---
kind: "section"
citation: "20 U.S.C. § 1072"
title: "20"
title_heading: "Education"
number: "1072"
heading: "Advances for reserve funds of State and nonprofit private loan insurance programs"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/20/1072"
units:
  - "Chapter 28 — Higher Education Resources and Student Assistance"
  - "Subchapter IV — Student Assistance"
  - "Part B — Federal Family Education Loan Program"
---

# §1072. Advances for reserve funds of State and nonprofit private loan insurance programs

- (a) **Purpose of and authority for advances to reserve funds—**
  - (1) **Purpose; eligible recipients—** From sums appropriated pursuant to paragraphs (3) and (4)(A) of [section 1071(b) of this title](/usc/20/1071.md?p=b), the [Secretary](/usc/20/1003.md?p=17) is authorized to make advances to any [State](/usc/20/1003.md?p=21-A) with which the [Secretary](/usc/20/1003.md?p=17) has made an agreement pursuant to [section 1078(b) of this title](/usc/20/1078.md?p=b) for the purpose of helping to establish or strengthen the reserve fund of the student [loan](/usc/20/1066a.md?p=2) insurance program covered by that agreement. If for any fiscal year a [State](/usc/20/1003.md?p=21-A) does not have a student [loan](/usc/20/1066a.md?p=2) insurance program covered by an agreement made pursuant to [section 1078(b) of this title](/usc/20/1078.md?p=b), and the [Secretary](/usc/20/1003.md?p=17) determines after consultation with the chief executive [officer](/usc/20/1019.md?p=7) of that [State](/usc/20/1003.md?p=21-A) that there is no reasonable likelihood that the [State](/usc/20/1003.md?p=21-A) will have such a student [loan](/usc/20/1066a.md?p=2) insurance program for such year, the [Secretary](/usc/20/1003.md?p=17) may make advances for such year for the same purpose to one or more [nonprofit](/usc/20/1003.md?p=13) private institutions or organizations with which the [Secretary](/usc/20/1003.md?p=17) has made an agreement pursuant to [section 1078(b) of this title](/usc/20/1078.md?p=b) in order to enable students in the [State](/usc/20/1003.md?p=21-A) to participate in a program of student [loan](/usc/20/1066a.md?p=2) insurance covered by such an agreement. The [Secretary](/usc/20/1003.md?p=17) may make advances under this subsection both to a [State](/usc/20/1003.md?p=21-A) program (with which he has such an agreement) and to one or more [nonprofit](/usc/20/1003.md?p=13) private institutions or organizations (with which he has such an agreement) in that [State](/usc/20/1003.md?p=21-A) if he determines that such advances are necessary in order that students in each [eligible institution](/usc/20/1058.md?p=b) have access through such institution to a student [loan](/usc/20/1066a.md?p=2) insurance program which meets the requirements of [section 1078(b)(1) of this title](/usc/20/1078.md?p=b-1).
  - (2) **Matching requirement—** No advance shall be made after June 30, 1968, unless matched by an equal amount from non-Federal sources. Such equal amount may include the unencumbered non-Federal portion of a reserve fund. As used in the preceding sentence, the term “unencumbered non-Federal portion” means the amount (determined as of the time immediately preceding the making of the advance) of the reserve fund less the greater of—
    - (A) the sum of—
      - (i) advances made under this section prior to July 1, 1968;
      - (ii) an amount equal to twice the amount of advances made under this section after June 30, 1968, and before the advance for purposes of which the determination is made; and
      - (iii) the proceeds of earnings on advances made under this section; or
    - (B) any amount which is required to be maintained in such fund pursuant to [State](/usc/20/1003.md?p=21-A) law or regulation, or by agreement with [lenders](/usc/20/1019.md?p=6), as a reserve against the insurance of [outstanding](/usc/20/1066a.md?p=7) [loans](/usc/20/1066a.md?p=2).

    Except as provided in [section 1078(c)(9)(E)](/usc/20/1078.md?p=c-9-E) or (F) of this title, such unencumbered non-Federal portion shall not be subject to recall, repayment, or recovery by the [Secretary](/usc/20/1003.md?p=17).

