a)(1), Oct. 3, 1980, 94 Stat. 1503, related to a student loan insurance fund, prior to the general revision of this part by Pub. L. 99–498. AMENDMENTS 1987—Subsec. (a). Pub. L. 100–50 substituted ‘‘section 1072 of this title’’ for ‘‘section 1072(a)(4)(C) of this title’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1987 AMENDMENT Amendment by Pub. L. 100–50 effective as if enacted as part of the Higher Education Amendments of 1986, Pub. L. 99–498, see section 27 of Pub. L. 100–50, set out as a note under section 1001 of this title. FEDERAL FAMILY EDUCATION LOAN INSURANCE FUND Pub. L. 105–244, title IV, § 434, Oct. 7, 1998, 112 Stat. 1711, provided that: ‘‘Any funds in the insurance fund, as established under section 431 of the Higher Edu- cation Act of 1965 (20 U.S.C. 1081), on the date of enact- ment of this Act [Oct. 7, 1998] shall be transferred to and deposited in the Treasury. All funds received by the Secretary of Education under subsection (a) of such section after the date of enactment of this Act shall be deposited into the fund in accordance with such sub- section.’’ TRANSFER OF ASSETS AND LIABILITIES OF THE VOCATIONAL STUDENT LOAN INSURANCE FUND All assets and liabilities of the vocational student loan insurance fund transferred to the student loan in- surance fund, see section 116(c)(2) of Pub. L. 90–575, set out as a note under former section 981 et seq. of this title. § 1082. Legal powers and responsibilities (a) General powers In the performance of, and with respect to, the functions, powers, and duties, vested in him by this part, the Secretary may— (1) prescribe such regulations as may be nec- essary to carry out the purposes of this part, including regulations applicable to third party servicers (including regulations concerning fi- nancial responsibility standards for, and the assessment of liabilities for program viola- tions against, such servicers) to establish min- imum standards with respect to sound man- agement and accountability of programs under this part, except that in no case shall damages be assessed against the United States for the actions or inactions of such servicers; (2) sue and be sued in any court of record of a State having general jurisdiction or in any district court of the United States, and such district courts shall have jurisdiction of civil actions arising under this part without regard to the amount in controversy, and action in- stituted under this subsection by or against the Secretary shall survive notwithstanding any change in the person occupying the office of Secretary or any vacancy in that office; but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Secretary or property under the Secretary’s control and nothing herein shall be construed to except litigation arising out of activities under this part from the ap- plication of sections 509, 517, 547, and 2679 of title 28; Page 484 TITLE 20—EDUCATION § 1082 (3) include in any contract for Federal loan insurance such terms, conditions, and cov- enants relating to repayment of principal and payment of interest, relating to the Sec- retary’s obligations and rights to those of eli- gible lenders, and borrowers in case of default, and relating to such other matters as the Sec- retary determines to be necessary to assure that the purposes of this part will be achieved; and any term, condition, and covenant made pursuant to this paragraph or pursuant to any other provision of this part may be modified by the Secretary, after notice and opportunity for a hearing, if the Secretary finds that the modification is necessary to protect the United States from the risk of unreasonable loss; (4) subject to the specific limitations in this part, consent to modification, with respect to rate of interest, time of payment of any in- stallment of principal and interest or any por- tion thereof, or any other provision of any note or other instrument evidencing a loan which has been insured by the Secretary under this part; (5) enforce, pay, or compromise, any claim on, or arising because of, any such insurance or any guaranty agreement under section 1078(c) of this title; and (6) enforce, pay, compromise, waive, or re- lease any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption. (b) Financial operations responsibilities The Secretary shall, with respect to the finan- cial operations arising by reason of this part prepare annually and submit a budget program as provided for wholly owned Government cor- porations by chapter 91 of title 31. The trans- actions of the Secretary, including the settle- ment of insurance claims and of claims for pay- ments pursuant to section 1078 of this title, and transactions related thereto and vouchers ap- proved by the Secretary in connection with such transactions, shall be final and conclusive upon all accounting and other officers of the Govern- ment. The Secretary may not enter into any set- tlement of any claim under this subchapter that exceeds $1,000,000 unless— (1) the Secretary requests a review of the proposed settlement of such claim by the At- torney General; and (2) the Attorney General responds to such re- quest, which may include, at the Attorney General’s discretion, a written opinion related to such proposed settlement. (c) Data collection (1) Collection by category of loan (A) For loans insured after December 31, 1976, or in the case of each insurer after such earlier date where the data required by this subsection are available, the Secretary and all other insurers under this part shall collect and accumulate all data relating to (i) loan vol- ume insured and (ii) defaults reimbursed or de- fault rates according to the categories of loans listed in subparagraph (B) of this paragraph. (B) The data indicated in subparagraph (A) of this paragraph shall be accumulated accord- ing to the category of lender making the loan and shall be accumulated separately for lend- ers who are (i) eligible institutions, (ii) State or private, nonprofit direct lenders, (iii) com- mercial financial institutions who are banks, savings and loan associations, or credit unions, and (iv) all other types of institutions or agencies. (C) The Secretary may designate