§1072b Agency Operating Fund

Summary

Each guaranty agency must set up an Operating Fund no later than 60 days after October 7, 1998. The agency must invest the fund wisely. The agency must put certain fees and receipts into the fund, including the loan processing and issuance fee paid by the Secretary (under section 1078(f)), 30 percent of administrative-cost payments received after October 7, 1998 for loans insured before that date, the account maintenance fee (section 1087h), the default-aversion fee (section 1078(l)), remaining collections from defaulted loans after the Secretary’s share (excluding amounts sent to the Federal Fund under section 1072a(c)(2)), and other receipts the Secretary names. Money in the fund can be used for student loan work such as processing applications, making disbursements, tracking enrollment and repayment, preventing defaults, collecting on defaulted loans, training, outreach, compliance, and other related activities the agency chooses. The agency may transfer money from the Operating Fund to the Federal Fund; any transfer is final and those funds become the property of the United States. Default collection activities: work to collect loans after a default claim has been paid, including required follow-up steps. Default aversion activities: work to help lenders with delinquent loans before a loan is legally in default, including required follow-up. Enrollment and repayment status management: work to check a student’s enrollment and repayment status, tell the lender, and make sure loan papers match agency records. Except for money moved in from the Federal Fund under section 1072a(f), the Operating Fund is the guaranty agency’s property. The Secretary generally cannot control how the agency spends the fund but can require reports and audits under section 1078(b)(2). If the agency owes money back to the Federal Fund because of earlier transfers under section 1072a(f), then the fund may only be used for student loan program expenses and the Secretary may regulate its use.