  - (3) **Terms and conditions; repayment—** Advances pursuant to this subsection shall be upon such terms and conditions (including conditions relating to the time or times of payment) consistent with the requirements of [section 1078(b) of this title](/usc/20/1078.md?p=b) as the [Secretary](/usc/20/1003.md?p=17) determines will best carry out the purpose of this section. Advances made by the [Secretary](/usc/20/1003.md?p=17) under this subsection shall be repaid within such period as the [Secretary](/usc/20/1003.md?p=17) may deem to be appropriate in each case in the light of the maturity and solvency of the reserve fund for which the advance was made.
- (b) **Limitations on total advances—**
  - (1) **In general—** The total of the advances from the sums appropriated pursuant to paragraph (4)(A) of [section 1071(b) of this title](/usc/20/1071.md?p=b) to [nonprofit](/usc/20/1003.md?p=13) private institutions and organizations for the benefit of students in any [State](/usc/20/1003.md?p=21-A) and to such [State](/usc/20/1003.md?p=21-A) may not exceed an amount which bears the same ratio to such sums as the population of such [State](/usc/20/1003.md?p=21-A) aged 18 to 22, inclusive, bears to the population of all the [States](/usc/20/1003.md?p=21-A) aged 18 to 22 inclusive, but such advances may otherwise be in such amounts as the [Secretary](/usc/20/1003.md?p=17) determines will best achieve the purposes for which they are made. The amount available for advances to any [State](/usc/20/1003.md?p=21-A) shall not be less than $25,000 and any additional funds needed to meet this requirement shall be derived by proportionately reducing (but not below $25,000) the amount available for advances to each of the remaining [States](/usc/20/1003.md?p=21-A).
  - (2) **Calculation of population—** For the purpose of this subsection, the population aged 18 to 22, inclusive, of each [State](/usc/20/1003.md?p=21-A) and of all the [States](/usc/20/1003.md?p=21-A) shall be determined by the [Secretary](/usc/20/1003.md?p=17) on the basis of the most recent satisfactory data available to him.
- (c) **Advances for insurance obligations—**
  - (1) **Use for payment of insurance obligations—** From sums appropriated pursuant to [section 1071(b)(4)(B) of this title](/usc/20/1071.md), the [Secretary](/usc/20/1003.md?p=17) shall advance to each [State](/usc/20/1003.md?p=21-A) which has an agreement with the [Secretary](/usc/20/1003.md?p=17) under [section 1078(c) of this title](/usc/20/1078.md?p=c) with respect to a student [loan](/usc/20/1066a.md?p=2) insurance program, an amount determined in accordance with paragraph (2) of this subsection to be used for the purpose of making payments under the [State](/usc/20/1003.md?p=21-A)’s insurance obligations under such program.
  - (2) **Amount of advances—**
    - (A) Except as provided in [subparagraph (B)](#c-2-B), the amount to be advanced to each such [State](/usc/20/1003.md?p=21-A) shall be equal to 10 percent of the principal amount of [loans](/usc/20/1066a.md?p=2) made by [lenders](/usc/20/1019.md?p=6) and insured by such agency on those [loans](/usc/20/1066a.md?p=2) on which the first payment of principal became due during the fiscal year immediately preceding the fiscal year in which the advance is made.
    - (B) The amount of any advance determined according to subparagraph (A) of this paragraph shall be reduced by—
      - (i) the amount of any advance or advances made to such [State](/usc/20/1003.md?p=21-A) pursuant to this subsection at an earlier date; and
      - (ii) the amount of the unspent balance of the advances made to a [State](/usc/20/1003.md?p=21-A) pursuant to [subsection (a)](#a).

      Notwithstanding [subparagraph (A)](#c-2-A) and the preceding sentence of this subparagraph, but subject to subparagraph (D) of this paragraph, the amount of any advance to a [State](/usc/20/1003.md?p=21-A) described in [paragraph (5)(A)](#c-5-A) for the first year of its eligibility under such paragraph, and the amount of any advance to any [State](/usc/20/1003.md?p=21-A) described in [paragraph (5)(B)](#c-5-B) for each year of its eligibility under such paragraph, shall not be less than $50,000.

    - (C) For the purpose of [subparagraph (B)](#c-2-B), the unspent balance of the advances made to a [State](/usc/20/1003.md?p=21-A) pursuant to [subsection (a)](#a) shall be that portion of the balance of the [State](/usc/20/1003.md?p=21-A)’s reserve fund (remaining at the time of the [State](/usc/20/1003.md?p=21-A)’s first request for an advance pursuant to this subsection) which bears the same ratio to such balance as the Federal advances made and not returned by such [State](/usc/20/1003.md?p=21-A), pursuant to [subsection (a)](#a), bears to the total of all past contributions to such reserve funds from all sources (other than [interest](/usc/20/1066a.md?p=6) on investment of any portion of the reserve fund) contributed since the date such [State](/usc/20/1003.md?p=21-A) executed an agreement pursuant to [section 1078(b) of this title](/usc/20/1078.md?p=b).
    - (D) If the sums appropriated for any fiscal year for paying the amounts determined under subparagraphs [(A)](#c-2-A) and [(B)](#c-2-B) are not sufficient to pay such amounts in full, then such amounts shall be reduced—
      - (i) by ratably reducing that portion of the amount allocated to each [State](/usc/20/1003.md?p=21-A) which exceeds $50,000; and
      - (ii) if further reduction is required, by equally reducing the $50,000 minimum allocation of each [State](/usc/20/1003.md?p=21-A).

      If additional sums become available for paying such amounts for any fiscal year during which the preceding sentence has been applied, such reduced amounts shall be increased on the same basis as they were reduced.

