20 U.S.C. § 1087bb — Allocation of funds

submitted 40 years ago by Pub. L. 89-329 to r/title-20-EDUCATION · 3,059 words · no verdicts yet

in plain englishAI-generated · not legal advice

This section sets the formula for allocating Perkins Loan funds among eligible institutions. It uses prior allocations, student need, collections, default penalties, and rules for reallocation and institutions with high default rates.

(a) Allocation based on previous allocation. (1) From the amount appropriated under section 1087aa(b) for each fiscal year, the Secretary must first give each eligible institution an amount equal to 100 percent of what it received under subsections (a) and (b) for fiscal year 1999, multiplied by its default penalty under subsection (e). An institution above the maximum cohort default rate under subsection (f) receives nothing under this paragraph. (2) Next, for an eligible institution that began participating after fiscal year 1999 and is not a first- or second-time participant, the amount is the greater of $5,000 or 100 percent of what it received and spent in its first participation year. For a first- or second-time participant, the amount is the greatest of $5,000; an amount calculated as 90 percent of the amount received and used in the second preceding year by comparable-program institutions divided by their enrollment and multiplied by the applicant’s enrollment; or 90 percent of the institution’s prior-year allocation. Despite these rules, a first-time participant in fiscal year 2000 or later that received more in its second participation year receives 90 percent of that second-year amount. In later years, the institution receives the applicable amount under this paragraph multiplied by its default penalty, unless its cohort default rate exceeds the maximum rate. (3) If the appropriation is less than all paragraph (1) allocations, reduce each of them proportionally. If it covers paragraph (1) but not all paragraph (2) allocations, pay paragraph (1) in full and reduce paragraph (2) allocations proportionally. If more money is later appropriated, increase the reduced amounts on the same proportional basis until the paragraph (1) and (2) amounts are reached. (b) Allocation of excess based on excess eligible amounts. (1) After subsection (a) allocations, the Secretary must distribute the remaining appropriation among eligible institutions with excess eligible amounts. Each institution’s share of the remainder equals its excess eligible amount divided by the total excess eligible amounts. (2) An institution’s excess eligible amount is the amount by which its share of the full appropriation, calculated as its eligible amount divided by all institutions’ eligible amounts and multiplied by the fiscal-year appropriation, exceeds its subsection (a) allocation. An institution above the maximum cohort default rate cannot receive this allocation. (3) An institution’s eligible amount is its self-help need under subsection (c), minus anticipated collections, multiplied by its default penalty under subsection (e). If its cohort default rate exceeds the maximum, its eligible amount is zero. (c) Determining self-help need. (1) An institution’s self-help need is the self-help need of its eligible undergraduate students plus that of its eligible graduate and professional students. (2) For undergraduates, the Secretary must: (A) create income categories for dependent and independent students; (B) set a student aid index for each category using the average index, calculated under part F, for a representative sample in that category in the second preceding fiscal year; (C) calculate 25 percent of average undergraduate cost of attendance; (D) for each dependent category, multiply eligible-student count by the lesser of that 25-percent amount or average cost minus the category’s index, with the subtraction never below zero; (E) add dependent-category results; (F) do the same for each independent category; (G) add independent results; and (H) add the dependent and independent totals. (3) For graduate and professional students, the Secretary must: (A) create income categories; (B) set an index for each using the same representative-sample method for the second preceding fiscal year; (C) find average cost of attendance; (D) subtract each category’s index, never below zero; (E) multiply each result by eligible students in that category; and (F) add the category results. (4) (A) “Average cost of attendance” means the average attendance cost for undergraduate and graduate/professional students, including tuition and fees, standard living expenses, and books and supplies. (B) Tuition and fees are calculated from information