such addi- tional subcategories within the categories specified in subparagraph (B) of this paragraph as the Secretary deems appropriate. (D) The category or designation of a loan shall not be changed for any reason, including its purchase or acquisition by a lender of an- other category. (2) Collection and reporting requirements (A) The Secretary shall collect data under this subsection from all insurers under this part and shall publish not less often than once every fiscal year a report showing loan volume guaranteed and default data for each category specified in subparagraph (B) of paragraph (1) of this subsection and for the total of all lend- ers. (B) The reports specified in subparagraph (A) of this paragraph shall include a separate re- port for each insurer under this part including the Secretary, and where an insurer insures loans for lenders in more than one State, such insurer’s report shall list all data separately for each State. (3) Institutional, public, or nonprofit lenders For purposes of clarity in communications, the Secretary shall separately identify loans made by the lenders referred to in clause (i) and loans made by the lenders referred to in clause (ii) of paragraph (1)(B) of this sub- section. (d) Delegation (1) Regional offices The functions of the Secretary under this part listed in paragraph (2) of this subsection may be delegated to employees in the regional office of the Department. (2) Delegable functions The functions which may be delegated pur- suant to this subsection are— (A) reviewing applications for loan insur- ance under section 1079 of this title and issuing contracts for Federal loan insurance, certificates of insurance, and certificates of comprehensive insurance coverage to eligi- ble lenders which are financial or credit in- stitutions subject to examination and super- vision by an agency of the United States or of any State; (B) receiving claims for payments under section 1080(a) of this title, examining those claims, and pursuant to regulations of the Secretary, approving claims for payment, or requiring lenders to take additional collec- tion action as a condition for payment of claims; and (C) certifying to the central office when collection of defaulted loans has been com- pleted, compromising or agreeing to the modification of any Federal claim against a Page 485 TITLE 20—EDUCATION § 1082 1 See References in Text note below. borrower (pursuant to regulations of the Secretary issued under subsection (a)), and recommending litigation with respect to any such claim. (e) Use of information on borrowers Notwithstanding any other provision of law, the Secretary may provide to eligible lenders, and to any guaranty agency having a guaranty agreement under section 1078(c)(1) of this title, any information with respect to the names and addresses of borrowers or other relevant infor- mation which is available to the Secretary, from whatever source such information may be de- rived. (f) Audit of financial transactions (1) Comptroller General and Inspector General authority The Comptroller General and the Inspector General of the Department of Education shall each have the authority to conduct an audit of the financial transactions of— (A) any guaranty agency operating under an agreement with the Secretary pursuant to section 1078(b) of this title; (B) any eligible lender as defined in section 1085(d)(1) of this title; (C) a representative sample of eligible lenders under this part, upon the request of either of the authorizing committees, with respect to the payment of the special allow- ance under section 1087–1 of this title in order to evaluate the program authorized by this part. (2) Access to records For the purpose of carrying out this sub- section, the records of any entity described in subparagraph (A), (B), (C), or (D) 1 of paragraph (1) shall be available to the Comptroller Gen- eral and the Inspector General of the Depart- ment of Education. For the purpose of section 716(c) of title 31, such records shall be consid- ered to be records to which the Comptroller General has access by law, and for the purpose of section 406(a)(4) of title 5, such records shall be considered to be records necessary in the performance of functions assigned by chapter 4 of title 5 to the Inspector General. (3) ‘‘Record’’ defined For the purpose of this subsection, the term ‘‘record’’ includes any information, document, report, answer, account, paper, or other data or documentary evidence. (4) Audit procedures In conducting audits pursuant to this sub- section, the Comptroller General and the In- spector General of the Department of Edu- cation shall audit the records to determine the extent to which they, at a minimum, comply with Federal statutes, and rules and regula- tions prescribed by the Secretary, in effect at the time that the record was made, and in no case shall the Comptroller General or the In- spector General apply subsequently deter- mined standards, procedures, or regulations to the records of such agency, lender, or Author- ity. (g) Civil penalties (1) Authority to impose penalties Upon determination, after reasonable notice and opportunity for a hearing, that a lender or a guaranty agency— (A) has violated or failed to carry out any provision of this part or any regulation pre- scribed under this part, or (B) has engaged in substantial misrepre- sentation of the nature of its financial charges, the Secretary may impose a civil penalty upon such lender or agency of not to exceed $25,000 for each violation, failure, or misrepresenta- tion. (2) Limitations No civil penalty may be imposed under para- graph (1) of this subsection unless the Sec- retary determines that— (A) the violation, failure, or substantial misrepresentation referred to in that para- graph resulted from a violation, failure, or misrepresentation that is material; and (B) the lender or guaranty agency knew or should have known that its actions violated or failed to carry out the provisions of this part or the regulations thereunder. (3) Correction of failure A lender or guaranty agency has no liability under paragraph (1) of this subsection if, prior to notification by the