§292q Agreements for Operation of School Loan Funds

Summary

Authorizes the Secretary to make agreements with public or nonprofit medical, dental, pharmacy, podiatry, optometry, osteopathic, or veterinary schools so they can set up and run a student loan fund. Each agreement must make the school create the fund and put in money from several sources: federal capital contributions, at least one‑ninth of that federal amount from the school, principal and interest repaid on loans, money collected under section 292r(j), and any other earnings. The fund can only be used to make loans to the school’s full‑time students in the listed health professions (working toward the required degrees) and to pay costs of collecting those loans. The school must tell every loan applicant in writing about section 292r rules under which the Secretary might pay outstanding loans. The agreement must also protect the United States’ financial interests. The Secretary must set rules for measuring a school’s failure to collect loans, but schools won’t be forced to repay funds for loans that became uncollectible before August 1985. The failure rate is the percentage equal to defaulted principal outstanding divided by matured loans. Definitions: “default” = borrower misses required payment or breaks loan terms (except bankruptcy or if the school has written proof the borrower will repay); “defaulted principal outstanding” = loan principal in repayment that is in default for at least 120 days (monthly loans) or 180 days (less frequent); “grace period” = one year after the student stops full‑time study; “matured loans” = total principal made minus loans to students still enrolled or in their grace period.