the institution reports, including total tuition-and-fee revenue and enrollment in the second preceding year. (C) Standard living expense is 150 percent of the difference between the income-protection allowance for a family of five with one in college and the allowance for a family of six with one in college, for a single independent student. (D) Books and supplies are allowed at $600. (d) Anticipated collections. (1) These equal the amount collected in the second year before the award period began, multiplied by 1.21. (2) The Secretary must create an appeals process that may waive this amount for institutions with low cohort default rates in the assisted program. (e) Default penalties. (1) Before fiscal year 2000, an institution at or above 15 percent must establish a regulatory default-reduction plan, except a plan is not required if the rate is below 20 percent and fewer than 100 students had loans under this part in that academic year. An institution at or above 20 but below 25 percent has a 0.9 penalty; at or above 25 but below 30 percent, a 0.7 penalty; and at or above 30 percent, a zero penalty. (2) For fiscal year 2000 and later, an institution at or above 25 percent has a zero penalty. (3) For those years, an institution at or above 50 percent in each of the three latest years with data is ineligible for this part for the determination year and the next two years. It may appeal within 30 days. The Secretary must decide within 45 days and may allow participation if the rate calculation is wrong and recalculation lowers any of the three rates below 50 percent, or if so few borrowers entered repayment that applying the rule would be inequitable. Participation may continue during the appeal. Within 90 days after termination or the appeal’s conclusion, whichever is later, the institution’s fund balance is distributed: first to the Secretary in the ratio of Federal capital contributions to total Federal and institutional contributions, and the remainder to the institution. Returned Federal funds are reallocated under subsection (i). “Loss of eligibility” means mandatory liquidation of the institution’s fund and assignment of its outstanding loan portfolio to the Secretary. (f) The maximum cohort default rate is 30 percent for award years before 2000 and 25 percent for award year 2000 and later. (g) “Cohort default rate.” (1)(A) If at least 30 current or former students enter repayment in an award year on loans received for attendance at the institution, the rate is the percentage who default before the end of the following award year. (B) If fewer than 30 enter repayment, it is the percentage of such students who entered repayment in the three latest award years and defaulted before the end of the award year after their repayment year. (C) A payment by the institution or an affiliated person or entity to avoid the borrower’s default still counts as a default. (D) A student who borrowed at more than one school is attributed to the school for which the loan entering repayment in that award year was received. (E) Exclude a loan if, after the paragraph (2) period, the borrower voluntarily made six consecutive payments, made all currently due payments, repaid the amount due in full, or received a deferment or forbearance based on a condition that began before that period; if the loan was rehabilitated or canceled; or if the Secretary otherwise requires exclusion. (F) The Secretary must issue regulations preventing evasion through branching, consolidation, ownership or control changes, or other means. (2) A loan is in default 240 days after a missed payment or other promissory-note violation if payable monthly, or 270 days if payable quarterly. (h) The Secretary must periodically set application filing deadlines. (i) Reallocation of excess allocations. (1) If an institution returns any fiscal-year allocation, the Secretary must give 80 percent of the returned amount to participating institutions, limited by their paragraph (2) excess eligible amounts. A participating institution is one that participated in fiscal year 1999 and did not receive a subsection (a) allocation in the reallocation year. (2) Its excess eligible amount is its share of available reallocation funds, based on its subsection (b)(3) eligible amount divided by the total eligible amounts of participating institutions, minus the amount required under subsection (b). (3) The Secretary reallocates the rest under regulations. (4) If an institution returns more than 10 percent, its next-year allocation is reduced by the returned amount. The Secretary may waive this for a specific institution if enforcement would conflict with the program’s interests.