Secretary under that paragraph, the lender or guaranty agency cures or corrects the violation or failure or no- tifies the person who received the substantial misrepresentation of the actual nature of the financial charges involved. (4) Consideration as single violation For the purpose of paragraph (1) of this sub- section, violations, failures, or substantial misrepresentations arising from a specific practice of a lender or guaranty agency, and occurring prior to notification by the Sec- retary under that paragraph, shall be deemed to be a single violation, failure, or substantial misrepresentation even if the violation, fail- ure, or substantial misrepresentation affects more than one loan or more than one bor- rower, or both. The Secretary may only im- pose a single civil penalty for each such viola- tion, failure, or substantial misrepresentation. (5) Assignees not liable for violations by others If a loan affected by a violation, failure, or substantial misrepresentation is assigned to another holder, the lender or guaranty agency responsible for the violation, failure, or sub- stantial misrepresentation shall remain liable for any civil money penalty provided for under paragraph (1) of this subsection, but the as- signee shall not be liable for any such civil money penalty. (6) Compromise Until a matter is referred to the Attorney General, any civil penalty under paragraph (1) of this subsection may be compromised by the Secretary. In determining the amount of such penalty, or the amount agreed upon in com- promise, the Secretary shall consider the ap- Page 486 TITLE 20—EDUCATION § 1082 propriateness of the penalty to the resources of the lender or guaranty agency subject to the determination; the gravity of the viola- tion, failure, or substantial misrepresentation; the frequency and persistence of the violation, failure, or substantial misrepresentation; and the amount of any losses resulting from the violation, failure, or substantial misrepresen- tation. The amount of such penalty, when fi- nally determined, or the amount agreed upon in compromise, may be deducted from any sums owing by the United States to the lender or agency charged, unless the lender or agency has, in the case of a final agency determina- tion, commenced proceedings for judicial re- view within 90 days of the determination, in which case the deduction may not be made during the pendency of the proceeding. (h) Authority of the Secretary to impose and en- force limitations, suspensions, and termi- nations (1) Imposition of sanctions (A) If the Secretary, after a reasonable no- tice and opportunity for hearing to an eligible lender, finds that the eligible lender— (i) has substantially failed— (I) to exercise reasonable care and dili- gence in the making and collecting of loans under the provisions of this part, (II) to make the reports or statements under section 1078(a)(4) of this title, or (III) to pay the required loan insurance premiums to any guaranty agency, or (ii) has engaged in— (I) fraudulent or misleading advertising or in solicitations that have resulted in the making of loans insured or guaranteed under this part to borrowers who are ineli- gible; or (II) the practice of making loans that violate the certification for eligibility pro- vided in section 1078 of this title, the Secretary shall limit, suspend, or termi- nate that lender from participation in the in- surance programs operated by guaranty agen- cies under this part. (B) The Secretary shall not lift any such limitation, suspension, or termination until the Secretary is satisfied that the lender’s failure under subparagraph (A)(i) of this para- graph or practice under subparagraph (A)(ii) of this paragraph has ceased and finds that there are reasonable assurances that the lender will— (i) exercise the necessary care and dili- gence, (ii) comply with the requirements de- scribed in subparagraph (A)(i), or (iii) cease to engage in the practices de- scribed in subparagraph (A)(ii), as the case may be. (2) Review of sanctions on lenders (A) The Secretary shall review each limita- tion, suspension, or termination imposed by any guaranty agency pursuant to section 1078(b)(1)(U) of this title within 60 days after receipt by the Secretary of a notice from the guaranty agency of the imposition of such limitation, suspension, or termination, unless the right to such review is waived in writing by the lender. The Secretary shall uphold the imposition of such limitation, suspension, or termination in the student loan insurance pro- gram of each of the guaranty agencies under this part, and shall notify such guaranty agen- cies of such sanction— (i) if such review is waived; or (ii) if such review is not waived, unless the Secretary determines that the limitation, suspension, or termination was not imposed in accordance with requirements of such sec- tion. (B) The Secretary’s review under this para- graph of the limitation, suspension, or termi- nation imposed by a guaranty agency pursu- ant to section 1078(b)(1)(U) of this title shall be limited to— (i) a review of the written record of the proceedings in which the guaranty agency imposed such sanctions; and (ii) a determination as to whether the guaranty agency complied with section 1078(b)(1)(U) of this title and any notice and hearing requirements prescribed in regula- tions of the Secretary under this part. (C) The Secretary shall not lift any such sanction until the Secretary is satisfied that the lender has corrected the failures which led to the limitation, suspension, or termination, and finds that there are reasonable assurances that the lender will, in the future, comply with the requirements of this part. The Sec- retary shall notify each guaranty agency of the lifting of any such sanction. (3) Review of sanctions on eligible institutions (A) The Secretary shall review each limita- tion, suspension, or termination imposed by any guaranty agency pursuant to section 1078(b)(1)(T) of this title within 60 days after receipt by the Secretary of a notice from the guaranty agency of the imposition of such limitation, suspension, or termination, unless the right to such review is waived in writing