PRIA, Government Policy, Made Personal

Summary

The Secretary can give a lender a certificate that insures a student loan if the lender applies on the required form and meets the rules. The lender must agree to pay the premiums and to send reports and information the Secretary requires. The insurance starts on the date the certificate is issued, but the Secretary can allow commitments that let the insurance be effective when the loan money is actually paid. The insurance stops if the lender is 60 days late paying required premiums. Instead of a separate certificate for each loan, the Secretary may issue one comprehensive certificate that automatically covers all insurable loans a lender makes up to a stated cutoff date and an aggregate dollar limit. That coverage can have conditions, can be confirmed by endorsements that are final unless there is fraud, misrepresentation, or a clear error, and normally does not cover line-of-credit advances made after the cutoff date unless the certificate says so. Insurance rights may be assigned only to another eligible lender or the Student Loan Marketing Association. Consolidating or refinancing loans does not cancel the insurance; the Secretary can replace or amend certificates accordingly. Lenders and borrowers may consolidate loans (or refinance a single loan one time), and lenders should fully explain the pros and cons. Loans consolidated under section 1078–3 of title 20 are not eligible for special allowance payments under section 1087–1 of title 20.

Title 42, §292e

The Public Health and Welfare, Source: USLM XML via OLRC

(a)In general

(1)Authority for issuance of certificate

If, upon application by an eligible lender, made upon such form, containing such information, and supported by such evidence as the Secretary may require, and otherwise in conformity with this section, the Secretary finds that the applicant has made a loan to an eligible borrower which is insurable under the provisions of this subpart, he may issue to the applicant a certificate of insurance covering the loan and setting forth the amount and terms of the insurance.

(2)Effective date of insurance

Insurance evidenced by a certificate of insurance pursuant to subsection (a)(1) shall become effective upon the date of issuance of the certificate, except that the Secretary is authorized, in accordance with regulations, to issue commitments with respect to proposed loans, or with respect to lines (or proposed lines) of credit, submitted by eligible lenders, and in that event, upon compliance with subsection (a)(1) by the lender, the certificate of insurance may be issued effective as of the date when any loan, or any payment by the lender pursuant to a line of credit, to be covered by such insurance is made to a student described in section 292d(a)(1) of this title. Such insurance shall cease to be effective upon 60 days’ default by the lender in the payment of any installment of the premiums payable pursuant to section 292g of this title.

(3)Certain agreements for lenders

An application submitted pursuant to subsection (a)(1) shall contain— (A)

(B)an agreement by the applicant that if the loan is covered by insurance the applicant will submit such supplementary reports and statements during the effective period of the loan agreement, upon such forms, at such times, and containing such information as the Secretary may prescribe by or pursuant to regulation.

(b)Authority regarding comprehensive insurance coverage

(1)In general

In lieu of requiring a separate insurance application and issuing a separate certificate of insurance for each loan made by an eligible lender as provided in subsection (a), the Secretary may, in accordance with regulations consistent with section 292a of this title, issue to any eligible lender applying therefor a certificate of comprehensive insurance coverage which shall, without further action by the Secretary, insure all insurable loans made by that lender, on or after the date of the certificate and before a specified cutoff date, within the limits of an aggregate maximum amount stated in the certificate. Such regulations may provide for conditioning such insurance, with respect to any loan, upon compliance by the lender with such requirements (to be stated or incorporated by reference in the certificate) as in the Secretary’s judgment will best achieve the purpose of this subsection while protecting the financial interest of the United States and promoting the objectives of this subpart, including (but not limited to) provisions as to the reporting of such loans and information relevant thereto to the Secretary and as to the payment of initial and other premiums and the effect of default therein, and including provision for confirmation by the Secretary from time to time (through endorsement of the certificate) of the coverage of specific new loans by such certificate, which confirmation shall be incontestable by the Secretary in the absence of fraud or misrepresentation of fact or patent error.

(2)Lines of credit beyond cutoff date

If the holder of a certificate of comprehensive insurance coverage issued under this subsection grants to a borrower a line of credit extending beyond the cutoff date specified in that certificate, loans or payments thereon made by the holder after that date pursuant to the line of credit shall not be deemed to be included in the coverage of that certificate except as may be specifically provided therein; but, subject to the limitations of section 292a of this title, the Secretary may, in accordance with regulations, make commitments to insure such future loans or payments, and such commitments may be honored either as provided in subsection (a) or by inclusion of such insurance in comprehensive coverage under this subsection for the period or periods in which such future loans or payments are made.

