---
kind: "section"
citation: "45 C.F.R. § 264.40"
title: "45"
number: "264.40"
heading: "What happens if a State does not repay a Federal loan?"
url: "https://uscodex.org/cfr/45/264.40"
---

# §264.40. What happens if a State does not repay a Federal loan?

- (a) If a State fails to repay the amount of principal and interest due at any point under a loan agreement developed pursuant to section 406 of the Act:
  - (1) The entire outstanding loan balance, plus all accumulated interest, becomes due and payable immediately; and
  - (2) We will reduce the SFAG payable for the immediately succeeding fiscal year quarter by the outstanding loan amount plus interest.
- (b) Neither the reasonable cause provisions at [§ 262.5](/cfr/45/262.5.md) of this chapter nor the corrective compliance plan provisions at [§ 262.6](/cfr/45/262.6.md) of this chapter apply when a State fails to repay a Federal loan.

## Notes

### Authority

Authority: 31 U.S.C. 7501 et seq.; 42 U.S.C. 608, 609, 654, 1302, 1308, and 1337.

### Source

Source: 64 FR 17896, Apr. 12, 1999, unless otherwise noted.