---
kind: "section"
citation: "20 U.S.C. § 1072a"
title: "20"
title_heading: "Education"
number: "1072a"
heading: "Federal Student Loan Reserve Fund"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/20/1072a"
units:
  - "Chapter 28 — Higher Education Resources and Student Assistance"
  - "Subchapter IV — Student Assistance"
  - "Part B — Federal Family Education Loan Program"
---

# §1072a. Federal Student Loan Reserve Fund

- (a) **Establishment—** Each [guaranty agency](/usc/20/1085.md?p=j) shall, not later than 60 days after October 7, 1998, deposit all funds, securities, and other liquid [assets](/usc/20/1087vv.md?p=f-1) contained in the reserve fund established pursuant to [section 1072 of this title](/usc/20/1072.md) into a Federal Student [Loan](/usc/20/1066a.md?p=2) Reserve Fund (in this section and [section 1072b of this title](/usc/20/1072b.md) referred to as the “Federal Fund”), which shall be an account of a type selected by the agency, with the approval of the [Secretary](/usc/20/1003.md?p=17).
- (b) **Investment of funds—** Funds transferred to the Federal Fund shall be invested in obligations issued or guaranteed by the United States or a [State](/usc/20/1003.md?p=21-A), or in other similarly low-risk securities selected by the [guaranty agency](/usc/20/1085.md?p=j), with the approval of the [Secretary](/usc/20/1003.md?p=17). Earnings from the Federal Fund shall be the sole property of the Federal Government.
- (c) **Additional deposits—** After the establishment of the Federal Fund, a [guaranty agency](/usc/20/1085.md?p=j) shall deposit into the Federal Fund—
  - (1) all amounts received from the [Secretary](/usc/20/1003.md?p=17) as payment of reinsurance on [loans](/usc/20/1066a.md?p=2) pursuant to [section 1078(c)(1) of this title](/usc/20/1078.md?p=c-1);
  - (2) from amounts collected on behalf of the obligation of a defaulted borrower, a percentage amount equal to the complement of the reinsurance percentage in effect when payment under the guaranty agreement was made—
    - (A) with respect to the defaulted [loan](/usc/20/1066a.md?p=2) pursuant to [sections 1078(c)(6)(A)](/usc/20/1078.md?p=c-6-A)[^1] and [1078–6(a)(1)(B)](/usc/20/1078–6.md?p=a-1-B) of this title; and
    - (B) with respect to a [loan](/usc/20/1066a.md?p=2) that the [Secretary](/usc/20/1003.md?p=17) has repaid or discharged under [section 1087 of this title](/usc/20/1087.md);
  - (3) insurance premiums collected from borrowers pursuant to sections [1078(b)(1)(H)](/usc/20/1078.md?p=b-1-H) and [1078–8(h)](/usc/20/1078–8.md?p=h) of this title;
  - (4) all amounts received from the [Secretary](/usc/20/1003.md?p=17) as payment for supplemental preclaims activity performed prior to October 7, 1998;
  - (5) 70 percent of amounts received after October 7, 1998, from the [Secretary](/usc/20/1003.md?p=17) as payment for administrative cost allowances for [loans](/usc/20/1066a.md?p=2) upon which insurance was issued prior to October 7, 1998; and
  - (6) other receipts as specified in regulations of the [Secretary](/usc/20/1003.md?p=17).
- (d) **Uses of funds—** Subject to [subsection (f)](#f), the Federal Fund may only be used by a [guaranty agency](/usc/20/1085.md?p=j)—
  - (1) to pay [lender](/usc/20/1019.md?p=6) claims pursuant to sections [1078(b)(1)(G)](/usc/20/1078.md?p=b-1-G), [1078(j)](/usc/20/1078.md?p=j), and [1087](/usc/20/1087.md) of this title; and
  - (2) to pay into the Agency Operating Fund established pursuant to [section 1072b of this title](/usc/20/1072b.md) (in this section and [section 1072b of this title](/usc/20/1072b.md) referred to as the “Operating Fund”) a [default](/usc/20/1085.md?p=l) aversion fee in accordance with [section 1078(l)](/usc/20/1078.md?p=l) of this title.