the actual law source: uscode.house.gov ↗public domain

(a) Allocation based on previous allocation

(1)

From the amount appropriated pursuant to section 1087aa(b) 1 of this title for each fiscal year, the Secretary shall first allocate to each eligible institution an amount equal to—

(A)

100 percent of the amount received under subsections (a) and (b) of this section for fiscal year 1999 (as such subsections were in effect with respect to allocations for such fiscal year), multiplied by

(B)

the institution’s default penalty, as determined under subsection (e),

except that if the institution has a cohort default rate in excess of the applicable maximum cohort default rate under subsection (f), the institution may not receive an allocation under this paragraph.

(2)

(A)

From the amount so appropriated, the Secretary shall next allocate to each eligible institution that began participation in the program under this part after fiscal year 1999 but is not a first or second time participant, an amount equal to the greater of—

(i)

$5,000; or

(ii)

100 percent of the amount received and expended under this part for the first year it participated in the program.

(B)

From the amount so appropriated, the Secretary shall next allocate to each eligible institution that began participation in the program under this part after fiscal year 1999 and is a first or second time participant, an amount equal to the greatest of—

(i)

$5,000;

(ii)

an amount equal to (I) 90 percent of the amount received and used under this part in the second preceding fiscal year by eligible institutions offering comparable programs of instruction, divided by (II) the number of students enrolled at such comparable institutions in such fiscal year, multiplied by (III) the number of students enrolled at the applicant institution in such fiscal year; or

(iii)

90 percent of the institution’s allocation under this part for the preceding fiscal year.

(C)

Notwithstanding subparagraphs (A) and (B) of this paragraph, the Secretary shall allocate to each eligible institution which—

(i)

was a first-time participant in the program in fiscal year 2000 or any subsequent fiscal year, and

(ii)

received a larger amount under this subsection in the second year of participation,

an amount equal to 90 percent of the amount it received under this subsection in its second year of participation.

(D)

For any fiscal year after a fiscal year in which an institution receives an allocation under subparagraph (A), (B), or (C), the Secretary shall allocate to such institution an amount equal to the product of—

(i)

the amount determined under subparagraph (A), (B), or (C), multiplied by

(ii)

the institution’s default penalty, as determined under subsection (e),

(3)

(A)

If the amount appropriated for any fiscal year is less than the amount required to be allocated to all institutions under paragraph (1) of this subsection, then the amount of the allocation to each such institution shall be ratably reduced.

(B)

If the amount appropriated for any fiscal year is more than the amount required to be allocated to all institutions under paragraph (1) but less than the amount required to be allocated to all institutions under paragraph (2), then—

(i)

the Secretary shall allot the amount required to be allocated to all institutions under paragraph (1), and

(ii)

the amount of the allocation to each institution under paragraph (2) shall be ratably reduced.

(C)

If additional amounts are appropriated for any such fiscal year, such reduced amounts shall be increased on the same basis as they were reduced (until the amount allocated equals the amount required to be allocated under paragraphs (1) and (2) of this subsection).

(b) Allocation of excess based on share of excess eligible amounts

(1)

From the remainder of the amount appropriated pursuant to section 1087aa(b) ¹ of this title after making the allocations required by subsection (a) of this section, the Secretary shall allocate to each eligible institution which has an excess eligible amount an amount which bears the same ratio to such remainder as such excess eligible amount bears to the sum of the excess eligible amounts of all such eligible institutions (having such excess eligible amounts).

(2)

For any eligible institution, the excess eligible amount is the amount, if any, by which—

(A)

(i)

that institution’s eligible amount (as determined under paragraph (3)), divided by (ii) the sum of the eligible amounts of all institutions (as so determined), multiplied by (iii) the amount appropriated pursuant to section 1087aa(b) ¹ of this title for the fiscal year; exceeds

(B)

the amount required to be allocated to that institution under subsection (a),

except that an eligible institution which has a cohort default rate in excess of the applicable maximum cohort default rate under subsection (f) may not receive an allocation under this paragraph.

(3)

For any eligible institution, the eligible amount of that institution is equal to—

(A)

the amount of the institution’s self-help need, as determined under subsection (c); minus

(B)

the institution’s anticipated collections; multiplied by

(C)

the institution’s default penalty, as determined under subsection (e);

except that, if the institution has a cohort default rate in excess of the applicable maximum cohort default rate under subsection (f), the eligible amount of that institution is zero.

(1)

The amount of an institution’s self-help need is equal to the sum of the self-help need of the institution’s eligible undergraduate students and the self-help need of the institution’s eligible graduate and professional students.

