42 U.S.C. § 297a — Student loan fund

(a) Agreements to establish and operate fund authorized The Secretary can make an agreement with any public or nonprofit private nursing school located in a state to set up and run a student loan fund under this part. (b) Provisions of agreements Every agreement must: (1) set up a student loan fund at the school; (2) require money to be deposited into the fund (except as section 298d says otherwise), made up of: (A) the federal money (called capital contributions) the Secretary pays the school from allotments under section 297d; (B) extra money from other sources equal to at least one-ninth of that federal money; (C) principal and interest collected on loans already made from the fund; (D) money collected under section 297b(f) (late-payment charges); and (E) any other money the fund earns; (3) say the fund (except as section 298d allows) can only be used to make loans to the school's own students under the agreement, and to pay the cost of collecting those loans and their interest; (4) say loans can only go to students in a full-time or half-time program at the school that leads to a bachelor's or associate degree in nursing (or an equivalent degree), a nursing diploma, or a graduate nursing degree; and (5) include any other terms needed to protect the government's financial interests. (c) Regulatory standards applicable to collection of loans (1) Any rule the Secretary makes about how schools must collect these loans has to measure a school's collection failures the way this subsection describes. Schools do not have to pay back the loan fund for loans that became uncollectable before 1983. (2) A school's failure to collect is measured as a percentage: the amount of defaulted principal still owed, divided by the school's matured loans. (3) For this subsection: (A) "default" means a borrower failed to make a payment when due, or broke some other loan term — except that a loan isn't counted as in default if it was wiped out in bankruptcy, or if the school reasonably believes from written contact that the borrower still plans to repay; (B) "defaulted principal amount outstanding" means the total amount borrowed that has reached the repayment stage (after subtracting anything repaid or cancelled), where the loan is either repayable monthly and at least 120 days late, or repayable less often than monthly and at least 180 days late; (C) "grace period" means the nine months starting when the borrower stops studying full-time or half-time; and (D) "matured loans" means the total amount a school has ever loaned out, minus the principal owed by students who are still enrolled full-time or half-time, or who are in their grace period.