- (e) **Ownership of Federal Fund—** The Federal Fund, and any nonliquid asset (such as a building or equipment) developed or purchased by the [guaranty agency](/usc/20/1085.md?p=j) in whole or in part with Federal reserve funds, regardless of who holds or controls the Federal reserve funds or such asset, shall be considered to be the property of the United States, prorated based on the percentage of such asset developed or purchased with Federal reserve funds, which property shall be used in the operation of the program authorized by this part, as provided in [subsection (d)](#d). The [Secretary](/usc/20/1003.md?p=17) may restrict or regulate the use of such asset only to the extent necessary to reasonably protect the [Secretary](/usc/20/1003.md?p=17)’s prorated share of the value of such asset. 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 activity involving expenditures, use, or transfer of the Federal Fund administered by the [guaranty agency](/usc/20/1085.md?p=j) that the [Secretary](/usc/20/1003.md?p=17) determines is a misapplication, misuse, or improper expenditure of the Federal Fund or the [Secretary](/usc/20/1003.md?p=17)’s share of such asset.
- (f) **Transition—**
  - (1) **In general—** In order to establish the Operating Fund, each [guaranty agency](/usc/20/1085.md?p=j) may transfer not more than 180 days’ cash expenses for normal operating expenses (not including claim payments) as a working capital reserve as defined in Office of Management and Budget Circular A–87 (Cost Accounting Standards) from the Federal Fund for deposit into the Operating Fund for use in the performance of the [guaranty agency](/usc/20/1085.md?p=j)’s duties under this part. Such transfers may occur during the first 3 years following the establishment of the Operating Fund. However, no agency may transfer in excess of 45 percent of the balance, as of September 30, 1998, of the agency’s Federal Fund to the agency’s Operating Fund during such 3-year period. In determining the amount that may be transferred, the agency shall ensure that sufficient funds remain in the Federal Fund to pay [lender](/usc/20/1019.md?p=6) claims within the required time periods and to meet the reserve recall requirements of this section and subsections (h) and (i) of [section 1072 of this title](/usc/20/1072.md).
  - (2) **Special rule—** A limited number of [guaranty agencies](/usc/20/1085.md?p=j) may transfer [interest](/usc/20/1066a.md?p=6) earned on the Federal Fund to the Operating Fund during the first 3 years after October 7, 1998, if the [guaranty agency](/usc/20/1085.md?p=j) demonstrates to the [Secretary](/usc/20/1003.md?p=17) that—
    - (A) the cash flow in the Operating Fund will be negative without the transfer of such [interest](/usc/20/1066a.md?p=6); and
    - (B) the transfer of such [interest](/usc/20/1066a.md?p=6) will substantially improve the financial circumstances of the [guaranty agency](/usc/20/1085.md?p=j).
  - (3) **Repayment provisions—** Each [guaranty agency](/usc/20/1085.md?p=j) shall begin repayment of sums transferred pursuant to this subsection not later than the start of the fourth year after the establishment of the Operating Fund, and shall repay all amounts transferred not later than 5 years from the date of the establishment of the Operating Fund. With respect to amounts transferred from the Federal Fund, the [guaranty agency](/usc/20/1085.md?p=j) shall not be required to repay any [interest](/usc/20/1066a.md?p=6) on the funds transferred and subsequently repaid. The [guaranty agency](/usc/20/1085.md?p=j) shall provide to the [Secretary](/usc/20/1003.md?p=17) a reasonable schedule for repayment of the sums transferred and an annual financial analysis demonstrating the agency’s ability to comply with the schedule and repay all [outstanding](/usc/20/1066a.md?p=7) sums transferred.
  - (4) **Prohibition—** If a [guaranty agency](/usc/20/1085.md?p=j) transfers funds from the Federal Fund in accordance with this section, and fails to make scheduled repayments to the Federal Fund, 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 made such repayments. The [Secretary](/usc/20/1003.md?p=17) shall pay to the [guaranty agency](/usc/20/1085.md?p=j) any funds withheld in accordance with this paragraph immediately upon making the determination that the [guaranty agency](/usc/20/1085.md?p=j) has made all such repayments.
  - (5) **Waiver—** The [Secretary](/usc/20/1003.md?p=17) may—
    - (A) waive the requirements of [paragraph (3)](#f-3), but only with respect to repayment of [interest](/usc/20/1066a.md?p=6) that was transferred in accordance with [paragraph (2)](#f-2); and
    - (B) waive [paragraph (4)](#f-4);

