§292a Scope and Duration of Loan Insurance Program

Summary

Sets yearly limits on how much new federally insured loan money can be made. The limits are $350,000,000 for fiscal year 1993, $375,000,000 for fiscal year 1994, and $425,000,000 for fiscal year 1995. If less than the limit is used in a year, the unused amount rolls over to the next year and adds to that year’s limit. After those years, insurance can only be given to help students who already had insured loans to finish their education or to pay interest on prior loans. No insurance can be given for loans or line-of-credit payments after September 30, 1998. The Secretary must grant this insurance without following usual budget apportionment limits. The Secretary may set and change quotas for lenders, states, or areas to spread benefits fairly. When giving insurance through big contracts, the Secretary should give first to lenders who charge lower interest or offer better terms to students. The Student Loan Marketing Association may buy, sell, service, consolidate, or otherwise handle these insured loans. If such loans are consolidated, the interest rate is the weighted average of the loans, rounded down to the nearest one-eighth of 1 percent, but not below the federal guaranteed loan rate. Borrowers must pay any interest that builds up before repayment starts or during times when principal payments are not required. Federal rules for lenders also apply to the Association and to other loan buyers.