PRIA, Government Policy, Made Personal

Summary

The Education Secretary can buy, or promise to buy later, student loans from eligible lenders when there is not enough loan money available for certain federal student loan programs. This can cover loans first given out on or after October 1, 2003 and before July 1, 2010, and it can also cover loans lenders bought under the loan rehabilitation rules (if those loans are not in default). The Secretary must work with the Treasury Secretary and the Director of the Office of Management and Budget. Any purchases must be judged to be in the best interest of the United States and must not cause any overall cost to the federal government (including the cost to service the loans). Before buying loans, the three officials must publish a notice in the Federal Register that explains the rules, how they will set prices, and how they will make sure the buys won’t cost the government. Money paid to a lender must be used to keep that lender in the federal student loan programs and to make new federal student loans or to buy loans as allowed. The Secretary may have the selling lender keep servicing the loans if it does not cost more than the government would pay and it is best for borrowers. Once a loan is bought, the guaranty agency loses its duties and insurance for defaults that happen on or after the purchase date. The Department must report quarterly from July 1, 2008 through September 30, 2010 on loans bought and participation interests, broken down by lender and loan type, and must provide detailed cost estimates by February 15, 2011 and yearly for 2008–2011. The authority to buy loans ends on July 1, 2010.

Title 20, §1087i–1

Education, Source: USLM XML via OLRC

(a)(1)Upon a determination by the Secretary that there is an inadequate availability of loan capital to meet the demand for loans under section 1078, 1078–2, or 1078–8 of this title, whether as a result of inadequate liquidity for such loans or for other reasons, the Secretary, in consultation with the Secretary of the Treasury, is authorized to purchase, or enter into forward commitments to purchase, from any eligible lender, as defined by section 1085(d)(1) of this title, loans first disbursed under section 1078, 1078–2, or 1078–8 of this title on or after October 1, 2003, and before July 1, 2010, on such terms as the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget jointly determine are in the best interest of the United States, except that any purchase under this section shall not result in any net cost to the Federal Government (including the cost of servicing the loans purchased), as determined jointly by the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget.

(2)The Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget, shall jointly publish a notice in the Federal Register prior to any purchase of loans under paragraph (1) that—

(A)establishes the terms and conditions governing the purchases authorized by paragraph (1);

(B)includes an outline of the methodology and factors that the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget, will jointly consider in evaluating the price at which to purchase loans made under section 1078, 1078–2, or 1078–8 of this title; and

(C)describes how the use of such methodology and consideration of such factors used to determine purchase price will ensure that loan purchases do not result in any net cost to the Federal Government (including the cost of servicing the loans purchased).

(3)(A)In addition to the authority described in paragraph (1), the Secretary, in consultation with the Secretary of the Treasury, is authorized to purchase, or enter into forward commitments to purchase, from any eligible lender (as defined in section 1085(d)(1) of this title), loans that such lender purchased under section 1078–6 of this title on or after October 1, 2003, and before July 1, 2010, and that are not in default, on such terms as the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget jointly determine are in the best interest of the United States, except that any purchase under this paragraph shall not result in any net cost to the Federal Government (including the cost of servicing the loans purchased), as determined jointly by the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget.

(B)The Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget shall jointly publish a notice in the Federal Register prior to any purchase of loans under this paragraph that—

(i)establishes the terms and conditions governing the purchases authorized by this paragraph;

(ii)includes an outline of the methodology and factors that the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget will jointly consider in evaluating the price at which to purchase loans rehabilitated pursuant to section 1078–6(a) of this title; and

(iii)describes how the use of such methodology and consideration of such factors used to determine purchase price will ensure that loan purchases do not result in any net cost to the Federal Government (including the cost of servicing the loans purchased).

(b)The Secretary shall require, as a condition of any purchase under subsection (a), that the funds paid by the Secretary to any eligible lender under this section be used—

(1)to ensure continued participation of such lender in the Federal student loan programs authorized under part B of this subchapter; and

(2)(A)in the case of loans purchased pursuant to subsection (a)(1), to originate new Federal loans to students, as authorized under part B of this subchapter; or

(B)in the case of loans purchased pursuant to subsection (a)(3), to originate such new Federal loans to students, or to purchase loans in accordance with section 1078–6(a) of this title.

(c)The Secretary may, if agreed upon by an eligible lender selling loans under this section, contract with such lender for the servicing of the loans purchased, provided that—

(1)the cost of such servicing arrangement does not exceed the cost the Federal Government would otherwise incur for the servicing of loans purchased, as determined under subsection (a); and

(2)such servicing arrangement is in the best interest of the borrowers whose loans are purchased.

