20 U.S.C. § 1087i–1 — Temporary authority to purchase student loans
submitted 18 years ago by Pub. L. 89-329 to r/title-20-EDUCATION · 1,493 words · no verdicts yet
The Secretary may temporarily buy certain Federal student loans from eligible lenders when loan capital is not sufficiently available. The purchases must not create a net cost for the Federal Government, and the Secretary must report on the purchases and their costs.
(a) Authority to purchase. (1) Authority; determination required. If the Secretary* determines that there is not enough loan capital to meet demand for loans under sections 1078, 1078–2, or 1078–8, because of insufficient liquidity or another reason, the Secretary, after consulting the Secretary of the Treasury, may buy—or make a future commitment to buy—from any “eligible lender” (a term defined in section 1085(d)(1), not in this section) loans first paid out under those sections on or after October 1, 2003, and before July 1, 2010. The Secretary, the Treasury Secretary, and the Director of the Office of Management and Budget must jointly set terms that they determine are in the United States’ best interest. The purchase, including loan-servicing costs, may not create any net cost to the Federal Government, as those three officials jointly determine. (2) Federal Register notice. Before any purchase under paragraph (1), those three officials must jointly publish a Federal Register notice that (A) sets the purchase terms and conditions; (B) outlines the method and factors they will use to evaluate the purchase price for loans under sections 1078, 1078–2, or 1078–8; and (C) explains how that method and those factors will ensure that the purchases, including servicing costs, create no net cost to the Federal Government. (3) Temporary authority to purchase rehabilitated loans. (A) Authority. In addition to paragraph (1), the Secretary, after consulting the Treasury Secretary, may buy—or make a future commitment to buy—from any “eligible lender” loans that lender bought under section 1078–6 on or after October 1, 2003, and before July 1, 2010, if the loans are not in default. The three officials must jointly set terms they determine are in the United States’ best interest, and the purchase, including servicing costs, may not create a net cost to the Federal Government. (B) Federal Register notice. Before a purchase under this paragraph, the three officials must jointly publish a notice that (i) sets its terms and conditions; (ii) outlines the method and factors they will use to evaluate the price of loans rehabilitated under section 1078–6(a); and (iii) explains how the method and factors will ensure that the purchase, including servicing costs, creates no net cost to the Federal Government.
(b) Proceeds. As a condition of a purchase under subsection (a), the Secretary must require the eligible lender to use the money paid by the Secretary (1) to keep taking part in the Federal student-loan programs authorized under part B of this subchapter; and (2)(A), for loans bought under subsection (a)(1), to make new Federal student loans as part B allows; or (B), for loans bought under subsection (a)(3), to make those new loans or buy loans under section 1078–6(a).
(c) Maintaining servicing arrangements. If the eligible lender agrees, the Secretary may contract with that lender to service the purchased loans. The servicing cost must not be more than the cost the Federal Government would otherwise incur, as determined under subsection (a), and the arrangement must be in the purchased borrowers’ best interest.
(d) Guaranty agency responsibilities and payments. Despite other provisions of this chapter, starting when the Secretary buys a loan, (1) the guaranty agency that insured it no longer has duties, responsibilities, or rights—including payment rights—under this chapter for loan-administration activity occurring or required on or after that date; and (2) the agency’s insurance under section 1078(b) no longer covers a default occurring on or after that date.
