Title 7, AgricultureRelease 119-110

§940c Cushion of Credit Payments Program

Title 7 › CHAPTER 31 — RURAL ELECTRIFICATION AND TELEPHONE SERVICE › SUBCHAPTER III — RURAL ELECTRIC AND TELEPHONE DIRECT LOAN PROGRAMS › § 940c

Last updated Sep 22, 2026|Official source

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%.

Full Legal Text

Title 7, §940c

Agriculture, Source: USLM XML via OLRC

(a)Establishment
(1)In general
(A)Development and promotion of program
The Secretary shall develop and promote a program to encourage borrowers to voluntarily make deposits into cushion of credit accounts established within the Rural Electrification and Telephone Revolving Fund.
(B)Termination
Effective on December 20, 2018, no deposits may be made under subparagraph (A).
(2)Interest
(A)In general
Amounts in each cushion of credit account shall accrue interest to the borrower at a rate of 5 percent per annum.
(B)Reduction
Notwithstanding subparagraph (A), amounts in each cushion of credit account shall accrue interest to the borrower at a rate equal to—
(i)4 percent per annum in fiscal year 2021; and
(ii)the then applicable 1-year Treasury rate thereafter.
(3)Balance
(A)In general
A borrower may reduce the balance of its cushion of credit account only if the amount obtained from the reduction is used to make scheduled payments on loans made or guaranteed under this chapter.
(B)Prepayment
Notwithstanding subparagraph (A) and subject to subparagraph (C), beginning on December 20, 2018, and ending with September 30, 2020, a borrower may, at the sole discretion of the borrower, reduce the balance of its cushion of credit account if the amount obtained from the reduction is used to prepay loans made or guaranteed under this chapter.
(C)No prepayment premium
Notwithstanding any other provision of this chapter, no prepayment premium shall be imposed or collected with respect to that portion of a loan that is prepaid by a borrower in accordance with subparagraph (B).
(D)Mandatory funding
Notwithstanding section 661c of title 2, out of any funds in the Treasury not otherwise appropriated, the Secretary of the Treasury shall make available such sums as necessary to cover any loan modification costs as defined in section 661a of title 2.
(b)Uses of cushion of credit payments
(1)In general
(A)Cash balance
Cushion of credit payments shall be held in the Rural Electrification and Telephone Revolving Fund as a cash balance in the cushion of credit accounts of borrowers.
(B)Interest
All cash balance amounts (obtained from cushion of credit payments, loan payments, and other sources) held by the Fund shall bear interest to the Fund at a rate equal to the weighted average rate on outstanding certificates of beneficial ownership issued by the Fund.
(C)Credits
The amount of interest accrued on the cash balances shall be credited to the Fund as an offsetting reduction to the amount of interest paid by the Fund on its certificates of beneficial ownership.
(2)Rural economic development subaccount
The Secretary shall maintain a subaccount within the Rural Electrification and Telephone Revolving Fund to which shall be credited, on a monthly basis, a sum determined by multiplying the outstanding cushion of credit payments made after October 1, 1987, by the difference (converted to a monthly basis) between the average weighted interest rate paid on outstanding certificates of beneficial ownership issued by the Fund and 5 percent.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

2018—Subsec. (a)(1). Pub. L. 115–334, § 6503(1), designated existing provisions as subpar. (A), inserted heading, and added subpar. (B). Subsec. (a)(2). Pub. L. 115–334, § 6503(2), designated existing provisions as subpar. (A), inserted heading, and added subpar. (B). Subsec. (a)(3). Pub. L. 115–334, § 6503(3), designated existing provisions as subpar. (A), inserted heading, and added subpar. (B). Subsec. (b)(2). Pub. L. 115–334, § 6504(b), struck out subpar. (A) designation and heading before “The Secretary shall”, substituted “5 percent.” for “the 5 percent rate of interest provided to borrowers on cushion of credit payments.”, and struck out subpars. (B) to (E) which related to grants, repayments, proceeds, and number of grants, respectively. 1994—Subsecs. (a)(1), (b)(2)(A) to (C). Pub. L. 103–354 substituted “Secretary” for “Administrator”.

Reference

Citations & Metadata

Citation

7 U.S.C. § 940c

Title 7, Agriculture

Last Updated

Sep 22, 2026

Release point: 119-110