  - (3) **Use of earnings for insurance obligations—** The earnings, if any, on any investments of advances received pursuant to this subsection must be used for making payments under the [State](/usc/20/1003.md?p=21-A)’s insurance obligations.
  - (4) **Repayment of advances—** Advances made by the [Secretary](/usc/20/1003.md?p=17) under this subsection shall, subject to [subsection (d)](#d), be repaid within such period as the [Secretary](/usc/20/1003.md?p=17) may deem to be appropriate and shall be deposited in the fund established by [section 1081 of this title](/usc/20/1081.md).
  - (5) **Limitation on number of advances—** Except as provided in [paragraph (7)](#c-7), advances pursuant to this subsection shall be made to a [State](/usc/20/1003.md?p=21-A)—
    - (A) in the case of a [State](/usc/20/1003.md?p=21-A) which is actively carrying on a program under an agreement pursuant to [section 1078(b) of this title](/usc/20/1078.md?p=b) which was entered into before October 12, 1976, upon such date as such [State](/usc/20/1003.md?p=21-A) may request, but not before October 1, 1977, and on the same day of each of the 2 succeeding calendar years after the date so requested; and
    - (B) in the case of a [State](/usc/20/1003.md?p=21-A) which enters into an agreement pursuant to [section 1078(b) of this title](/usc/20/1078.md?p=b) on or after October 12, 1976, or which is not actively carrying on a program under an agreement pursuant to such section on such date, upon such date as such [State](/usc/20/1003.md?p=21-A) may request, but not before October 1, 1977, and on the same day of each of the 4 succeeding calendar years after the date so requested of the advance.
  - (6) **Payment of advances where no State program—**
    - (A) If for any fiscal year a [State](/usc/20/1003.md?p=21-A) does not have a student [loan](/usc/20/1066a.md?p=2) insurance program covered by an agreement made pursuant to [section 1078(b) of this title](/usc/20/1078.md?p=b), and the [Secretary](/usc/20/1003.md?p=17) determines after consultation with the chief executive [officer](/usc/20/1019.md?p=7) of that [State](/usc/20/1003.md?p=21-A) that there is no reasonable likelihood that the [State](/usc/20/1003.md?p=21-A) will have such a student [loan](/usc/20/1066a.md?p=2) insurance program for such year, the [Secretary](/usc/20/1003.md?p=17) may make advances pursuant to this subsection for such year for the same purpose to one or more [nonprofit](/usc/20/1003.md?p=13) private institutions or organizations with which he has made an agreement pursuant to [subsection (c)](#c), as well as subsection (b), of [section 1078 of this title](/usc/20/1078.md) and subparagraph (B) of this paragraph in order to enable students in that [State](/usc/20/1003.md?p=21-A) to participate in a program of student [loan](/usc/20/1066a.md?p=2) insurance covered by such agreements.
    - (B) The [Secretary](/usc/20/1003.md?p=17) may enter into an agreement with a private [nonprofit](/usc/20/1003.md?p=13) institution or organization for the purpose of this paragraph under which such institution or organization—
      - (i) agrees to establish within such [State](/usc/20/1003.md?p=21-A) at least one office with sufficient staff to handle written, electronic, and telephone inquiries from students, [eligible lenders](/usc/20/1019.md?p=4), and other persons in the [State](/usc/20/1003.md?p=21-A), to encourage maximum commercial [lender](/usc/20/1019.md?p=6) participation within the [State](/usc/20/1003.md?p=21-A), and to conduct periodic visits to at least the major [eligible lenders](/usc/20/1019.md?p=4) within the [State](/usc/20/1003.md?p=21-A);
      - (ii) agrees that its insurance will not be denied any student because of his or her choice of [eligible institutions](/usc/20/1058.md?p=b); and
      - (iii) certifies that it is neither an [eligible institution](/usc/20/1058.md?p=b), nor has any substantial affiliation with an [eligible institution](/usc/20/1058.md?p=b).
  - (7) **Emergency advances—** The [Secretary](/usc/20/1003.md?p=17) is authorized to make advances, on terms and conditions satisfactory to the [Secretary](/usc/20/1003.md?p=17), to a [guaranty agency](/usc/20/1085.md?p=j)—
    - (A) in accordance with [section 1078(j) of this title](/usc/20/1078.md?p=j), in order to ensure that the [guaranty agency](/usc/20/1085.md?p=j) shall make [loans](/usc/20/1066a.md?p=2) as the [lender](/usc/20/1019.md?p=6)-of-last-resort; or
    - (B) if the [Secretary](/usc/20/1003.md?p=17) is seeking to terminate the [guaranty agency](/usc/20/1085.md?p=j)’s agreement, or assuming the [guaranty agency](/usc/20/1085.md?p=j)’s functions, in accordance with [section 1078(c)(9)(F)(v) of this title](/usc/20/1078.md?p=c-9-F-v), in order to assist the agency in meeting its immediate cash needs, ensure the uninterrupted payment of claims, or ensure that the [guaranty agency](/usc/20/1085.md?p=j) shall make [loans](/usc/20/1066a.md?p=2) as described in [subparagraph (A)](#c-7-A).
- (d) **Recovery of advances during fiscal years 1988 and 1989—**
  - (1) **Amount and use of recovered funds—** Notwithstanding any other provision of this section, advances made by the [Secretary](/usc/20/1003.md?p=17) under this section shall be repaid in accordance with this subsection and shall be deposited in the fund established by [section 1081 of this title](/usc/20/1081.md). The [Secretary](/usc/20/1003.md?p=17) shall, in accordance with the requirements of [paragraph (2)](#d-2), recover (and so deposit) an amount equal to $75,000,000 during fiscal year 1988 and an amount equal to $35,000,000 for fiscal year 1989.
  - (2) **Determination of guaranty agency obligations—** In determining the amount of advances which shall be repaid by a [guaranty agency](/usc/20/1085.md?p=j) under [paragraph (1)](#d-1), the [Secretary](/usc/20/1003.md?p=17)—
