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Title 20 — EducationRelease 119-73

§1079 Certificate of Federal loan insurance—effective date of insurance

Title 20 › Chapter CHAPTER 28— - HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE › Subchapter SUBCHAPTER IV— - STUDENT ASSISTANCE › Part Part B— - Federal Family Education Loan Program › § 1079

Last updated Apr 6, 2026|Official source

Summary

The Secretary may give a lender a certificate that insures a student loan if the lender applies on the required form and shows the loan meets the rules. The insurance starts when the certificate is issued. The Secretary can also promise to insure proposed loans or lines of credit and allow the certificate to be backdated to when a loan or payment was made, if the lender follows the rules. Insurance stops if the lender is 60 days late in paying the required premiums. The lender’s application must agree to pay those premiums and to send any reports the Secretary requires while the loan is covered. Instead of a certificate for each loan, the Secretary can issue one comprehensive certificate that covers all insurable loans a lender makes between the certificate date and a cutoff date, up to a stated total amount. Rules may require reporting, premium payments, and other conditions, and the Secretary can confirm coverage of specific loans by endorsing the certificate; those endorsements can’t be challenged except for fraud, clear mistake, or false facts. Lines of credit that extend past the cutoff are not covered unless the certificate says so, though the Secretary can agree to insure future loans. The premium may not exceed one‑fourth of 1 percent per year of the unpaid principal (not including interest added to principal), and it must be paid in advance. That premium may be waived or refunded for periods after borrower default, death, or total and permanent disability if notice is given and a claim is made or the Secretary pays. A lender may assign its insurance rights as security only to another eligible lender and under Secretary rules. Combining several federally insured loans into one new loan does not cancel U.S. insurance; the Secretary can issue a new certificate or amend a comprehensive one for the consolidated loan.

Full Legal Text

Title 20, §1079

Education — Source: USLM XML via OLRC

(a)(1)If, upon application by an eligible lender, made upon such form, containing such information, and supported by such evidence as the Secretary may require, and otherwise in conformity with this section, the Secretary finds that the applicant has made a loan to an eligible student which is insurable under the provisions of this part, he may issue to the applicant a certificate of insurance covering the loan and setting forth the amount and terms of the insurance.
(2)Insurance evidenced by a certificate of insurance pursuant to subsection (a)(1) shall become effective upon the date of issuance of the certificate, except that the Secretary is authorized, in accordance with regulations, to issue commitments with respect to proposed loans, or with respect to lines (or proposed lines) of credit, submitted by eligible lenders, and in that event, upon compliance with subsection (a)(1) by the lender, the certificate of insurance may be issued effective as of the date when any loan, or any payment by the lender pursuant to a line of credit, to be covered by such insurance was made. Such insurance shall cease to be effective upon 60 days’ default by the lender in the payment of any installment of the premiums payable pursuant to subsection (c).
(3)An application submitted pursuant to subsection (a)(1) shall contain (A) an agreement by the applicant to pay, in accordance with regulations, the premiums fixed by the Secretary pursuant to subsection (c), and (B) an agreement by the applicant that if the loan is covered by insurance the applicant will submit such supplementary reports and statement during the effective period of the loan agreement, upon such forms, at such times, and containing such information as the Secretary may prescribe by or pursuant to regulation.
(b)(1)In lieu of requiring a separate insurance application and issuing a separate certificate of insurance for each student loan made by an eligible lender as provided in subsection (a), the Secretary may, in accordance with regulations consistent with section 1074 of this title, issue to any eligible lender applying therefor a certificate of comprehensive insurance coverage which shall, without further action by the Secretary, insure all insurable loans made by that lender, on or after the date of the certificate and before a specified cutoff date, within the limits of an aggregate maximum amount stated in the certificate. Such regulations may provide for conditioning such insurance, with respect to any loan, upon compliance by the lender with such requirements (to be stated or incorporated by reference in the certificate) as in the Secretary’s judgment will best achieve the purpose of this subsection while protecting the United States from the risk of unreasonable loss and promoting the objectives of this part, including (but not limited to) provisions as to the reporting of such loans and information relevant thereto to the Secretary and as to the payment of initial and other premiums and the effect of default therein, and including provision for confirmation by the Secretary from time to time (through endorsement of the certificate) of the coverage of specific new loans by such certificate, which confirmation shall be incontestable by the Secretary in the absence of fraud or misrepresentation of fact or patent error.
(2)If the holder of a certificate of comprehensive insurance coverage issued under this subsection grants to a student a line of credit extending beyond the cutoff date specified in that certificate, loans or payments thereon made by the holder after that date pursuant to the line of credit shall not be deemed to be included in the coverage of that certificate except as may be specifically provided therein; but, subject to the limitations of section 1074 of this title, the Secretary may, in accordance with regulations, make commitments to insure such future loans or payments, and such commitments may be honored either as provided in subsection (a) or by inclusion of such insurance on comprehensive coverage under the subsection for the period or periods in which such future loans or payments are made.
(c)The Secretary shall, pursuant to regulations, charge for insurance on each loan under this part a premium in an amount not to exceed one-fourth of 1 percent per year of the unpaid principal amount of such loan (excluding interest added to principal), payable in advance, at such times and in such manner as may be prescribed by the Secretary. Such regulations may provide that such premium shall not be payable, or if paid shall be refundable, with respect to any period after default in the payment of principal or interest or after the borrower has died or becomes totally and permanently disabled, if (1) notice of such default or other event has been duly given, and (2) requests for payment of the loss insured against has been made or the Secretary has made such payment on his own motion pursuant to section 1080(a) of this title.
(d)The rights of an eligible lender arising under insurance evidenced by a certificate of insurance issued to it under this section may be assigned as security by such lender only to another eligible lender, and subject to regulation by the Secretary.
(e)The consolidation of the obligations of two or more federally insured loans obtained by a student borrower in any fiscal year into a single obligation evidenced by a single instrument of indebtedness shall not affect the insurance by the United States. If the loans thus consolidated are covered by separate certificates of insurance issued under subsection (a), the Secretary may upon surrender of the original certificates issue a new certificate of insurance in accordance with that subsection upon the consolidated obligation; if they are covered by a single comprehensive certificate issued under subsection (b), the Secretary may amend that certificate accordingly.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 1079, Pub. L. 89–329, title IV, § 429, Nov. 8, 1965, 79 Stat. 1243; Pub. L. 94–482, title I, § 127(a), Oct. 12, 1976, 90 Stat. 2123; Pub. L. 96–374, title XIII, § 1391(a)(1), (2), Oct. 3, 1980, 94 Stat. 1503, related to certificates of Federal loan insurance, prior to the general revision of this part by Pub. L. 99–498.

Reference

Citations & Metadata

Citation

20 U.S.C. § 1079

Title 20 — Education

Last Updated

Apr 6, 2026

Release point: 119-73