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Title 20 — EducationRelease 119-73

§1087b Funds for origination of direct student loans

Title 20 › Chapter CHAPTER 28— - HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE › Subchapter SUBCHAPTER IV— - STUDENT ASSISTANCE › Part Part D— - William D. Ford Federal Direct Loan Program › § 1087b

Last updated Apr 6, 2026|Official source

Summary

The Secretary must provide money for direct student and parent loans based on students’ need and eligibility. The money goes either straight to a college that has agreed to both take part in the program and make loans, or through a different loan originator the Secretary picks for colleges that take part but do not make loans themselves. Colleges do not have a guaranteed right to join or to make loans, but eligible students and parents at participating colleges can still borrow. Loan funds must be sent before the payment period, like Federal Pell Grants. For schools outside the United States, funds must be sent through a U.S. bank the Secretary names, and the foreign school must arrange with that bank.

Full Legal Text

Title 20, §1087b

Education — Source: USLM XML via OLRC

(a)The Secretary shall provide, on the basis of the need and the eligibility of students at each participating institution, and parents of such students, for such loans, funds for student and parent loans under this part—
(1)directly to an institution of higher education that has an agreement with the Secretary under section 1087d(a) of this title to participate in the direct student loan programs under this part and that also has an agreement with the Secretary under section 1087d(b) of this title to originate loans under this part; or
(2)through an alternative originator designated by the Secretary to students (and parents of students) attending institutions of higher education that have an agreement with the Secretary under section 1087d(a) of this title but that do not have an agreement with the Secretary under section 1087d(b) of this title.
(b)No institution of higher education shall have a right to participate in the programs authorized by this part, to originate loans, or to perform any program function under this part. Nothing in this subsection shall be construed so as to limit the entitlement of an eligible student attending a participating institution (or the eligible parent of such student) to borrow under this part.
(c)Loan funds shall be paid and delivered to an institution by the Secretary prior to the beginning of the payment period established by the Secretary in a manner that is consistent with payment and delivery of Federal Pell Grants under subpart 1 of part A of this subchapter.
(d)Loan funds for students (and parents of students) attending institutions outside the United States shall be disbursed through a financial institution located or operating in the United States and designated by the Secretary to serve as the agent of such institutions with respect to the receipt of the disbursements of such loan funds and the transfer of such funds to such institutions. To be eligible to receive funds under this part, an institution outside the United States shall make arrangements with the agent designated by the Secretary under this subsection to receive funds under this part.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 1087b, Pub. L. 89–329, title IV, § 452, as added Pub. L. 90–575, title I, § 141, Oct. 16, 1968, 82 Stat. 1031, authorized grants for programs of cooperative education, prior to repeal by Pub. L. 94–482, title I, § 129(a), Oct. 12, 1976, 90 Stat. 2144, eff. 30 days after Oct. 12, 1976.

Amendments

2010—Subsec. (d). Pub. L. 111–152 added subsec. (d). 1998—Subsec. (c). Pub. L. 105–244 substituted “Federal Pell Grants” for “basic grants”. 1997—Subsecs. (b) to (d). Pub. L. 105–33 redesignated subsecs. (c) and (d) as (b) and (c), respectively, and struck out former subsec. (b) which required the Secretary to pay fees to institutions of higher education and alternative loan originators to assist in meeting the cost of loan origination. 1993—Pub. L. 103–66 amended section generally, substituting provisions relating to funds for origination of direct student loans for former provisions relating to payment rules. 1992—Pub. L. 102–325 amended section generally, substituting provisions relating to payment rules for former provisions authorizing demonstration projects.

Statutory Notes and Related Subsidiaries

Effective Date

of 1998 AmendmentAmendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as a note under section 1001 of this title.

Effective Date

of 1992 AmendmentAmendment by Pub. L. 102–325 effective Oct. 1, 1992, see section 2 of Pub. L. 102–325, set out as a note under section 1001 of this title.

Reference

Citations & Metadata

Citation

20 U.S.C. § 1087b

Title 20 — Education

Last Updated

Apr 6, 2026

Release point: 119-73