    - (A) shall consider the solvency and maturity of the reserve and insurance funds of the [guaranty agency](/usc/20/1085.md?p=j) assisted by such advances, as determined by the Comptroller General taking into account the requirements of [State](/usc/20/1003.md?p=21-A) law as in effect on October 17, 1986;
    - (B) shall not seek repayment of such advances from any [State](/usc/20/1003.md?p=21-A) described in [subsection (c)(5)(B)](#c-5-B) during any year of its eligibility under such subsection; and
    - (C) shall not seek repayment of such advances from any [State](/usc/20/1003.md?p=21-A) if such repayment encumbers the reserve fund requirement of [State](/usc/20/1003.md?p=21-A) law as in effect on October 17, 1986.
- (e) **Correction for errors under reduction of excess cash reserves—**
  - (1) **In general—** The [Secretary](/usc/20/1003.md?p=17) shall pay any [guaranty agency](/usc/20/1085.md?p=j) the amount of reimbursement of claims under [section 1078(c)(1) of this title](/usc/20/1078.md?p=c-1), filed between September 1, 1988, and December 31, 1989, which were previously withheld or canceled in order to be applied to satisfy such agency’s obligation to eliminate excess cash reserves held by such agency, based on the maximum cash reserve (as described in [subsection (e)](#e) of this section as in effect on September 1, 1988) permitted at the end of 1986, if such maximum cash reserve was miscalculated because of erroneous financial information provided by such agency to the [Secretary](/usc/20/1003.md?p=17) and if (A) such erroneous information is verified by an audited financial statement of the reserve fund, signed by a certified public accountant, and (B) such audited financial statement is provided to the [Secretary](/usc/20/1003.md?p=17) prior to January 1, 1993.
  - (2) **Amount—** The amount of reimbursement for claims shall be equal to the amount of reimbursement for claims withheld or canceled in order to be applied to such agency’s obligation to eliminate excess cash reserves which exceeds the amount of that which would have been withheld or canceled if the maximum excess cash reserves had been accurately calculated.
- (f) **Refund of cash reserve payments—** The [Secretary](/usc/20/1003.md?p=17) shall, within 30 days after July 23, 1992, pay the full amount of payments withheld or canceled under paragraph (3) of this subsection to any [guaranty agency](/usc/20/1085.md?p=j) which—
  - (1) was required to eliminate excess cash reserves, based on the maximum cash reserve (as described in [subsection (e)](#e) of this section as in effect on September 1, 1988) permitted at the end of 1986;
  - (2) appealed the [Secretary](/usc/20/1003.md?p=17)’s demand that such agency should eliminate such excess cash reserves and received a waiver of a portion of the amount of such excess cash reserves to be eliminated;
  - (3) had payments under [section 1078(c)(1) of this title](/usc/20/1078.md?p=c-1) or [section 1078(f) of this title](/usc/20/1078.md?p=f) previously withheld or canceled in order to be applied to satisfy such agency’s obligation to eliminate excess cash reserves held by such agency, based on the maximum cash reserve (as described in [subsection (e)](#e) of this section as in effect on September 1, 1988) permitted at the end of 1986; and
  - (4) according to a [Department](/usc/20/1003.md?p=4) of Education review that was completed and forwarded to such [guaranty agency](/usc/20/1085.md?p=j) prior to January 1, 1992, is expected to become insolvent during or before 1996 and the payments withheld or canceled under paragraph (3) of this subsection are a factor in such agency’s impending insolvency.
- (g) **Preservation and recovery of guaranty agency reserves—**
  - (1) **Authority to recover funds—** Notwithstanding any other provision of law, the reserve funds of the [guaranty agencies](/usc/20/1085.md?p=j), and any [assets](/usc/20/1087vv.md?p=f-1) purchased with such reserve funds, regardless of who holds or controls the reserves or [assets](/usc/20/1087vv.md?p=f-1), shall be considered to be the property of the United States to be used in the operation of the program authorized by this part. However, the [Secretary](/usc/20/1003.md?p=17) may not require the return of all reserve funds of a [guaranty agency](/usc/20/1085.md?p=j) to the [Secretary](/usc/20/1003.md?p=17) unless the [Secretary](/usc/20/1003.md?p=17) determines that such return is in the best [interest](/usc/20/1066a.md?p=6) of the operation of the program authorized by this part, or to ensure the proper maintenance of such agency’s funds or [assets](/usc/20/1087vv.md?p=f-1) or the orderly termination of the [guaranty agency](/usc/20/1085.md?p=j)’s operations and the liquidation of its [assets](/usc/20/1087vv.md?p=f-1). The reserves shall be maintained by each [guaranty agency](/usc/20/1085.md?p=j) to pay program expenses and contingent liabilities, as authorized by the [Secretary](/usc/20/1003.md?p=17), except that—
    - (A) the [Secretary](/usc/20/1003.md?p=17) may direct a [guaranty agency](/usc/20/1085.md?p=j) to return to the [Secretary](/usc/20/1003.md?p=17) a portion of its reserve fund which the [Secretary](/usc/20/1003.md?p=17) determines is unnecessary to pay the program expenses and contingent liabilities of the [guaranty agency](/usc/20/1085.md?p=j);
    - (B) the [Secretary](/usc/20/1003.md?p=17) may direct the [guaranty agency](/usc/20/1085.md?p=j) to require the return, to the [guaranty agency](/usc/20/1085.md?p=j) or to the [Secretary](/usc/20/1003.md?p=17), of any reserve funds or [assets](/usc/20/1087vv.md?p=f-1) held by, or under the control of, any other entity, which the [Secretary](/usc/20/1003.md?p=17) determines are necessary to pay the program expenses and contingent liabilities of the [guaranty agency](/usc/20/1085.md?p=j), or which are required for the orderly termination of the [guaranty agency](/usc/20/1085.md?p=j)’s operations and the liquidation of its [assets](/usc/20/1087vv.md?p=f-1);