(e) Reports and cost estimates. The Secretary must prepare, send to the authorizing committees*, and make public: (1) Quarterly reports. (A) Contents. Within 60 days after each quarter from July 1, 2008, through September 30, 2010, a report must state* (i) the number of loans the Secretary agreed to buy or bought under this section and their total unpaid principal and accrued interest during that period; and (ii) the number of loans in which the Secretary bought a participation interest and their total unpaid principal and accrued interest during that period. (B) Disaggregated information. Each report must break down both sets of information by lender and, for each lender, by institution category using section 1015a(d) and by loan type. (2) Estimates of purchase program costs. By February 15, 2011, the Secretary must estimate the costs of the loan-purchase program in paragraph (1)(A)(i) and the participation-interest program in paragraph (1)(A)(ii), for July 1, 2008, through September 30, 2010. Each estimate must (A) be as detailed and similarly presented as the President’s budget estimates for the part B loan program and this part’s direct-loan program, and also report current and future administrative costs; (B) estimate Federal gross and net outlays, including subsidy and administrative costs and Department* payments to lenders, trusts, or other related entities; and (C) compare (i) average gross and net outlays, including costs and payments, for each $100 of purchased loans or loans with purchased participation interests, broken down by loan type, with (ii) average comparable Federal outlays for each $100 of loans made under this part and part B, broken down by part and loan type. (3) Annual cost estimates. By February 15 of the fiscal year after each of fiscal years 2008, 2009, 2010, and 2011, the Secretary must make an annual estimate for both programs described in paragraph (1)(A), including paragraph (2)’s information for that fiscal year.
(f) Expiration of authority. The Secretary’s authority to buy loans under this section ends July 1, 2010.
Upon a determination by the Secretary* that there is an inadequate availability of loan capital to meet the demand for loans under sections 1078, 1078–2, or 1078–8 of this title, whether as a result of inadequate liquidity for such loans or for other reasons, the Secretary, in consultation with the Secretary of the Treasury, is authorized to purchase, or enter into forward commitments to purchase, from any eligible lender, as defined by section 1085(d)(1) of this title, loans first disbursed under sections 1078, 1078–2, or 1078–8 of this title on or after October 1, 2003, and before July 1, 2010, on such terms as the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget jointly determine are in the best interest of the United States, except that any purchase under this section shall not result in any net cost to the Federal Government (including the cost of servicing the loans purchased), as determined jointly by the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget.
The Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget, shall jointly publish a notice in the Federal Register prior to any purchase of loans under paragraph (1) that—
establishes the terms and conditions governing the purchases authorized by paragraph (1);
includes an outline of the methodology and factors that the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget, will jointly consider in evaluating the price at which to purchase loans made under section 1078, 1078–2, or 1078–8 of this title; and
describes how the use of such methodology and consideration of such factors used to determine purchase price will ensure that loan purchases do not result in any net cost to the Federal Government (including the cost of servicing the loans purchased).
In addition to the authority described in paragraph (1), the Secretary, in consultation with the Secretary of the Treasury, is authorized to purchase, or enter into forward commitments to purchase, from any eligible lender (as defined in section 1085(d)(1) of this title), loans that such lender purchased under section 1078–6 of this title on or after October 1, 2003, and before July 1, 2010, and that are not in default, on such terms as the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget jointly determine are in the best interest of the United States, except that any purchase under this paragraph shall not result in any net cost to the Federal Government (including the cost of servicing the loans purchased), as determined jointly by the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget.
The Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget shall jointly publish a notice in the Federal Register prior to any purchase of loans under this paragraph that—
establishes the terms and conditions governing the purchases authorized by this paragraph;
includes an outline of the methodology and factors that the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget will jointly consider in evaluating the price at which to purchase loans rehabilitated pursuant to section 1078–6(a) of this title; and
describes how the use of such methodology and consideration of such factors used to determine purchase price will ensure that loan purchases do not result in any net cost to the Federal Government (including the cost of servicing the loans purchased).
The Secretary shall require, as a condition of any purchase under subsection (a), that the funds paid by the Secretary to any eligible lender under this section be used—
to ensure continued participation of such lender in the Federal student loan programs authorized under part B of this subchapter; and
in the case of loans purchased pursuant to subsection (a)(1), to originate new Federal loans to students, as authorized under part B of this subchapter; or
in the case of loans purchased pursuant to subsection (a)(3), to originate such new Federal loans to students, or to purchase loans in accordance with section 1078–6(a) of this title.
