---
kind: "section"
citation: "20 U.S.C. § 1080"
title: "20"
title_heading: "Education"
number: "1080"
heading: "Default of student under Federal loan insurance program"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/20/1080"
units:
  - "Chapter 28 — Higher Education Resources and Student Assistance"
  - "Subchapter IV — Student Assistance"
  - "Part B — Federal Family Education Loan Program"
---

# §1080. Default of student under Federal loan insurance program

- (a) **Notice to Secretary and payment of loss—** Upon [default](/usc/20/1085.md?p=l) by the student borrower on any [loan](/usc/20/1066a.md?p=2) covered by Federal [loan](/usc/20/1066a.md?p=2) insurance pursuant to this part, and prior to the commencement of suit or other enforcement proceedings upon security for that [loan](/usc/20/1066a.md?p=2), the [insurance beneficiary](/usc/20/1085.md?p=k) shall promptly notify the [Secretary](/usc/20/1003.md?p=17), and the [Secretary](/usc/20/1003.md?p=17) shall if requested (at that time or after further collection efforts) by the beneficiary, or may on the [Secretary](/usc/20/1003.md?p=17)’s own motion, if the insurance is still in effect, pay to the beneficiary the amount of the loss sustained by the insured upon that [loan](/usc/20/1066a.md?p=2) as soon as that amount has been determined. The “amount of the loss” on any [loan](/usc/20/1066a.md?p=2) shall, for the purposes of this subsection and [subsection (b)](#b), be deemed to be an amount equal to the unpaid balance of the principal amount and accrued [interest](/usc/20/1066a.md?p=6), including [interest](/usc/20/1066a.md?p=6) accruing from the date of submission of a valid [default](/usc/20/1085.md?p=l) claim (as determined by the [Secretary](/usc/20/1003.md?p=17)) to the date on which payment is authorized by the [Secretary](/usc/20/1003.md?p=17), reduced to the extent required by [section 1075(b) of this title](/usc/20/1075.md?p=b). Such beneficiary shall be required to meet the standards of [due diligence](/usc/20/1085.md?p=f) in the collection of the [loan](/usc/20/1066a.md?p=2) and shall be required to submit proof that the institution was contacted and other reasonable attempts were made to locate the borrower (when the location of the borrower is unknown) and proof that contact was made with the borrower (when the location is known). The [Secretary](/usc/20/1003.md?p=17) shall make the determination required to carry out the provisions of this section not later than 90 days after the notification by the [insurance beneficiary](/usc/20/1085.md?p=k) and shall make payment in full on the amount of the beneficiary’s loss pending completion of the [due diligence](/usc/20/1085.md?p=f) investigation.
- (b) **Effect of payment of loss—** Upon payment of the amount of the loss pursuant to [subsection (a)](#a), the United States shall be subrogated for all of the rights of the [holder](/usc/20/1085.md?p=i) of the obligation upon the insured [loan](/usc/20/1066a.md?p=2) and shall be entitled to an assignment of the note or other evidence of the insured [loan](/usc/20/1066a.md?p=2) by the [insurance beneficiary](/usc/20/1085.md?p=k). If the net recovery made by the [Secretary](/usc/20/1003.md?p=17) on a [loan](/usc/20/1066a.md?p=2) after deduction of the cost of that recovery (including reasonable administrative costs and collection costs, to the extent set forth in regulations issued by the [Secretary](/usc/20/1003.md?p=17)) exceeds the amount of the loss, the excess shall be paid over to the insured. The [Secretary](/usc/20/1003.md?p=17) may, in attempting to make recovery on such [loans](/usc/20/1066a.md?p=2), contract with private business concerns, [State](/usc/20/1003.md?p=21-A) student [loan](/usc/20/1066a.md?p=2) insurance agencies, or [State](/usc/20/1003.md?p=21-A) [guaranty agencies](/usc/20/1085.md?p=j), for payment for services rendered by such concerns or agencies in assisting the [Secretary](/usc/20/1003.md?p=17) in making such recovery. Any contract under this subsection entered into by the [Secretary](/usc/20/1003.md?p=17) shall provide that attempts to make recovery on such [loans](/usc/20/1066a.md?p=2) shall be fair and reasonable, and do not involve harassment, intimidation, false or misleading representations, or unnecessary communications concerning the existence of any such [loan](/usc/20/1066a.md?p=2) to persons other than the student borrower.
- (c) **Forbearance not precluded—** Nothing in this section or in this part shall be construed to preclude any forbearance for the benefit of the student borrower which may be agreed upon by the parties to the insured [loan](/usc/20/1066a.md?p=2) and approved by the [Secretary](/usc/20/1003.md?p=17), or to preclude forbearance by the [Secretary](/usc/20/1003.md?p=17) in the enforcement of the insured obligation after payment on that insurance. Any forbearance which is approved by the [Secretary](/usc/20/1003.md?p=17) under this subsection with respect to the repayment of a [loan](/usc/20/1066a.md?p=2), including a forbearance during [default](/usc/20/1085.md?p=l), shall not be considered as indicating that a [holder](/usc/20/1085.md?p=i) of a federally insured [loan](/usc/20/1066a.md?p=2) has failed to exercise reasonable care and [due diligence](/usc/20/1085.md?p=f) in the collection of the [loan](/usc/20/1066a.md?p=2).
- (d) **Care and diligence required of holders—** Nothing in this section or in this part shall be construed to excuse the [holder](/usc/20/1085.md?p=i) of a federally insured [loan](/usc/20/1066a.md?p=2) from exercising reasonable care and diligence in the making and collection of [loans](/usc/20/1066a.md?p=2) under the provisions of this part. If the [Secretary](/usc/20/1003.md?p=17), after a reasonable notice and opportunity for hearing to an [eligible lender](/usc/20/1019.md?p=4), finds that it has substantially failed to exercise such care and diligence or to make the reports and statements required under [section 1078(a)(4) of this title](/usc/20/1078.md?p=a-4) and [section 1079(a)(3) of this title](/usc/20/1079.md?p=a-3), or to pay the required Federal [loan](/usc/20/1066a.md?p=2) insurance premiums, the [Secretary](/usc/20/1003.md?p=17) shall disqualify that [lender](/usc/20/1019.md?p=6) for further Federal insurance on [loans](/usc/20/1066a.md?p=2) granted pursuant to this part until the [Secretary](/usc/20/1003.md?p=17) is satisfied that its failure has ceased and finds that there is reasonable assurance that the [lender](/usc/20/1019.md?p=6) will in the future exercise necessary care and diligence or comply with such requirements, as the case may be.
- (e) **Default rate of lenders, holders, and guaranty agencies—**
  - (1) **In general—** The [Secretary](/usc/20/1003.md?p=17) shall annually publish a list indicating the [cohort default rate](/usc/20/1085.md?p=m-1-A) (determined in accordance with [section 1085(m) of this title](/usc/20/1085.md?p=m)) for each originating [lender](/usc/20/1019.md?p=6), subsequent [holder](/usc/20/1085.md?p=i), and [guaranty agency](/usc/20/1085.md?p=j) participating in the program assisted under this part and an average [cohort default rate](/usc/20/1085.md?p=m-1-A) for all institutions of higher education within each [State](/usc/20/1003.md?p=21-A).
  - (2) **Regulations—** The [Secretary](/usc/20/1003.md?p=17) shall prescribe regulations designed to prevent an institution from evading the application to that institution of a [cohort default rate](/usc/20/1085.md?p=m-1-A) through the use of such measures as branching, consolidation, change of ownership or control, or any similar device.
  - (3) **Rate establishment and correction—** The [Secretary](/usc/20/1003.md?p=17) shall establish a [cohort default rate](/usc/20/1085.md?p=m-1-A) for [lenders](/usc/20/1019.md?p=6), [holders](/usc/20/1085.md?p=i), and [guaranty agencies](/usc/20/1085.md?p=j) (determined consistent with [section 1085(m) of this title](/usc/20/1085.md?p=m)), except that the rate for [lenders](/usc/20/1019.md?p=6), [holders](/usc/20/1085.md?p=i), and [guaranty agencies](/usc/20/1085.md?p=j) shall not reflect any [loans](/usc/20/1066a.md?p=2) issued in accordance with [section 1078(j) of this title](/usc/20/1078.md?p=j). The [Secretary](/usc/20/1003.md?p=17) shall allow institutions, [lenders](/usc/20/1019.md?p=6), [holders](/usc/20/1085.md?p=i), and [guaranty agencies](/usc/20/1085.md?p=j) the opportunity to correct such [cohort default rate](/usc/20/1085.md?p=m-1-A) information.