    - (C) the [Secretary](/usc/20/1003.md?p=17) may direct a [guaranty agency](/usc/20/1085.md?p=j), or such agency’s [officers](/usc/20/1019.md?p=7) or directors, to cease any activities involving expenditure, use or transfer of the [guaranty agency](/usc/20/1085.md?p=j)’s reserve funds or [assets](/usc/20/1087vv.md?p=f-1) which the [Secretary](/usc/20/1003.md?p=17) determines is a misapplication, misuse, or improper expenditure of such funds or [assets](/usc/20/1087vv.md?p=f-1); and
    - (D) any such determination under subparagraph [(A)](#g-1-A) or [(B)](#g-1-B) shall be based on standards prescribed by regulations that are developed through negotiated rulemaking and that include procedures for administrative due process.
  - (2) **Termination provisions in contracts—**
    - (A) To ensure that the funds and [assets](/usc/20/1087vv.md?p=f-1) of the [guaranty agency](/usc/20/1085.md?p=j) are preserved, any contract with respect to the administration of a [guaranty agency](/usc/20/1085.md?p=j)’s reserve funds, or the administration of any [assets](/usc/20/1087vv.md?p=f-1) purchased or acquired with the reserve funds of the [guaranty agency](/usc/20/1085.md?p=j), that is entered into or extended by the [guaranty agency](/usc/20/1085.md?p=j), or any other party on behalf of or with the concurrence of the [guaranty agency](/usc/20/1085.md?p=j), after August 10, 1993, shall provide that the contract is terminable by the [Secretary](/usc/20/1003.md?p=17) upon 30 days notice to the contracting parties if the [Secretary](/usc/20/1003.md?p=17) determines that such contract includes an impermissible transfer of the reserve funds or [assets](/usc/20/1087vv.md?p=f-1), or is otherwise inconsistent with the terms or purposes of this section.
    - (B) The [Secretary](/usc/20/1003.md?p=17) may direct a [guaranty agency](/usc/20/1085.md?p=j) to suspend or cease activities under any contract entered into by or on behalf of such agency after January 1, 1993, if the [Secretary](/usc/20/1003.md?p=17) determines that the misuse or improper expenditure of such [guaranty agency](/usc/20/1085.md?p=j)’s funds or [assets](/usc/20/1087vv.md?p=f-1) or such contract provides unnecessary or improper benefits to such agency’s [officers](/usc/20/1019.md?p=7) or directors.
  - (3) **Penalties—** Violation of any direction issued by the [Secretary](/usc/20/1003.md?p=17) under this subsection may be subject to the penalties described in [section 1097 of this title](/usc/20/1097.md).
  - (4) **Availability of funds—** Any funds that are returned or otherwise recovered by the [Secretary](/usc/20/1003.md?p=17) pursuant to this subsection shall be available for expenditure for expenses pursuant to [section 1087h of this title](/usc/20/1087h.md).
- (h) **Recall of reserves; limitations on use of reserve funds and assets—**
  - (1) **In general—** Notwithstanding any other provision of law, the [Secretary](/usc/20/1003.md?p=17) shall, except as otherwise provided in this subsection, recall $1,000,000,000 from the reserve funds held by [guaranty agencies](/usc/20/1085.md?p=j) on September 1, 2002.
  - (2) **Deposit—** Funds recalled by the [Secretary](/usc/20/1003.md?p=17) under this subsection shall be deposited in the Treasury.
  - (3) **Required share—** The [Secretary](/usc/20/1003.md?p=17) shall require each [guaranty agency](/usc/20/1085.md?p=j) to return reserve funds under [paragraph (1)](#h-1) based on the agency’s required share of recalled reserve funds held by [guaranty agencies](/usc/20/1085.md?p=j) as of September 30, 1996. For purposes of this paragraph, a [guaranty agency](/usc/20/1085.md?p=j)’s required share of recalled reserve funds shall be determined as follows:
    - (A) The [Secretary](/usc/20/1003.md?p=17) shall compute each [guaranty agency](/usc/20/1085.md?p=j)’s reserve ratio by dividing (i) the amount held in the agency’s reserve funds as of September 30, 1996 (but reflecting later accounting or auditing adjustments approved by the [Secretary](/usc/20/1003.md?p=17)), by (ii) the original principal amount of all [loans](/usc/20/1066a.md?p=2) for which the agency has an [outstanding](/usc/20/1066a.md?p=7) insurance obligation as of such date, including amounts of [outstanding](/usc/20/1066a.md?p=7) [loans](/usc/20/1066a.md?p=2) transferred to the agency from another [guaranty agency](/usc/20/1085.md?p=j).
    - (B) If the reserve ratio of any [guaranty agency](/usc/20/1085.md?p=j) as computed under [subparagraph (A)](#h-3-A) exceeds 2.0 percent, the agency’s required share shall include so much of the amounts held in the agency’s reserve funds as exceed a reserve ratio of 2.0 percent.
    - (C) If any additional amount is required to be recalled under [paragraph (1)](#h-1) (after deducting the total of the required shares calculated under [subparagraph (B)](#h-3-B)), such additional amount shall be obtained by imposing on each [guaranty agency](/usc/20/1085.md?p=j) an equal percentage reduction in the amount of the agency’s reserve funds remaining after deduction of the amount recalled under [subparagraph (B)](#h-3-B), except that such percentage reduction under this subparagraph shall not result in the agency’s reserve ratio being reduced below 0.58 percent. The equal percentage reduction shall be the percentage obtained by dividing—
      - (i) the additional amount required to be recalled (after deducting the total of the required shares calculated under [subparagraph (B)](#h-3-B)), by
      - (ii) the total amount of all such agencies’ reserve funds remaining (after deduction of the required shares calculated under such subparagraph).