(c)Assignment of insurance rights

The rights of an eligible lender arising under insurance evidenced by a certificate of insurance issued to it under this section may be assigned by such lender, subject to regulation by the Secretary, only to—

(1)another eligible lender (including a public entity in the business of purchasing student loans); or

(2)the Student Loan Marketing Association.

(d)Effect of refinancing or consolidation of obligations

The consolidation of the obligations of two or more federally insured loans obtained by a borrower in any fiscal year into a single obligation evidenced by a single instrument of indebtedness or the refinancing of a single loan shall not affect the insurance by the United States. If the loans thus consolidated are covered by separate certificates of insurance issued under subsection (a), the Secretary may upon surrender of the original certificates issue a new certificate of insurance in accordance with that subsection upon the consolidated obligation. If the loans thus consolidated are covered by a single comprehensive certificate issued under subsection (b), the Secretary may amend that certificate accordingly.

(e)Rule of construction regarding consolidation of debts and refinancing

Nothing in this section shall be construed to preclude the lender and the borrower, by mutual agreement, from consolidating all of the borrower’s loans insured under this subpart into a single instrument (or, if the borrower obtained only 1 loan insured under this subpart, refinancing the loan 1 time) under the terms applicable to an insured loan made at the same time as the consolidation. The lender or loan holder should provide full information to the borrower concerning the advantages and disadvantages of loan consolidation or refinancing. Nothing in this section shall be construed to preclude the consolidation of the borrower’s loans insured under this subpart under section 1078–3 of title 20. Any loans insured pursuant to this subpart that are consolidated under section 1078–3 of title 20 shall not be eligible for special allowance payments under section 1087–1 of title 20.

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 292e, act

July 1, 1944, ch. 373, title VII, § 705, as added Oct. 12, 1976, Pub. L. 94–484, title II, § 204, 90 Stat. 2248; amended Nov. 9, 1978, Pub. L. 95–623, § 11(f), 92 Stat. 3456; Aug. 13, 1981, Pub. L. 97–35, title XXVII, § 2718, 95 Stat. 914, related to establishment and maintenance of records and annual financial reports and audits, prior to the general revision of this subchapter by Pub. L. 102–408. Another prior section 292e, act

July 1, 1944, ch. 373, title VII, § 706, as added

July 30, 1956, 779, § 2, 70 Stat. 719; amended Oct. 5, 1961, Pub. L. 87–395, § 8(c), (d), 75 Stat. 827; Sept. 24, 1963, Pub. L. 88–129, § 2(a), 77 Stat. 164; Aug. 16, 1968, Pub. L. 90–490, title IV, § 402, 82 Stat. 789; Nov. 18, 1971, Pub. L. 92–157, title I, § 102(k)(2)(A), (B), 85 Stat. 437, limited amount of grant available for

Construction

of health research facilities, including provisions relating to its maximum, reservation of amount, manner of payment, and exclusion of amounts granted by certain other funds, prior to repeal by Pub. L. 94–484, title II, § 201(a), Oct. 12, 1976, 90 Stat. 2246. A prior section 706 of act

July 1, 1944, was classified to section 292f of this title prior to the general revision of this subchapter by Pub. L. 102–408. Another prior section 706 of act

July 1, 1944, was classified to section 230 of this title prior to repeal by act Apr. 27, 1956, ch. 211, § 5(e), 70 Stat. 117.

Amendments

1998—Subsec. (d). Pub. L. 105–392, § 145(1), in heading, substituted “refinancing or consolidation” for “consolidation” and, in first sentence, substituted “indebtedness or the refinancing of a single loan” for “indebtedness”. Subsec. (e). Pub. L. 105–392, § 145(2), in heading, substituted “debts and refinancing” for “debts”, in first sentence, substituted “all of the borrower’s loans insured under this subpart into a single instrument (or, if the borrower obtained only 1 loan insured under this subpart, refinancing the loan 1 time)” for “all of the borrower’s debts into a single instrument”, and in second sentence, substituted “consolidation or refinancing” for “consolidation”.

§292e Certificate of Loan Insurance; Effective Date of Insurance