by the institution. The Secretary shall uphold the imposition of such limitation, suspension, or termination in the student loan insurance program of each of the guaranty agencies under this part, and shall notify such guar- anty agencies of such sanctions— (i) if such review is waived; or (ii) if such review is not waived, unless the Secretary determines that the limitation, suspension, or termination was not imposed in accordance with requirements of such sec- tion. (B) The Secretary’s review under this para- graph of the limitation, suspension, or termi- nation imposed by a guaranty agency pursu- ant to section 1078(b)(1)(T) of this title shall be limited to— (i) a review of the written record of the proceedings in which the guaranty agency imposed such sanctions; and (ii) a determination as to whether the guaranty agency complied with section 1078(b)(1)(T) of this title and any notice and hearing requirements prescribed in regula- tions of the Secretary under this part. Page 487 TITLE 20—EDUCATION § 1082 (C) The Secretary shall not lift any such sanction until the Secretary is satisfied that the institution has corrected the failures which led to the limitation, suspension, or ter- mination, and finds that there are reasonable assurances that the institution will, in the fu- ture, comply with the requirements of this part. The Secretary shall notify each guaranty agency of the lifting of any such sanction. (i) Authority to sell defaulted loans In the event that all other collection efforts have failed, the Secretary is authorized to sell defaulted student loans assigned to the United States under this part to collection agencies, el- igible lenders, guaranty agencies, or other quali- fied purchaser on such terms as the Secretary determines are in the best financial interests of the United States. A loan may not be sold pursu- ant to this subsection if such loan is in repay- ment status. (j) Authority of Secretary to take emergency ac- tions against lenders (1) Imposition of sanctions If the Secretary— (A) receives information, determined by the Secretary to be reliable, that a lender is violating any provision of this subchapter, any regulation prescribed under this sub- chapter, or any applicable special arrange- ment, agreement, or limitation; (B) determines that immediate action is necessary to prevent misuse of Federal funds; and (C) determines that the likelihood of loss outweighs the importance of following the limitation, suspension, or termination pro- cedures authorized in subsection (h); the Secretary shall, effective on the date on which a notice and statement of the basis of the action is mailed to the lender (by reg- istered mail, return receipt requested), take emergency action to stop the issuance of guar- antee commitments and the payment of inter- est benefits and special allowance to the lend- er. (2) Length of emergency action An emergency action under this subsection may not exceed 30 days unless a limitation, suspension, or termination proceeding is initi- ated against the lender under subsection (h) before the expiration of that period. (3) Opportunity to show cause The Secretary shall provide the lender, if it so requests, an opportunity to show cause that the emergency action is unwarranted. (k) Program of assistance for borrowers (1) In general The Secretary shall undertake a program to encourage corporations and other private and public employers, including the Federal Gov- ernment, to assist borrowers in repaying loans received under this subchapter, including pro- viding employers with options for payroll de- duction of loan payments and offering loan re- payment matching provisions as part of em- ployee benefit packages. (2) Publication The Secretary shall publicize models for pro- viding the repayment assistance described in paragraph (1) and each year select entities that deserve recognition, through means de- vised by the Secretary, for the development of innovative plans for providing such assistance to employees. (3) Recommendation The Secretary shall recommend to the ap- propriate committees in the Senate and House of Representatives changes to statutes that could be made in order to further encourage such efforts. (l) Uniform administrative and claims proce- dures (1) In general The Secretary shall, by regulation developed in consultation with guaranty agencies, lend- ers, institutions of higher education, sec- ondary markets, students, third party servicers and other organizations involved in providing loans under this part, prescribe standardized forms and procedures regarding— (A) origination of loans; (B) electronic funds transfer; (C) guaranty of loans; (D) deferments; (E) forbearance; (F) servicing; (G) claims filing; (H) borrower status change and antici- pated graduation date; and (I) cures. (2) Special rules (A) The forms and procedures described in paragraph (1) shall include all aspects of the loan process as such process involves eligible lenders and guaranty agencies and shall be de- signed to minimize administrative costs and burdens (other than the costs and burdens in- volved in the transition to new forms and pro- cedures) involved in exchanges of data to and from borrowers, schools, lenders, secondary markets, and the Department. (B) Nothing in this paragraph shall be con- strued to limit the development of electronic forms and procedures. (3) Simplification requirements Such regulations shall include— (A) standardization of computer formats, forms design, and guaranty agency proce- dures relating to the origination, servicing, and collection of loans made under this part; (B) authorization of alternate means of document retention, including the use of microfilm, microfiche, laser disc, compact disc, and other methods allowing the produc- tion of a facsimile of the original docu- ments; (C) authorization of the use of computer or similar electronic methods of maintaining records relating to the performance of serv- icing, collection, and other regulatory re- quirements under this chapter; and (D) authorization and implementation of electronic data linkages for the exchange of information to and from lenders, guarantors, Page 488 