42 U.S.C. § 297b — Loan provisions

(a) Maximum amount per individual per year; preference to first year students A nursing school can't lend a student more than $3,300 in loans for one academic year, except in the final two years of the program, when the yearly cap rises to $5,200. Across all years combined, a student can't be lent more than $17,000 total during fiscal years 2010 and 2011. After fiscal year 2011, these dollar limits go up to keep pace with rising cost of attendance. When deciding who gets loans, a school must give preference to licensed practical nurses, students with especially high financial need, and students who started as first-year students after this subchapter became law. (b) Terms and conditions Each school sets its own loan terms, but the Secretary can add rules (by regulation or in the school's agreement) meant to protect the fund's capital as much as possible while still letting the student finish school. Within those limits: (1) A loan can go only to a student who: (A) needs the loan money to study full-time or half-time toward a bachelor's, associate, or graduate nursing degree, or a nursing diploma; (B) the school believes can keep good academic standing; and (C) for anyone enrolling after June 30, 2000, has financial need as the Secretary defines it by regulation. (2) The loan must be repaid in equal or increasing installments (the borrower can pay it off faster if they want) over ten years, starting nine months after the borrower stops studying full-time or half-time. Some periods don't count against that ten years: up to three years of active-duty military service or Peace Corps service; up to ten years spent studying full-time or half-time toward a further nursing degree or other advanced nursing training; and any extra time allowed under paragraph (8). (3) For a loan made before September 29, 1995, up to 85% of the loan (plus interest) gets cancelled if the borrower works full-time as a professional nurse — including teaching nursing or working as an administrator, supervisor, or consultant in nursing — for a public or nonprofit agency, institution, or organization (including neighborhood health centers). The cancellation rate is 15% of the amount still owed (plus interest) for each of the first three years of such work, and 20% for each of the fourth and fifth years. (4) The rest of the loan and interest is cancelled entirely if the borrower dies, or if the Secretary decides the borrower has become permanently and totally disabled. (5) The loan carries 5% yearly interest, but only for the periods when it's actually due to be repaid. (6) No security or co-signer is required — unless the borrower is a minor whose signature wouldn't otherwise create a binding legal obligation, in which case security or a co-signer can be required. (7) A school can't transfer or assign the loan note to anyone else, except that if the borrower switches to another participating nursing school, the loan can transfer to that new school. (8) Using rules the Secretary sets, if a borrower missed payments during the repayment period but then made at least 12 payments in a row during the last 12 months of that period, the Secretary can extend the repayment period by up to 10 more years. (c) Cancellation Whenever all or part of a loan (or its interest) is cancelled, the Secretary pays the school its fair share of the cancelled amount, as the Secretary decides. (d) Installments Loans are paid out to students in installments as set by the Secretary's regulations or the school's agreement. If a school tells the Secretary that a borrower isn't keeping satisfactory academic standing, the school can withhold that student's remaining loan installments. (e) Availability to eligible students in need Each school's agreement must make sure the loan fund is reasonably available — as far as the money in it allows — to every eligible student at the school who needs it. (f) Penalty for late payment If a borrower is late paying an installment, or late filing proof needed to qualify for a payment deferral under (b)(2) or a cancellation under (b)(3), the school must charge a late fee, following the Secretary's rules. No fee applies if the payment or paperwork comes in within 60 days of the due date. The fee can't be more than 6% of the overdue installment. The school can either add the fee to the loan's principal, or make it due by the time the next installment is due. (g) Minimum monthly repayment A school can require, under the Secretary's rules, that a borrower pay at least $40 a month total on all their loans from that school's fund during the repayment period. (h) Loan cancellation This part deals with a 1971 change to the law. (A) Anyone who took out a loan from a nursing school's fund, who became eligible for cancellation before November 18, 1971 under the older version of this section, but who wasn't doing the qualifying service on that date, can still choose at any time to get that cancellation under the old rules. (B) Anyone who was doing that qualifying service on that date keeps being covered by the old rules until they stop doing the service. (i) Loan repayment If someone who took out a nursing student loan applies, the Secretary can agree to pay off all or part of that loan and its interest (with no cost to the borrower) if the Secretary decides, using regulations that set the criteria, that the person: (1) didn't finish the nursing program the loan paid for; (2) is in exceptionally needy financial circumstances; and (3) hasn't gone back to nursing school, and isn't likely to go back, within two years of leaving. (j) Collection by Secretary of loan in default If a nursing school refers a defaulted loan to the Secretary, the Secretary can try to collect it on the school's behalf, under terms the Secretary sets (including being reimbursed from the school's loan fund for collection costs) — but only if the school has followed the Secretary's rules for loan collection. Such a referred loan is treated as a debt under section 5514 of title 5. Whatever is collected goes back into the school's loan fund. If the Secretary wants to sue over the loan, the matter goes to the Attorney General. (k) Elimination of statute of limitations for loan collections (1) Purpose: This subsection makes sure loan repayment obligations can be enforced no matter what time limits federal or state law would otherwise impose. (2) Prohibition: No federal or state time limit can stop a nursing school (that has an agreement with the Secretary under section 297a) from suing, enforcing a judgment, or taking other collection action — like garnishment — to recover a defaulted loan under this part.