(2)

To determine the self-help need of an institution’s eligible undergraduate students, the Secretary shall—

(A)

establish various income categories for dependent and independent undergraduate students;

(B)

establish a student aid index for each income category of dependent and independent undergraduate students, determined on the basis of the average student aid index (computed in accordance with part F of this subchapter) of a representative sample within each income category for the second preceding fiscal year;

(C)

compute 25 percent of the average cost of attendance for all undergraduate students;

(D)

multiply the number of eligible dependent students in each income category by the lesser of—

(i)

25 percent of the average cost of attendance for all undergraduate students determined under subparagraph (C); or

(ii)

the average cost of attendance for all undergraduate students minus the student aid index determined under subparagraph (B) for that income category, except that the amount computed by such subtraction shall not be less than zero;

(E)

add the amounts determined under subparagraph (D) for each income category of dependent students;

(F)

multiply the number of eligible independent students in each income category by the lesser of—

(i)

25 percent of the average cost of attendance for all undergraduate students determined under subparagraph (C); or

(ii)

(G)

add the amounts determined under subparagraph (F) for each income category of independent students; and

(H)

add the amounts determined under subparagraphs (E) and (G).

(3)

To determine the self-help need of an institution’s eligible graduate and professional students, the Secretary shall—

(A)

establish various income categories for graduate and professional students;

(B)

establish a student aid index for each income category of graduate and professional students, determined on the basis of the average student aid index (computed in accordance with part F of this subchapter) of a representative sample within each income category for the second preceding fiscal year;

(C)

determine the average cost of attendance for all graduate and professional students;

(D)

subtract from the average cost of attendance for all graduate and professional students (determined under subparagraph (C)), the student aid index (determined under subparagraph (B)) for each income category, except that the amount computed by such subtraction for any income category shall not be less than zero;

(E)

multiply the amounts determined under subparagraph (D) by the number of eligible students in each category;

(F)

add the amounts determined under subparagraph (E) for each income category.

(4)

(A)

For purposes of paragraphs (2) and (3), the term “average cost of attendance” means the average of the attendance costs for undergraduate students and for graduate and professional students, which shall include (i) tuition and fees determined in accordance with subparagraph (B), (ii) standard living expenses determined in accordance with subparagraph (C), and (iii) books and supplies determined in accordance with subparagraph (D).

(B)

The average undergraduate and graduate and professional tuition and fees described in subparagraph (A)(i) shall be computed on the basis of information reported by the institution to the Secretary, which shall include (i) total revenue received by the institution from undergraduate and graduate tuition and fees for the second year preceding the year for which it is applying for an allocation, and (ii) the institution’s enrollment for such second preceding year.

(C)

The standard living expense described in subparagraph (A)(ii) is equal to 150 percent of the difference between the income protection allowance for a family of five with one in college and the income protection allowance for a family of six with one in college for a single independent student.

(D)

The allowance for books and supplies described in subparagraph (A)(iii) is equal to $600.

(d) Anticipated collections

(1)

An institution’s anticipated collections are equal to the amount which was collected during the second year preceding the beginning of the award period, multiplied by 1.21.

(2)

The Secretary shall establish an appeals process by which the anticipated collections required in paragraph (1) may be waived for institutions with low cohort default rates in the program assisted under this part.

(e) Default penalties

(1) Years preceding fiscal year 2000

For any fiscal year preceding fiscal year 2000, any institution with a cohort default rate that—

(A)

equals or exceeds 15 percent, shall establish a default reduction plan pursuant to regulations prescribed by the Secretary, except that such plan shall not be required with respect to an institution that has a default rate of less than 20 percent and that has less than 100 students who have loans under this part in such academic year;

(B)

equals or exceeds 20 percent, but is less than 25 percent, shall have a default penalty of 0.9;

(C)

equals or exceeds 25 percent, but is less than 30 percent, shall have a default penalty of 0.7; and

(D)

equals or exceeds 30 percent shall have a default penalty of zero.