    - (D) If any additional amount is required to be recalled under [paragraph (1)](#h-1) (after deducting the total of the required shares calculated under subparagraphs [(B)](#h-3-B) and [(C)](#h-3-C)), such additional amount shall be obtained by imposing on each [guaranty agency](/usc/20/1085.md?p=j) with a reserve ratio (after deducting the required shares calculated under such subparagraphs) in excess of 0.58 percent an equal percentage reduction in the amount of the agency’s reserve funds remaining (after such deduction) that exceed a reserve ratio of 0.58 percent. The equal percentage reduction shall be the percentage obtained by dividing—
      - (i) the additional amount to be recalled under [paragraph (1)](#h-1) (after deducting the amount recalled under subparagraphs [(B)](#h-3-B) and [(C)](#h-3-C)), by
      - (ii) the total amount of all such agencies’ reserve funds remaining (after deduction of the required shares calculated under such subparagraphs) that exceed a reserve ratio of 0.58 percent.
  - (4) **Restricted accounts required—**
    - (A) **In general—** Within 90 days after the beginning of each of the fiscal years 1998 through 2002, each [guaranty agency](/usc/20/1085.md?p=j) shall transfer a portion of the agency’s required share determined under [paragraph (3)](#h-3) to a restricted account established by the agency that is of a type selected by the agency with the approval of the [Secretary](/usc/20/1003.md?p=17). Funds transferred to such restricted accounts shall be invested in obligations issued or guaranteed by the United States or in other similarly low-risk securities.
    - (B) **Requirement—** A [guaranty agency](/usc/20/1085.md?p=j) shall not use the funds in such a restricted account for any purpose without the express written permission of the [Secretary](/usc/20/1003.md?p=17), except that a [guaranty agency](/usc/20/1085.md?p=j) may use the earnings from such restricted account for [default](/usc/20/1085.md?p=l) reduction activities.
    - (C) **Installments—** In each of fiscal years 1998 through 2002, each [guaranty agency](/usc/20/1085.md?p=j) shall transfer the agency’s required share to such restricted account in 5 equal annual installments, except that—
      - (i) a [guaranty agency](/usc/20/1085.md?p=j) that has a reserve ratio (as computed under subparagraph (3)(A)) equal to or less than 1.10 percent may transfer the agency’s required share to such account in 4 equal installments beginning in fiscal year 1999; and
      - (ii) a [guaranty agency](/usc/20/1085.md?p=j) may transfer such required share to such account in accordance with such other payment schedules as are approved by the [Secretary](/usc/20/1003.md?p=17).
  - (5) **Shortage—** If, on September 1, 2002, the total amount in the restricted accounts described in [paragraph (4)](#h-4) is less than the amount the [Secretary](/usc/20/1003.md?p=17) is required to recall under [paragraph (1)](#h-1), the [Secretary](/usc/20/1003.md?p=17) shall require the return of the amount of the shortage from other reserve funds held by [guaranty agencies](/usc/20/1085.md?p=j) under procedures established by the [Secretary](/usc/20/1003.md?p=17). The [Secretary](/usc/20/1003.md?p=17) shall first attempt to obtain the amount of such shortage from each [guaranty agency](/usc/20/1085.md?p=j) that failed to transfer the agency’s required share to the agency’s restricted account in accordance with [paragraph (4)](#h-4).
  - (6) **Enforcement—**
    - (A) **In general—** The [Secretary](/usc/20/1003.md?p=17) may take such reasonable measures, and require such information, as may be necessary to ensure that [guaranty agencies](/usc/20/1085.md?p=j) comply with the requirements of this subsection.
    - (B) **Prohibition—** If the [Secretary](/usc/20/1003.md?p=17) determines that a [guaranty agency](/usc/20/1085.md?p=j) has failed to transfer to a restricted account any portion of the agency’s required share under this subsection, the agency may not receive any other funds under this part until the [Secretary](/usc/20/1003.md?p=17) determines that the agency has so transferred the agency’s required share.
    - (C) **Waiver—** The [Secretary](/usc/20/1003.md?p=17) may waive the requirements of [subparagraph (B)](#h-6-B) for a [guaranty agency](/usc/20/1085.md?p=j) described in such subparagraph if the [Secretary](/usc/20/1003.md?p=17) determines that there are extenuating circumstances beyond the control of the agency that justify such waiver.
  - (7) **Limitation—**
    - (A) **Restriction on other authority—** The [Secretary](/usc/20/1003.md?p=17) shall not have any authority to direct a [guaranty agency](/usc/20/1085.md?p=j) to return reserve funds under [subsection (g)(1)(A)](#g-1-A) during the period from August 5, 1997, through September 30, 2002.
    - (B) **Use of termination collections—** Any reserve funds directed by the [Secretary](/usc/20/1003.md?p=17) to be returned to the [Secretary](/usc/20/1003.md?p=17) under [subsection (g)(1)(B)](#g-1-B) during such period that do not exceed a [guaranty agency](/usc/20/1085.md?p=j)’s required share of recalled reserve funds under [paragraph (3)](#h-3)—
      - (i) shall be used to satisfy the agency’s required share of recalled reserve funds; and
      - (ii) shall be deposited in the restricted account established by the agency under [paragraph (4)](#h-4), without regard to whether such funds exceed the next installment required under such paragraph.
    - (C) **Use of sanctions collections—** Any reserve funds directed by the [Secretary](/usc/20/1003.md?p=17) to be returned to the [Secretary](/usc/20/1003.md?p=17) under [subsection (g)(1)(C)](#g-1-C) during such period that do not exceed a [guaranty agency](/usc/20/1085.md?p=j)’s next installment under [paragraph (4)](#h-4)—