## Source credit

(Pub. L. 89–329, title IV, § 430, as added Pub. L. 99–498, title IV, § 402(a), Oct. 17, 1986, 100 Stat. 1397; amended Pub. L. 102–325, title IV, § 423, July 23, 1992, 106 Stat. 543; Pub. L. 105–244, title IV, § 426, Oct. 7, 1998, 112 Stat. 1702.)

## Notes

### Editorial Notes

### Prior Provisions

A prior section 1080, Pub. L. 89–329, title IV, § 430, Nov. 8, 1965, 79 Stat. 1244; Pub. L. 90–575, title I, § 113(b)(5), Oct. 16, 1968, 82 Stat. 1021; Pub. L. 92–318, title I, § 132B(c), June 23, 1972, 86 Stat. 262; Pub. L. 94–482, title I, § 127(a), Oct. 12, 1976, 90 Stat. 2125; Pub. L. 95–43, § 1(a)(33), June 15, 1977, 91 Stat. 216; Pub. L. 96–374, title IV, §§ 416(a)(1), (b), 422, title XIII, § 1391(a)(1), Oct. 3, 1980, 94 Stat. 1420, 1421, 1432, 1503; Pub. L. 99–272, title XVI, §§ 16014(a)(2), 16022, Apr. 7, 1986, 100 Stat. 341, 349, related to default of student borrowers under Federal loan insurance program, prior to the general revision of this part by Pub. L. 99–498.

### Amendments

1998—Subsec. (a). Pub. L. 105–244 inserted “the institution was contacted and other” after “submit proof that” in third sentence.

1992—Subsec. (e). Pub. L. 102–325 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.

### Study of Fraud-Based Defenses

Pub. L. 102–325, title XIV, § 1403, July 23, 1992, 106 Stat. 817, directed Secretary of Education to conduct a study of impact of fraud-based defenses on Federal Family Education Loan Program and to submit a report to Congress on the study not later than 19 months after July 23, 1992, prior to repeal by Pub. L. 105–332, § 6(b)(2), Oct. 31, 1998, 112 Stat. 3128.