(2) Years following fiscal year 2000

For fiscal year 2000 and any succeeding fiscal year, any institution with a cohort default rate (as defined under subsection (g)) that equals or exceeds 25 percent shall have a default penalty of zero.

(3) Ineligibility

(A) In general

For fiscal year 2000 and any succeeding fiscal year, any institution with a cohort default rate (as defined in subsection (g)) that equals or exceeds 50 percent for each of the 3 most recent years for which data are available shall not be eligible to participate in a program under this part for the fiscal year for which the determination is made and the 2 succeeding fiscal years, unless, within 30 days of receiving notification from the Secretary of the loss of eligibility under this paragraph, the institution appeals the loss of eligibility to the Secretary. The Secretary shall issue a decision on any such appeal within 45 days after the submission of the appeal. Such decision may permit the institution to continue to participate in a program under this part if—

(i)

the institution demonstrates to the satisfaction of the Secretary that the calculation of the institution’s cohort default rate is not accurate, and that recalculation would reduce the institution’s cohort default rate for any of the 3 fiscal years below 50 percent; or

(ii)

there are, in the judgment of the Secretary, such a small number of borrowers entering repayment that the application of this subparagraph would be inequitable.

(B) Continued participation

During an appeal under subparagraph (A), the Secretary may permit the institution to continue to participate in a program under this part.

Within 90 days after the date of any termination pursuant to subparagraph (A), or the conclusion of any appeal pursuant to subparagraph (B), whichever is later, the balance of the student loan fund established under this part by the institution that is the subject of the termination shall be distributed as follows:

(i)

The Secretary shall first be paid an amount which bears the same ratio to such balance (as of the date of such distribution) as the total amount of Federal capital contributions to such fund by the Secretary under this part bears to the sum of such Federal capital contributions and the capital contributions to such fund made by the institution.

(ii)

The remainder of such student loan fund shall be paid to the institution.

(D) Use of returned funds

Any funds returned to the Secretary under this paragraph shall be reallocated to institutions of higher education pursuant to subsection (i).

(E) Definition

For the purposes of subparagraph (A), the term “loss of eligibility” shall be defined as the mandatory liquidation of an institution’s student loan fund, and assignment of the institution’s outstanding loan portfolio to the Secretary.

(f) Applicable maximum cohort default rate

(1) Award years prior to 2000

For award years prior to award year 2000, the applicable maximum cohort default rate is 30 percent.

(2) Award year 2000 and succeeding award years

For award year 2000 and subsequent years, the applicable maximum cohort default rate is 25 percent.

(g) “Cohort default rate” defined

(1)

(A)

The term “cohort default rate” means, for any award year in which 30 or more current and former students at the institution enter repayment on loans under this part (received for attendance at the institution), the percentage of those current and former students who enter repayment on such loans (received for attendance at that institution) in that award year who default before the end of the following award year.

(B)

For any award year in which less than 30 of the institution’s current and former students enter repayment, the term “cohort default rate” means the percentage of such current and former students who entered repayment on such loans in any of the three most recent award years and who default before the end of the award year immediately following the year in which they entered repayment.

(C)

A loan on which a payment is made by the institution of higher education, its owner, agency, contractor, employee, or any other entity or individual affiliated with such institution, in order to avoid default by the borrower, is considered as in default for the purposes of this subsection.

(D)

In the case of a student who has attended and borrowed at more than one school, the student (and his or her subsequent repayment or default) is attributed to the school for attendance at which the student received the loan that entered repayment in the award year.

(E)

In determining the number of students who default before the end of such award year, the institution, in calculating the cohort default rate, shall exclude—

(i)

any loan on which the borrower has, after the time periods specified in paragraph (2)—

(I)

voluntarily made 6 consecutive payments;

(II)

voluntarily made all payments currently due;

(III)

repaid in full the amount due on the loan; or

(IV)

received a deferment or forbearance, based on a condition that began prior to such time periods;

(ii)

any loan which has, after the time periods specified in paragraph (2), been rehabilitated or canceled; and

(iii)

any other loan that the Secretary determines should be excluded from such determination.