TITLE 20—EDUCATION § 1082 institutions of higher education, third party servicers, and the Department of Education for student status confirmation reports, claim filing, interest and special allowance billing, deferment processing, and all other administrative steps relating to loans made pursuant to this part where using electronic data linkage is feasible. (4) Additional recommendations The Secretary shall review regulations pre- scribed pursuant to paragraph (1) and seek ad- ditional recommendations from guaranty agencies, lenders, institutions of higher edu- cation, students, secondary markets, third party servicers and other organizations in- volved in providing loans under this part, not less frequently than annually, for additional methods of simplifying and standardizing the administration of the programs authorized by this part. (m) Common forms and formats (1) Common guaranteed student loan applica- tion form and promissory note (A) In general The Secretary, in cooperation with rep- resentatives of guaranty agencies, eligible lenders, and organizations involved in stu- dent financial assistance, shall prescribe common application forms and promissory notes, or master promissory notes, to be used for applying for loans under this part. (B) Requirements The forms prescribed by the Secretary shall— (i) use clear, concise, and simple lan- guage to facilitate understanding of loan terms and conditions by applicants; and (ii) be formatted to require the applicant to clearly indicate a choice of lender. (C) Free application form For academic year 1999–2000 and suc- ceeding academic years, the Secretary shall prescribe the form developed under section 1090 of this title as the application form under this part, other than for loans under sections 1078–2 and 1078–3 of this title. (D) Master promissory note (i) In general The Secretary shall develop and require the use of master promissory note forms for loans made under this part and part D. Such forms shall be available for periods of enrollment beginning not later than July 1, 2000. Each form shall allow eligible bor- rowers to receive, in addition to initial loans, additional loans for the same or sub- sequent periods of enrollment through a student confirmation process approved by the Secretary. Such forms shall be used for loans made under this part or part D as di- rected by the Secretary. Unless otherwise notified by the Secretary, each institution of higher education that participates in the program under this part or part D may use a master promissory note for loans under this part and part D. (ii) Consultation In developing the master promissory note under this subsection, the Secretary shall consult with representatives of guar- anty agencies, eligible lenders, institu- tions of higher education, students, and or- ganizations involved in student financial assistance. (iii) Sale; assignment; enforceability Notwithstanding any other provision of law, each loan made under a master prom- issory note under this subsection may be sold or assigned independently of any other loan made under the same promis- sory note and each such loan shall be sepa- rately enforceable in all Federal and State courts on the basis of an original or copy of the master promissory note in accord- ance with the terms of the master promis- sory note. (E) Perfection of security interests in student loans (i) In general Notwithstanding the provisions of any State law to the contrary, including the Uniform Commercial Code as in effect in any State, a security interest in loans made under this part, on behalf of any eli- gible lender (as defined in section 1085(d) of this title) shall attach, be perfected, and be assigned priority in the manner pro- vided by the applicable State’s law for per- fection of security interests in accounts, as such law may be amended from time to time (including applicable transition pro- visions). If any such State’s law provides for a statutory lien to be created in such loans, such statutory lien may be created by the entity or entities governed by such State law in accordance with the applica- ble statutory provisions that created such a statutory lien. (ii) Collateral description In addition to any other method for de- scribing collateral in a legally sufficient manner permitted under the laws of the State, the description of collateral in any financing statement filed pursuant to this subparagraph shall be deemed legally suffi- cient if it lists such loans, or refers to records (identifying such loans) retained by the secured party or any designee of the secured party identified in such financing statement, including the debtor or any loan servicer. (iii) Sales Notwithstanding clauses (i) and (ii) and any provisions of any State law to the con- trary, other than any such State’s law pro- viding for creation of a statutory lien, an outright sale of loans made under this part shall be effective and perfected automati- cally upon attachment as defined in the Uniform Commercial Code of such State. (2) Common deferment form The Secretary, in cooperation with rep- resentatives of guaranty agencies, institutions of higher education, and lenders involved in loans made under this part, shall prescribe a common deferment reporting form to be used Page 489 TITLE 20—EDUCATION § 1082 for the processing of deferments of loans made under this subchapter. (3) Common reporting formats The Secretary shall promulgate standards including necessary rules, regulations (includ- ing the definitions of all relevant terms), and procedures so as to require all lenders and guaranty agencies to report information on all aspects of loans made under this part in uni- form formats, so as to permit the direct com- parison of data submitted by individual lend- ers, servicers, or guaranty agencies. (4) Electronic forms Nothing in this section shall be construed to limit the development and use of electronic forms and procedures. (n) Default reduction management (1) Authorization There are authorized to be appropriated $25,000,000 for fiscal year 1999 and each of the four succeeding fiscal years, for the Secretary to expend for default reduction management