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Title 20 — EducationRelease 119-73not60

§1081 Insurance Fund

Title 20 › Chapter 28— HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE › Subchapter IV— STUDENT ASSISTANCE › Part B— Federal Family Education Loan Program › § 1081

Last updated Apr 5, 2026|Official source

Summary

Creates a student loan insurance fund the Secretary can use without a yearly limit to pay when loans insured by the Secretary go into default or when payments are required under guaranty agreements. Money put into the fund includes insurance premiums, earnings or proceeds from claims or assets tied to the program, any excess advances under section 1072, and other money or property from program operations. Payments for defaults and guaranty agreements must come from this fund. Money not needed right away can be invested in U.S.-guaranteed bonds or similar obligations. If the fund does not have enough money, and Congress has approved it in an appropriations law, the Secretary may issue notes or other obligations that the Secretary of the Treasury will buy. The Treasury sets the interest rate based on recent comparable U.S. market yields and may later sell, buy, or redeem those notes. Money borrowed this way goes into the fund, and the fund must be used to pay back those notes.

Full Legal Text

Title 20, §1081

Education — Source: USLM XML via OLRC

(a)There is hereby established a student loan insurance fund (hereinafter in this section called the “fund”) which shall be available without fiscal year limitation to the Secretary for making payments in connection with the default of loans insured by the Secretary under this part, or in connection with payments under a guaranty agreement under section 1078(c) of this title. All amounts received by the Secretary as premium charges for insurance and as receipts, earnings, or proceeds derived from any claim or other assets acquired by the Secretary in connection with operations under this part, any excess advances under section 1072 of this title, and any other moneys, property, or assets derived by the Secretary from operations in connection with this section, shall be deposited in the fund. All payments in connection with the default of loans insured by the Secretary under this part, or in connection with such guaranty agreements shall be paid from the fund. Moneys in the fund not needed for current operations under this section may be invested in bonds or other obligations guaranteed as to principal and interest by the United States.
(b)If at any time the moneys in the fund are insufficient to make payments in connection with the default of any loan insured by the Secretary under this part, or in connection with any guaranty agreement made under section 1078(c) of this title, the Secretary is authorized, to the extent provided in advance by appropriations Acts, to issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions as may be prescribed by the Secretary with the approval of the Secretary of the Treasury. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States of comparable maturities during the month preceding the issuance of the notes or other obligations. The Secretary of the Treasury is authorized and directed to purchase any notes and other obligations issued hereunder and for that purpose is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31, and the purposes for which securities may be issued under that chapter, are extended to include any purchase of such notes and obligations. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired under this subsection. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States. Sums borrowed under the subsection shall be deposited in the fund and redemption of such notes and obligations shall be made by the Secretary from such fund.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Codification In subsec. (b), “chapter 31 of title 31” and “that chapter” substituted for “the Second Liberty Bond Act, as amended” and “that Act, as amended”, respectively, on authority of Pub. L. 97–258, § 4(b), Sept. 13, 1982, 96 Stat. 1067, the first section of which enacted Title 31, Money and Finance.

Prior Provisions

A prior section 1081, Pub. L. 89–329, title IV, § 431, Nov. 8, 1965, 79 Stat. 1245; Pub. L. 90–460, § 3(c), Aug. 3, 1968, 82 Stat. 638; Pub. L. 94–482, title I, § 127(a), Oct. 12, 1976, 90 Stat. 2126; Pub. L. 96–374, title XIII, § 1391(a)(1), Oct. 3, 1980, 94 Stat. 1503, related to a student loan insurance fund, prior to the general revision of this part by Pub. L. 99–498.

Amendments

1987—Subsec. (a). Pub. L. 100–50 substituted “section 1072 of this title” for “section 1072(a)(4)(C) of this title”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1987 AmendmentAmendment by Pub. L. 100–50 effective as if enacted as part of the Higher Education

Amendments

of 1986, Pub. L. 99–498, see section 27 of Pub. L. 100–50, set out as a note under section 1001 of this title. Federal Family Education Loan Insurance Fund Pub. L. 105–244, title IV, § 434, Oct. 7, 1998, 112 Stat. 1711, provided that: “Any funds in the insurance fund, as established under section 431 of the Higher Education Act of 1965 (20 U.S.C. 1081), on the date of enactment of this Act [Oct. 7, 1998] shall be transferred to and deposited in the Treasury. All funds received by the Secretary of Education under subsection (a) of such section after the date of enactment of this Act shall be deposited into the fund in accordance with such subsection.” Transfer of Assets and Liabilities of the Vocational Student Loan Insurance FundAll assets and liabilities of the vocational student loan insurance fund transferred to the student loan insurance fund, see section 116(c)(2) of Pub. L. 90–575, set out as a note under former section 981 et seq. of this title.

Reference

Citations & Metadata

Citation

20 U.S.C. § 1081

Title 20 — Education

Last Updated

Apr 5, 2026

Release point: 119-73not60