(F)

The Secretary shall prescribe regulations designed to prevent an institution from evading the application to that institution of a cohort default rate determination under this subsection through the use of such measures as branching, consolidation, change of ownership or control or other means as determined by the Secretary.

(2)

For purposes of calculating the cohort default rate under this subsection, a loan shall be considered to be in default—

(A)

240 days (in the case of a loan repayable monthly), or

(B)

270 days (in the case of a loan repayable quarterly),

after the borrower fails to make an installment payment when due or to comply with other terms of the promissory note.

(h) Filing deadlines

The Secretary shall, from time to time, set dates before which institutions must file applications for allocations under this part.

(i) Reallocation of excess allocations

(1) In general

(A)

If an institution of higher education returns to the Secretary any portion of the sums allocated to such institution under this section for any fiscal year, the Secretary shall reallocate 80 percent of such returned portions to participating institutions in an amount not to exceed such participating institution’s excess eligible amounts as determined under paragraph (2).

(B)

For the purpose of this subsection, the term “participating institution” means an institution of higher education that—

(i)

was a participant in the program assisted under this part in fiscal year 1999; and

(ii)

did not receive an allocation under subsection (a) in the fiscal year for which the reallocation determination is made.

(2) Excess eligible amount

For any participating institution, the excess eligible amount is the amount, if any, by which—

(A)

(i)

that institution’s eligible amount (as determined under subsection (b)(3)), divided by (ii) the sum of the eligible amounts of all participating institutions (as determined under paragraph (3)), multiplied by (iii) the amount of funds available for reallocation under this subsection; exceeds

(B)

the amount required to be allocated to that institution under subsection (b).

(3) Remainder

The Secretary shall reallocate the remainder of such returned portions in accordance with regulations of the Secretary.

(4) Allocation reductions

If under paragraph (1) of this subsection an institution returns more than 10 percent of its allocation, the institution’s allocation for the next fiscal year shall be reduced by the amount returned. The Secretary may waive this paragraph for a specific institution if the Secretary finds that enforcing it is contrary to the interest of the program.

Source credit: (Pub. L. 89–329, title IV, § 462, as added Pub. L. 99–498, title IV, § 405(a), Oct. 17, 1986, 100 Stat. 1440; amended Pub. L. 100–50, § 13(a)–(d), June 3, 1987, 101 Stat. 348; Pub. L. 102–325, title IV, § 462, July 23, 1992, 106 Stat. 576; Pub. L. 103–208, § 2(f)(1)–(4), Dec. 20, 1993, 107 Stat. 2470, 2471; Pub. L. 105–244, title IV, § 462(a)(1), (2), (b)–(e), Oct. 7, 1998, 112 Stat. 1720–1723; Pub. L. 110–315, title IV, § 462, Aug. 14, 2008, 122 Stat. 3266; Pub. L. 111–39, title IV, § 405(1), July 1, 2009, 123 Stat. 1947; Pub. L. 116–260, div. FF, title VII, § 704(1), (3), (4), Dec. 27, 2020, 134 Stat. 3199, 3200.)

history & why it existsrecord from the source credit

1986Enacted · Pub. L. 89-329 · 100 Stat. 1440
1987Amended · Pub. L. 100-50 · 101 Stat. 348
1992Amended · Pub. L. 102-325 · 106 Stat. 576
1993Amended · Pub. L. 103-208 · 107 Stat. 2470, 2471
1998Amended · Pub. L. 105-244 · 112 Stat. 1720
2008Amended · Pub. L. 110-315 · 122 Stat. 3266
2009Amended · Pub. L. 111-39 · 123 Stat. 1947
2020Amended · Pub. L. 116-260 · 134 Stat. 3199, 3200

A history note hasn’t been published yet. The record shows enactment by Pub. L. 89-329 on 1986-10-17.

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