      - (i) shall be used to satisfy the agency’s next installment; and
      - (ii) shall be deposited in the restricted account established by the agency under [paragraph (4)](#h-4).
    - (D) **Balance available to Secretary—** Any reserve funds directed by the [Secretary](/usc/20/1003.md?p=17) to be returned to the [Secretary](/usc/20/1003.md?p=17) under subparagraph [(B)](#g-1-B) or [(C)](#g-1-C) of subsection (g)(1) that remain after satisfaction of the requirements of subparagraphs (B) and (C) of this paragraph shall be deposited in the Treasury.
  - (8) **Definitions—** For the purposes of this subsection:
    - (A) **Default reduction activities—** The term “[default](/usc/20/1085.md?p=l) reduction activities” means activities to reduce student [loan](/usc/20/1066a.md?p=2) [defaults](/usc/20/1085.md?p=l) that improve, strengthen, and expand [default](/usc/20/1085.md?p=l) prevention activities, such as—
      - (i) establishing a program of partial [loan](/usc/20/1066a.md?p=2) cancellation to reward disadvantaged borrowers for good repayment histories with their [lenders](/usc/20/1019.md?p=6);
      - (ii) establishing a financial and debt management counseling program for high-risk borrowers that provides long-term training (beginning prior to the first disbursement of the borrower’s first student [loan](/usc/20/1066a.md?p=2) and continuing through the completion of the borrower’s program of education or training) in budgeting and other aspects of financial management, including debt management;
      - (iii) establishing a program of placement counseling to assist high-risk borrowers in identifying employment or additional training opportunities; and
      - (iv) developing public service announcements that would detail consequences of student [loan](/usc/20/1066a.md?p=2) [default](/usc/20/1085.md?p=l) and provide information regarding a toll-free telephone number established by the [guaranty agency](/usc/20/1085.md?p=j) for use by borrowers seeking assistance in avoiding [default](/usc/20/1085.md?p=l).
    - (B) **Reserve funds—** The term “reserve funds” when used with respect to a [guaranty agency](/usc/20/1085.md?p=j)—
      - (i) includes any reserve funds in cash or liquid [assets](/usc/20/1087vv.md?p=f-1) held by the [guaranty agency](/usc/20/1085.md?p=j), or held by, or under the control of, any other entity; and
      - (ii) does not include buildings, equipment, or other nonliquid [assets](/usc/20/1087vv.md?p=f-1).
- (i) **Additional recall of reserves—**
  - (1) **In general—** Notwithstanding any other provision of law and subject to [paragraph (4)](#i-4), the [Secretary](/usc/20/1003.md?p=17) shall recall, from reserve funds held in the Federal Student [Loan](/usc/20/1066a.md?p=2) Reserve Funds established under [section 1072a of this title](/usc/20/1072a.md) by [guaranty agencies](/usc/20/1085.md?p=j)—
    - (A) $85,000,000 in fiscal year 2002;
    - (B) $82,500,000 in fiscal year 2006; and
    - (C) $82,500,000 in fiscal year 2007.
  - (2) **Deposit—** Funds recalled by the [Secretary](/usc/20/1003.md?p=17) under this subsection shall be deposited in the Treasury.
  - (3) **Required share—** The [Secretary](/usc/20/1003.md?p=17) shall require each [guaranty agency](/usc/20/1085.md?p=j) to return reserve funds under [paragraph (1)](#i-1) on the basis of the agency’s required share. For purposes of this paragraph, a [guaranty agency](/usc/20/1085.md?p=j)’s required share shall be determined as follows:
    - (A) **Equal percentage—** The [Secretary](/usc/20/1003.md?p=17) shall require each [guaranty agency](/usc/20/1085.md?p=j) to return an amount representing an equal percentage reduction in the amount of reserve funds held by the agency on September 30, 1996.
    - (B) **Calculation—** The equal percentage reduction shall be the percentage obtained by dividing—
      - (i) $250,000,000, by
      - (ii) the total amount of all [guaranty agencies](/usc/20/1085.md?p=j)’ reserve funds held on September 30, 1996, less any amounts subject to recall under [subsection (h)](#h).
    - (C) **Special rule—** Notwithstanding subparagraphs [(A)](#i-3-A) and [(B)](#i-3-B), the percentage reduction under [subparagraph (B)](#i-3-B) shall not result in the depletion of the reserve funds of any agency which charges the 1.0 percent insurance premium pursuant to [section 1078(b)(1)(H) of this title](/usc/20/1078.md?p=b-1-H) below an amount equal to the amount of [lender](/usc/20/1019.md?p=6) claim payments paid during the 90 days prior to the date of the return under this subsection. If any additional amount is required to be returned after deducting the total of the required shares under [subparagraph (B)](#i-3-B) and as a result of the preceding sentence, such additional amount shall be obtained by imposing on each [guaranty agency](/usc/20/1085.md?p=j) to which the preceding sentence does not apply, an equal percentage reduction in the amount of the agency’s remaining reserve funds.
  - (4) **Offset of required shares—** If any [guaranty agency](/usc/20/1085.md?p=j) returns to the [Secretary](/usc/20/1003.md?p=17) any reserve funds in excess of the amount required under this subsection or [subsection (h)](#h), the total amount required to be returned under [paragraph (1)](#i-1) shall be reduced by the amount of such excess reserve funds returned.
  - (5) **Definition of reserve funds—** The term “reserve funds” when used with respect to a [guaranty agency](/usc/20/1085.md?p=j)—
    - (A) includes any reserve funds in cash or liquid [assets](/usc/20/1087vv.md?p=f-1) held by the [guaranty agency](/usc/20/1085.md?p=j), or held by, or under the control of, any other entity; and
    - (B) does not include buildings, equipment, or other nonliquid [assets](/usc/20/1087vv.md?p=f-1).