The Secretary may, if agreed upon by an eligible lender selling loans under this section, contract with such lender for the servicing of the loans purchased, provided that—
the cost of such servicing arrangement does not exceed the cost the Federal Government would otherwise incur for the servicing of loans purchased, as determined under subsection (a); and
such servicing arrangement is in the best interest of the borrowers whose loans are purchased.
Notwithstanding any other provision of this chapter, beginning on the date on which the Secretary purchases a loan under this section—
the guaranty agency that insured such loan shall cease to have any obligations, responsibilities, or rights (including rights to any payment) under this chapter for any activity related to the administration of such loan that is carried out or required to be carried out on or after the date of such purchase; and
the insurance issued by such agency pursuant to section 1078(b) of this title for such loan shall cease to be effective with respect to any default on such loan that occurs on or after the date of such purchase.
The Secretary shall prepare, transmit to the authorizing committees*, and make available to the public, the following:
Not later than 60 days after the end of each quarter during the period beginning July 1, 2008, and ending September 30, 2010, a quarterly report on—
the number of loans the Secretary has agreed to purchase, or has purchased, using the authority provided under this section, and the total amount of outstanding principal and accrued interest of such loans, during such period; and
the number of loans in which the Secretary has purchased a participation interest, and the total amount of outstanding principal and accrued interest of such loans, during such period.
For each quarterly report, the information described in clauses (i) and (ii) of subparagraph (A) shall be disaggregated by lender and, for each lender, by category of institution (using the categories described in section 1015a(d) of this title) and type of loan.
Not later than February 15, 2011, an estimate of the costs associated with the program of purchasing loans described in paragraph (1)(A)(i) during the period beginning July 1, 2008, and ending September 30, 2010, and an estimate of the costs associated with the program of purchasing a participation interest in loans described in paragraph (1)(A)(ii) during such period. Each such estimate shall—
contain the same level of detail, and be reported in a similar manner, as the budget estimates provided for the loan program under part B and the direct student loan program under this part in the President’s annual budget submission to Congress, except that current and future administrative costs shall also be reported;
include an estimate of the gross and net outlays that have been, or will be, incurred by the Federal Government (including subsidy and administrative costs, and any payments made by the Department* to lenders, trusts, or other entities related to such activities) in purchasing such loans or purchasing a participation interest in such loans during such period (as applicable); and
include a comparison of—
the average amount of the gross and net outlays (including costs and payments) described in subparagraph (B) for each $100 of loans purchased or for which a participation interest was purchased (as applicable) during such period, disaggregated by type of loan; with
the average amount of such gross and net outlays (including costs and payments) to the Federal Government for each $100 of comparable loans made under this part and part B during such period, disaggregated by part and by type of loan.
Not later than February 15 of the fiscal year following each of the fiscal years 2008, 2009, 2010, and 2011, an annual estimate of the costs associated with the program of purchasing loans described in paragraph (1)(A)(i), and an annual estimate of the costs associated with the program of purchasing a participation interest in loans described in paragraph (1)(A)(ii), that includes the information described in paragraph (2) for such fiscal year.
The Secretary’s authority to purchase loans under this section shall expire on July 1, 2010.
Source credit: (Pub. L. 89–329, title IV, § 459A, as added Pub. L. 110–227, § 7(b), May 7, 2008, 122 Stat. 746; amended Pub. L. 110–315, title IV, § 453, Aug. 14, 2008, 122 Stat. 3263; Pub. L. 110–350, § 1, Oct. 7, 2008, 122 Stat. 3947; Pub. L. 111–39, title IV, § 404(a), July 1, 2009, 123 Stat. 1945.)
- 2008Enacted · Pub. L. 89-329 · 122 Stat. 746
- 2008Amended · Pub. L. 110-315 · 122 Stat. 3263
- 2008Amended · Pub. L. 110-350 · 122 Stat. 3947
- 2009Amended · Pub. L. 111-39 · 123 Stat. 1945
A history note hasn’t been published yet. The record shows enactment by Pub. L. 89-329 on 2008-05-07.
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