    for a [guaranty agency](/usc/20/1085.md?p=j), if the [Secretary](/usc/20/1003.md?p=17) determines that there are extenuating circumstances (such as [State](/usc/20/1003.md?p=21-A) constitutional prohibitions) beyond the control of the agency that justify such a waiver.

  - (6) **Extension of repayment period for interest—**
    - (A) **Extension permitted—** The [Secretary](/usc/20/1003.md?p=17) shall extend the period for repayment of [interest](/usc/20/1066a.md?p=6) that was transferred in accordance with [paragraph (2)](#f-2) from 2 years to 5 years if the [Secretary](/usc/20/1003.md?p=17) determines that—
      - (i) the cash flow of the Operating Fund will be negative as a result of repayment as required by [paragraph (3)](#f-3);
      - (ii) the repayment of the [interest](/usc/20/1066a.md?p=6) transferred will substantially diminish the financial circumstances of the [guaranty agency](/usc/20/1085.md?p=j); and
      - (iii) the [guaranty agency](/usc/20/1085.md?p=j) has demonstrated—
        - (I) that the agency is able to repay all transferred funds by the end of the 8th year following the date of establishment of the Operating Fund; and
        - (II) that the agency will be financially sound on the completion of repayment.
    - (B) **Repayment of income on transferred funds—** All repayments made to the Federal Fund during the 6th, 7th, and 8th years following the establishment of the Operating Fund of [interest](/usc/20/1066a.md?p=6) that was transferred shall include the sums transferred plus any income earned from the investment of the sums transferred after the 5th year.
  - (7) **Investment of Federal funds—** Funds transferred from the Federal Fund to the Operating Fund for operating expenses shall be invested in obligations issued or guaranteed by the United States or a [State](/usc/20/1003.md?p=21-A), or in other similarly low-risk securities selected by the [guaranty agency](/usc/20/1085.md?p=j), with the approval of the [Secretary](/usc/20/1003.md?p=17).
  - (8) **Special rule—** In calculating the minimum reserve level required by [section 1078(c)(9)(A) of this title](/usc/20/1078.md?p=c-9-A), the [Secretary](/usc/20/1003.md?p=17) shall include all amounts owed to the Federal Fund by the [guaranty agency](/usc/20/1085.md?p=j) in the calculation.

## Footnotes

[^1]: See References in Text note below.

## Source credit

(Pub. L. 89–329, title IV, § 422A, as added Pub. L. 105–244, title IV, § 413(a), Oct. 7, 1998, 112 Stat. 1674; amended Pub. L. 110–315, title IV, § 438(a)(1), Aug. 14, 2008, 122 Stat. 3258.)

## Notes

### Editorial Notes

### References in Text

Section 1078(c)(6)(A) of this title, referred to in subsec. (c)(2)(A), was redesignated section 1078(c)(6)(A)(i) of this title by Pub. L. 109–171, title VIII, § 8014(d)(3)(A), (B), Feb. 8, 2006, 120 Stat. 170.

### Amendments

2008—Subsec. (d)(1). Pub. L. 110–315 substituted “and 1087” for “1087, and 1087–2(q)”.

### Statutory Notes and Related Subsidiaries

### Effective Date

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