## Source credit

(Pub. L. 89–329, title IV, § 422, as added Pub. L. 99–498, title IV, § 402(a), Oct. 17, 1986, 100 Stat. 1354; amended Pub. L. 100–203, title III, §§ 3001(a), 3002(a), Dec. 22, 1987, 101 Stat. 1330–36, 1330–38; Pub. L. 102–325, title IV, §§ 412, 416(p)(8), July 23, 1992, 106 Stat. 511, 527; Pub. L. 103–66, title IV, §§ 4041(a), (2)(A), 4042, Aug. 10, 1993, 107 Stat. 354, 357; Pub. L. 103–208, § 2(c)(1), Dec. 20, 1993, 107 Stat. 2460; Pub. L. 105–33, title VI, § 6101(a), Aug. 5, 1997, 111 Stat. 648; Pub. L. 105–244, title IV, § 412, Oct. 7, 1998, 112 Stat. 1673.)

## Notes

### Editorial Notes

### Codification

Amendment by Pub. L. 103–208 (which was effective as if included in Pub. L. 102–325) was executed to this section as amended by Pub. L. 102–325 and Pub. L. 103–66, to reflect the probable intent of Congress.

### Prior Provisions

A prior section 1072, Pub. L. 89–329, title IV, § 422, Nov. 8, 1965, 79 Stat. 1236; Pub. L. 89–752, § 11, Nov. 3, 1966, 80 Stat. 1243; Pub. L. 90–575, title I, § 114(b), (c), Oct. 16, 1968, 82 Stat. 1021, 1022; Pub. L. 94–482, title I, § 127(a), Oct. 12, 1976, 90 Stat. 2100; Pub. L. 95–43, § 1(a)(11)–(13), June 15, 1977, 91 Stat. 213, 214; Pub. L. 95–561, title XIII, § 1322(a), Nov. 1, 1978, 92 Stat. 2363; Pub. L. 96–374, title XIII, § 1391(a)(1), Oct. 3, 1980, 94 Stat. 1503; Pub. L. 99–272, title XVI, § 16011, Apr. 7, 1986, 100 Stat. 339, authorized advances to establish or strengthen reserve funds of State and nonprofit private loan insurance programs, prior to the general revision of this part by Pub. L. 99–498.

### Amendments

1998—Subsec. (a)(2). Pub. L. 105–244, § 412(1), substituted “section 1078(c)(9)(E)” for “section 1078(c)(10)(E)” in concluding provisions.

Subsec. (c)(6)(B)(i). Pub. L. 105–244, § 412(2)(A), substituted “written, electronic,” for “written”.

Subsec. (c)(7)(A). Pub. L. 105–244, § 412(2)(B), struck out “during the transition from the Federal Family Education Loan Program under this part to the Federal Direct Student Loan Program under part D of this subchapter” after “lender-of-last-resort”.

Subsec. (c)(7)(B). Pub. L. 105–244, § 412(2)(C), substituted “section 1078(c)(9)(F)(v)” for “section 1078(c)(10)(F)(v)”.

Subsec. (g)(1). Pub. L. 105–244, § 412(3), struck out “or the program authorized by part D of this subchapter” after “program authorized by this part” in first and second sentences.

Subsec. (i). Pub. L. 105–244, § 412(4), added subsec. (i).

1997—Subsec. (h). Pub. L. 105–33 added subsec. (h).

1993—Subsec. (c)(7). Pub. L. 103–66, § 4041(a)(2)(A), substituted “to a guaranty agency—” and subpars. (A) and (B) for “to a guaranty agency in accordance with section 1078(c)(10)(F)(v) of this title in order to assist the agency in meeting its immediate cash needs and ensure the uninterrupted payment of default claims by lenders.”

Subsec. (c)(7)(B). Pub. L. 103–208 substituted a period for semicolon at end. See Codification note above.

Subsec. (g). Pub. L. 103–66, § 4042, added subsec. (g).

1992—Subsec. (a)(2). Pub. L. 102–325, § 412(1), inserted at end “Except as provided in section 1078(c)(10)(E) or (F) of this title, such unencumbered non-Federal portion shall not be subject to recall, repayment, or recovery by the Secretary.”

Subsec. (c)(5), (7). Pub. L. 102–325, § 416(p)(8), substituted “Except as provided in paragraph (7), advances” for “Advances” in par. (5) and added par. (7).

Subsecs. (e), (f). Pub. L. 102–325, § 412(2), added subsecs. (e) and (f).

1987—Subsec. (e). Pub. L. 100–203, § 3002(a), struck out subsec. (e) which related to reduction of excess cash reserves.

Pub. L. 100–203, § 3001(a), added subsec. (e).

### Statutory Notes and Related Subsidiaries

### Effective Date of 1998 Amendment

Amendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as a note under section 1001 of this title.

### Effective Date of 1993 Amendment

Amendment by Pub. L. 103–208 effective as if included in the Higher Education Amendments of 1992, Pub. L. 102–325, except as otherwise provided, see section 5(a) of Pub. L. 103–208, set out as a note under section 1051 of this title.

### Effective Date of 1987 Amendment

Pub. L. 100–203, title III, § 3002(a), Dec. 22, 1987, 101 Stat. 1330–38, provided that the amendment made by that section is effective Sept. 30, 1989.