§940c Cushion of Credit Payments Program

Summary

Creates a program for borrowers to put voluntary deposits into cushion-of-credit accounts inside the Rural Electrification and Telephone Revolving Fund. No new deposits are allowed after December 20, 2018. Money in those accounts earns interest to the borrower at 5% per year, except it was 4% in fiscal year 2021 and after that it earns the then-current 1-year Treasury rate. A borrower can only withdraw money to make scheduled loan payments; however, from December 20, 2018 through September 30, 2020 a borrower could choose to withdraw to prepay loans, and no prepayment penalty could be charged on amounts prepaid. Regardless of section 661c of title 2, the Treasury must provide funds to cover defined loan modification costs (see section 661a of title 2). Cushion payments are kept as a cash balance in each borrower’s account in the Fund. Those cash balances earn interest to the Fund at the Fund’s weighted average rate on its outstanding certificates of beneficial ownership, and that earned interest is credited back to reduce the Fund’s interest costs. The Secretary must keep a rural economic development subaccount that is credited monthly with an amount equal to outstanding cushion payments made after October 1, 1987 multiplied by the monthly difference between the Fund’s average weighted certificate rate and 5%.