activities for the purposes of establishing a performance measure that will reduce defaults by 5 percent relative to the prior fiscal year. Such funds shall be in addition to, and not in lieu of, other appropriations made for such purposes. (2) Allowable activities Allowable activities for which such funds shall be expended by the Secretary shall in- clude the following: (A) program reviews; (B) audits; (C) debt management programs; (D) training activities; and (E) such other man- agement improvement activities approved by the Secretary. (3) Plan for use required The Secretary shall submit a plan, for inclu- sion in the materials accompanying the Presi- dent’s budget each fiscal year, detailing the expenditure of funds authorized by this sec- tion to accomplish the 5 percent reduction in defaults. At the conclusion of the fiscal year, the Secretary shall report the Secretary’s findings and activities concerning the expendi- ture of funds and whether the performance measure was met. If the performance measure was not met, the Secretary shall report the following: (A) why the goal was not met, including an indication of any managerial deficiencies or of any legal obstacles; (B) plans and a schedule for achieving the established performance goal; (C) recommended legislative or regulatory changes necessary to achieve the goal; and (D) if the performance standard or goal is impractical or infeasible, why that is the case and what action is recommended, in- cluding whether the goal should be changed or the program altered or eliminated. This report shall be submitted to the Appro- priations Committees of the House of Rep- resentatives and the Senate and to the author- izing committees. (o) Consequences of guaranty agency insolvency In the event that the Secretary has deter- mined that a guaranty agency is unable to meet its insurance obligations under this part, the holder of loans insured by the guaranty agency may submit insurance claims directly to the Secretary and the Secretary shall pay to the holder the full insurance obligation of the guar- anty agency, in accordance with insurance re- quirements no more stringent than those of the guaranty agency. Such arrangements shall con- tinue until the Secretary is satisfied that the in- surance obligations have been transferred to an- other guarantor who can meet those obligations or a successor will assume the outstanding in- surance obligations. (p) Reporting requirement All officers and directors, and those employees and paid consultants of eligible institutions, eli- gible lenders, guaranty agencies, loan servicing agencies, accrediting agencies or associations, State licensing agencies or boards, and entities acting as secondary markets (including the Stu- dent Loan Marketing Association), who are en- gaged in making decisions as to the administra- tion of any program or funds under this sub- chapter or as to the eligibility of any entity or individual to participate under this subchapter, shall report to the Secretary, in such manner and at such time as the Secretary shall require, on any financial interest which such individual may hold in any other entity participating in any program assisted under this subchapter. (Pub. L. 89–329, title IV, § 432, as added Pub. L. 99–498, title IV, § 402(a), Oct. 17, 1986, 100 Stat. 1401; amended Pub. L. 100–50, § 10(x), (y), June 3, 1987, 101 Stat. 346; Pub. L. 101–239, title II, § 2006(a), Dec. 19, 1989, 103 Stat. 2118; Pub. L. 102–325, title IV, § 425, July 23, 1992, 106 Stat. 543; Pub. L. 103–208, § 2(k)(2), (3), Dec. 20, 1993, 107 Stat. 2485; Pub. L. 104–66, title I, § 1042(e), Dec. 21, 1995, 109 Stat. 716; Pub. L. 105–244, title IV, § 427, Oct. 7, 1998, 112 Stat. 1702; Pub. L. 106–554, § 1(a)(1) [title III, § 311], Dec. 21, 2000, 114 Stat. 2763, 2763A–46; Pub. L. 109–171, title VIII, § 8014(j), Feb. 8, 2006, 120 Stat. 171; Pub. L. 110–315, title I, § 103(b)(6), title IV, § 433, Aug. 14, 2008, 122 Stat. 3089, 3247; Pub. L. 111–39, title IV, § 402(f)(9), July 1, 2009, 123 Stat. 1944; Pub. L. 117–286, § 4(b)(39), Dec. 27, 2022, 136 Stat. 4347.) Editorial Notes REFERENCES IN TEXT Subparagraph (D) of paragraph (1) of subsec. (f), re- ferred to in subsec. (f)(2), was repealed by Pub. L. 105–244, title IV, § 427(a)(3), Oct. 7, 1998, 112 Stat. 1702. PRIOR PROVISIONS A prior section 1082, Pub. L. 89–329, title IV, § 432, Nov. 8, 1965, 79 Stat. 1246; Pub. L. 90–460, § 3(d), Aug. 3, 1968, 82 Stat. 638; Pub. L. 93–604, title VII, § 705(a), Jan. 2, 1975, 88 Stat. 1964; Pub. L. 94–482, title I, § 127(a), Oct. 12, 1976, 90 Stat. 2127; Pub. L. 96–88, title III, § 301(b)(2), Oct. 17, 1979, 93 Stat. 678; Pub. L. 96–374, title IV, § 416(c), title XIII, § 1391(a)(1), Oct. 3, 1980, 94 Stat. 1421, 1503; Pub. L. 99–272, title XVI, § 16024, Apr. 7, 1986, 100 Stat. 351, related to functions, powers, and duties of Sec- retary, prior to the general revision of this part by Pub. L. 99–498. AMENDMENTS 2022—Subsec. (f)(2). Pub. L. 117–286 substituted ‘‘sec- tion 406(a)(4) of title 5,’’ for ‘‘section 6(a)(4) of the In- spector General Act of 1978,’’ and ‘‘chapter 4 of title 5’’ for ‘‘that Act’’. Page 490 TITLE 20—EDUCATION § 1082 2009—Subsec. (b). Pub. L. 111–39, § 402(f)(9)(A), made technical amendment to reference in original act which appears in text as reference to section 1078 of this title. Subsec. (m)(1)(B). Pub. L. 111–39, § 402(f)(9)(B), in cl. (i), inserted ‘‘and’’ at end and, in cl. (ii), substituted pe- riod for ‘‘; and’’. 2008—Subsec. (b). Pub. L. 110–315, § 433(a), inserted at end ‘‘The Secretary may not enter into any settlement of any claim under this subchapter that exceeds $1,000,000 unless—’’ and pars. (1) and (2). Subsec. (f)(1)(C). Pub. L. 110–315, § 103(b)(6)(A), sub- stituted ‘‘either of the authorizing committees’’ for ‘‘the Committee on Education and the Workforce of the House of Representatives or the Committee on Labor and Human Resources of the Senate’’. Subsec. (m)(1)(D)(i). Pub. L. 110–315, § 433(b), inserted at end ‘‘Unless otherwise notified by the Secretary, each institution of higher education that participates in the program under this part or part D may use a master promissory note for loans under this part and part D.’’ Subsec. (n)(3). Pub. L. 110–315, § 103(b)(6)(B), sub- stituted ‘‘authorizing committees’’ for ‘‘Committee on Education and the Workforce of the House of Rep- resentatives and the Committee on Labor and Human Resources of the Senate’’ in concluding provisions. 2006—Subsec. (l)(1)(H). Pub. L. 109–171 inserted ‘‘and anticipated graduation date’’ after ‘‘status change’’. 2000—Subsec. (m)(1)(D)(iv). Pub. L. 106–554, § 1(a)(1) [title III, § 311(1)], struck out heading and text of cl. (iv). Text read as follows: ‘‘Notwithstanding the provi- sions of any State law to the contrary, including the Uniform Commercial Code as in effect in any State, a security interest in loans made under this part created on behalf of any eligible lender as defined in section 1085(d) of this title may be perfected either through the taking of possession of such loans (which can be through taking possession of an original or copy of the master promissory note) or by the filing of notice of such security interest in such loans in the manner pro- vided by such State law for perfection of security inter- ests in accounts.’’ Subsec. (m)(1)(E). Pub. L. 106–554, § 1(a)(1) [title III, § 311(2)], added subpar. (E). 1998—Subsec. (f)(1)(B). Pub. L. 105–244, § 427(a)(1), sub- stituted ‘‘section 1085(d)(1)’’ for ‘‘section 1085(d)(1)(D), (F), or (H)’’. Subsec. (f)(1)(C). Pub. L. 105–244, § 427(a)(2), sub- stituted ‘‘and the Workforce’’ for ‘‘and Labor’’ and a period for ‘‘; and’’ at end. Subsec. (f)(1)(D). Pub. L. 105–244, § 427(a)(3), struck out subpar. (D) which read as follows: ‘‘any Authority re- quired to file a plan for doing business under section 1087–1(d) of this title.’’ Subsec. (k)(3). Pub. L. 105–244, § 427(b), substituted ‘‘The Secretary’’ for ‘‘Within 1 year after July 23, 1992, the Secretary’’. Subsec. (m)(1)(A). Pub. L. 105–244, § 427(c)(1)(A), sub- stituted ‘‘common application forms and promissory notes, or master promissory notes,’’ for ‘‘a common ap- plication form and promissory note’’. Subsec. (m)(1)(B). Pub. L. 105–244, § 427(c)(1)(B), sub- stituted ‘‘The forms’’ for ‘‘The form’’ in introductory provisions and struck out cl. (iii) which read as follows: ‘‘permit, to the maximum extent practicable, applica- tion for any loan under this part.’’ Subsec. (m)(1)(C). Pub. L. 105–244, § 427(c)(1)(C), amended heading and text of subpar. (C) generally. Prior to amendment, text read as follows: ‘‘The Sec- retary shall approve a form for use not later than 360 days after July 23, 1992.’’ Subsec. (m)(1)(D). Pub. L. 105–244, § 427(c)(1)(D), amended heading and text of subpar. (D) generally. Prior to amendment, text read as follows: ‘‘Nothing in this section shall be construed to limit the develop- ment of electronic forms and procedures.’’ Subsec. (m)(4). Pub. L. 105–244, § 427(c)(2), added par. (4). Subsec. (n)(1). Pub. L. 105–244, § 427(d)(1), substituted ‘‘1999’’ for ‘‘1993’’. Subsec. (n)(3). Pub. L. 105–244, § 427(d)(2), substituted ‘‘and the Workforce’’ for ‘‘and Labor’’ in concluding provisions. Subsec. (p). Pub. L. 105–244, § 427(e), struck out ‘‘State postsecondary reviewing entities designated under sub- part 1 of part H,’’ after ‘‘agencies or boards,’’. 1995—Subsec. (b). Pub. L. 104–66 amended heading and text of subsec. (b) generally. Prior to amendment, text read as follows: ‘‘The Secretary shall, with respect to the financial operations arising by reason of this part— ‘‘(1) prepare annually and submit a budget program as provided for wholly owned Government corpora- tions by chapter 91 of title 31; and ‘‘(2) maintain with respect to insurance under this part an integral set of accounts and prepare financial statements in accordance with generally accepted ac- counting principles, which shall be audited annually by the General Accounting Office in conformity with generally accepted Government auditing standards except that the transactions of the Secretary, includ- ing the settlement of insurance claims and of claims for payments pursuant to section 1078 of this title, and transactions related thereto and vouchers ap- proved by the Secretary in connection with such transactions, shall be final and conclusive upon all accounting and other officers of the Government.’’ 1993—Subsec. (h)(2)(A), (3)(A). Pub. L. 103–208 amended directory language of Pub. L. 102–325, § 425(d)(1). See 1992 Amendment notes below. 1992—Subsec. (a)(1). Pub. L. 102–325, § 425(a), inserted before semicolon at end ‘‘, including regulations appli- cable to third party servicers (including regulations concerning financial responsibility standards for, and the assessment of liabilities for program violations against, such servicers) to establish minimum stand- ards with respect to sound management and account- ability of programs under this part, except that in no case shall damages be assessed against the United States for the actions or inactions of such servicers’’. Subsecs. (a)(3), (g)(1). Pub. L. 102–325, § 425(b)(1), (2), struck out ‘‘on the record’’ after ‘‘for a hearing’’. Subsec. (g)(2). Pub. L. 102–325, § 425(c)(1), amended par. (2) generally. Prior to amendment, par. (2) read as fol- lows: ‘‘No civil penalty may be imposed under para- graph (1) of this subsection unless it is determined that the violation, failure, or substantial misrepresentation referred to in that paragraph resulted from— ‘‘(A)(i) a clear and consistent pattern or practice of violations, failures, or substantial misrepresenta- tions in which the lender or guaranty agency did not maintain procedures reasonably adapted to avoid the violation, failure, or substantial misrepresentation; ‘‘(ii) gross negligence; or ‘‘(iii) willful actions on the part of the lender or guaranty agency; and ‘‘(B) the violation, failure, or substantial misrepre- sentation is material.’’ Subsec. (g)(3). Pub. L. 102–325, § 425(c)(2), substituted ‘‘notification by the Secretary under that paragraph’’ for ‘‘the institution of an action under that para- graph’’. Subsec. (g)(4). Pub. L. 102–325, § 425(c)(3), inserted ‘‘, and occurring prior to notification by the Secretary under that paragraph,’’ after ‘‘guaranty agency’’ and substituted ‘‘or both. The’’ for ‘‘or both, and the’’. Subsec. (h)(2)(A). Pub. L. 102–325, § 425(d)(1), as amend- ed by Pub. L. 103–208, § 2(k)(2), in second sentence sub- stituted ‘‘The Secretary shall uphold the imposition of such limitation, suspension, or termination in the stu- dent loan insurance program of each of the guaranty agencies under this part, and shall notify such guar- anty agencies of such sanction’’ for ‘‘The Secretary shall disqualify such lender from participation in the student loan insurance program of each of the guaranty agencies under this part, and notify such guaranty agencies of such disqualification’’. Pub. L. 102–325, § 425(b)(3), in first sentence struck out ‘‘, in accordance with sections 556 and 557 of title 5,’’ after ‘‘The Secretary shall’’. Subsec. (h)(2)(B), (C). Pub. L. 102–325, § 425(d)(2), (3), added subpar. (B), redesignated former subpar. (B) as Page 491 TITLE 20—EDUCATION § 1083 (C), and substituted ‘‘sanction’’ for ‘‘disqualification’’ in two places. Subsec. (h)(3)(A). Pub. L. 102–325, § 425(d)(4), as amend- ed by Pub. L. 103–208, § 2(k)(3), in second sentence sub- stituted ‘‘The Secretary shall uphold the imposition of such limitation, suspension, or termination in the stu- dent loan insurance program of each of the guaranty agencies under this part, and shall notify such guar- anty agencies of such sanctions’’ for ‘‘The Secretary shall disqualify such institution from participation in the student loan insurance program of each of the guar- anty agencies under this part, and notify such guaranty agencies of such disqualification’’. Pub. L. 102–325, § 425(b)(4), in first sentence struck out ‘‘, in accordance with sections 556 and 557 of title 5,’’ after ‘‘The Secretary shall’’. Subsec. (h)(3)(B), (C). Pub. L. 102–325, § 425(d)(5), (6), added subpar. (B), redesignated former subpar. (B) as (C), and substituted ‘‘sanction’’ for ‘‘disqualification’’ in two places. Subsecs. (k) to (p). Pub. L. 102–325, § 425(e), added sub- secs. (k) to (p). 1989—Subsec. (j). Pub. L. 101–239 added subsec. (j). 1987—Subsec. (f)(4). Pub. L. 100–50, § 10(x), added par. (4). Subsec. (g)(2)(A)(i), (B). Pub. L. 100–50, § 10(y), sub- stituted ‘‘misrepresentation’’ for ‘‘representation’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2009 AMENDMENT Amendment by Pub. L. 111–39 effective as if enacted on the date of enactment of Pub. L. 110–315 (Aug. 14, 2008), see section 3 of Pub. L. 111–39, set out as a note under section 1001 of this title. 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. EFFECTIVE DATE OF 1987 AMENDMENT Amendment by Pub. L. 100–50 effective as if enacted as part of the Higher Education Amendments of 1986, Pub. L. 99–498, see section 27 of Pub. L. 100–50, set out as a note under section 1001 of this title. § 1083. Student loan information by eligible lend- ers (a) Required disclosure before disbursement Each eligible lender, at or prior to the time such lender disburses a loan that is insured or guaranteed under this part (other than a loan made under section 1078–3 of this title), shall provide thorough and accurate loan information on such loan to the borrower in simple and un- derstandable terms. Any disclosure required by this subsection may be made by an eligible lend- er by written or electronic means, including as part of the application material provided to the borrower, as part of the promissory note evi- dencing the loan, or on a separate written form provided to the borrower. Each lender shall pro- vide to each borrower a telephone number, and may provide an electronic address, through which additional loan information can be ob- tained. The disclosure shall include— (1) a statement prominently and clearly dis- played and in bold print that the borrower is receiving a loan that must be repaid; (2) the name of the eligible lender, and the address to which communications and pay- ments should be sent; (3) the principal amount of the loan; (4) the amount of any charges, such as the origination fee and Federal default fee, and whether those fees will be— (A) collected by the lender at or prior to the disbursal of the loan; (B) deducted from the proceeds of the loan; (C) paid separately by the borrower; or (D) paid by the lender; (5) the stated interest rate on the loan; (6) for loans made under section 1078–8 of this title or to a student borrower under sec- tion 1078–2 of this title, an explanation— (A) that the borrower has the option to pay the interest that accrues on the loan while the borrower is a student at an insti- tution of higher education; and (B) if the borrower does not pay such inter- est while attending an institution, when and how often interest on the loan will be cap- italized; (7) for loans made to a parent borrower on behalf of a student under section 1078–2 of this title, an explanation— (A) that the parent has the option to defer payment on the loan while the student is en- rolled on at least a half-time basis in an in- stitution of higher education; (B) if the parent does not pay the interest on the loan while the student is enrolled in an institution, when and how often interest on the loan will be capitalized; and (C) that the parent may be eligible for a deferment on the loan if the parent is en- rolled on at least a half-time basis in an in- stitution of higher education; (8) the yearly and cumulative maximum amounts that may be borrowed; (9) a statement of the total cumulative bal- ance, including the loan being disbursed, owed by the borrower to that lender, and an esti- mate of the projected monthly payment, given such cumulative balance; (10) an explanation of when repayment of the loan will be required and when the borrower will be obligated to pay interest that accrues on the loan; (11) a description of the types of repayment plans that are available for the loan; (12) a statement as to the minimum and maximum repayment terms which the lender may impose, and the minimum annual pay- ment required by law; (13) an explanation of any special options the borrower may have for loan consolidation or other refinancing of the loan; (14) a statement that the borrower has the right to prepay all or part of the loan, at any time, without penalty;