(d)Notwithstanding any other provision of this chapter, beginning on the date on which the Secretary purchases a loan under this section—

(1)the guaranty agency that insured such loan shall cease to have any obligations, responsibilities, or rights (including rights to any payment) under this chapter for any activity related to the administration of such loan that is carried out or required to be carried out on or after the date of such purchase; and

(2)the insurance issued by such agency pursuant to section 1078(b) of this title for such loan shall cease to be effective with respect to any default on such loan that occurs on or after the date of such purchase.

(e)The Secretary shall prepare, transmit to the authorizing committees, and make available to the public, the following:

(1)(A)Not later than 60 days after the end of each quarter during the period beginning July 1, 2008, and ending September 30, 2010, a quarterly report on—

(i)the number of loans the Secretary has agreed to purchase, or has purchased, using the authority provided under this section, and the total amount of outstanding principal and accrued interest of such loans, during such period; and

(ii)the number of loans in which the Secretary has purchased a participation interest, and the total amount of outstanding principal and accrued interest of such loans, during such period.

(B)For each quarterly report, the information described in clauses (i) and (ii) of subparagraph (A) shall be disaggregated by lender and, for each lender, by category of institution (using the categories described in section 1015a(d) of this title) and type of loan.

(2)Not later than February 15, 2011, an estimate of the costs associated with the program of purchasing loans described in paragraph (1)(A)(i) during the period beginning July 1, 2008, and ending September 30, 2010, and an estimate of the costs associated with the program of purchasing a participation interest in loans described in paragraph (1)(A)(ii) during such period. Each such estimate shall—

(A)contain the same level of detail, and be reported in a similar manner, as the budget estimates provided for the loan program under part B and the direct student loan program under this part in the President’s annual budget submission to Congress, except that current and future administrative costs shall also be reported;

(B)include an estimate of the gross and net outlays that have been, or will be, incurred by the Federal Government (including subsidy and administrative costs, and any payments made by the Department to lenders, trusts, or other entities related to such activities) in purchasing such loans or purchasing a participation interest in such loans during such period (as applicable); and

(C)include a comparison of—

(i)the average amount of the gross and net outlays (including costs and payments) described in subparagraph (B) for each $100 of loans purchased or for which a participation interest was purchased (as applicable) during such period, disaggregated by type of loan; with

(ii)the average amount of such gross and net outlays (including costs and payments) to the Federal Government for each $100 of comparable loans made under this part and part B during such period, disaggregated by part and by type of loan.

(3)Not later than February 15 of the fiscal year following each of the fiscal years 2008, 2009, 2010, and 2011, an annual estimate of the costs associated with the program of purchasing loans described in paragraph (1)(A)(i), and an annual estimate of the costs associated with the program of purchasing a participation interest in loans described in paragraph (1)(A)(ii), that includes the information described in paragraph (2) for such fiscal year.

(f)The Secretary’s authority to purchase loans under this section shall expire on July 1, 2010.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2009—Subsec. (a)(2). Pub. L. 111–39, § 404(a)(1)(A), substituted “purchase of loans under paragraph (1)” for “purchase of loans under this section” in introductory provisions. Subsec. (a)(3). Pub. L. 111–39, § 404(a)(1)(B), added par. (3). Subsec. (b). Pub. L. 111–39, § 404(a)(2), amended subsec. (b) generally. Prior to amendment, text read as follows: “The Secretary shall require, as a condition of any purchase under subsection (a), that the funds paid by the Secretary to any eligible lender under this section shall be used: (1) to ensure continued participation of such lender in the Federal student loan programs authorized under part B of this subchapter; and (2) to originate new Federal loans to students, as authorized under part B of this subchapter.” 2008—Subsec. (a)(1). Pub. L. 110–350, § 1(1), substituted “

July 1, 2010” for “

July 1, 2009”. Subsecs. (d), (e). Pub. L. 110–315, § 453(2), added subsecs. (d) and (e). Former subsec. (d) redesignated (f). Subsec. (e)(1)(A). Pub. L. 110–350, § 1(2)(A), substituted “

September 30, 2010” for “

September 30, 2009” in introductory provisions. Subsec. (e)(2). Pub. L. 110–350, § 1(2)(A), (B), substituted “

February 15, 2011” for “

February 15, 2010” and “

September 30, 2010” for “

September 30, 2009” in introductory provisions. Subsec. (e)(3). Pub. L. 110–350, § 1(2)(C), substituted “2009, 2010, and 2011” for “2009, and 2010”. Subsec. (f). Pub. L. 110–350, § 1(1), substituted “

July 1, 2010” for “

July 1, 2009”. Pub. L. 110–315, § 453(1), redesignated subsec. (d) as (f).

Statutory Notes and Related Subsidiaries

Effective Date

of 2009 AmendmentAmendment by Pub. L. 111–39 effective as if enacted on the date of enactment of Pub. L. 110–315 (Aug. 14, 2008), see section 3 of Pub. L. 111–39, set out as a note under section 1001 of this title.

§1087i–1 Temporary Authority to Purchase Student Loans