§1072b Agency Operating Fund

Summary

Each guaranty agency must set up an Operating Fund within 60 days after October 7, 1998. Money put into that fund can be invested by the agency using careful, reasonable investment rules. The fund must receive certain fees and payments, including the loan processing and issuance fee, 30 percent of some older administrative cost payments received after October 7, 1998, the account maintenance fee, the default aversion fee, certain leftover collections on defaulted loans after the Federal share is paid, and other receipts the Secretary allows. The fund can pay for things like processing applications, sending out loans, checking students’ enrollment and repayment status, preventing and collecting defaults, training schools and lenders, outreach about financial aid, compliance work, and similar student-aid activities. An agency may move money from the Operating Fund to the Federal Fund, but that move is final and then the money belongs to the United States. Default collection activities: work to collect loans after a default claim is paid. Default aversion activities: work to help avoid a loan becoming a legal default. Enrollment and repayment status management: work to check enrollment and make sure loan terms match records. The Operating Fund is generally the agency’s property, except for money moved from the Federal Fund. The Secretary cannot control how the agency spends the money, but can require reports and audits. If the agency owes money to the Federal Fund because of a transfer, then the money can only be used for student loan program expenses and the Secretary may control its use.