--- kind: "section" citation: "20 U.S.C. § 1087b" title: "20" title_heading: "Education" number: "1087b" heading: "Funds for origination of direct student loans" release: "119-102" date: "2026-07-12" url: "https://uscodex.org/usc/20/1087b" units: - "Chapter 28 — Higher Education Resources and Student Assistance" - "Subchapter IV — Student Assistance" - "Part D — William D. Ford Federal Direct Loan Program" --- # §1087b. Funds for origination of direct student loans - (a) **In general—** The [Secretary](/usc/20/1003.md?p=17) shall provide, on the basis of the need and the eligibility of students at each participating institution, and parents of such students, for such [loans](/usc/20/1066a.md?p=2), funds for student and parent [loans](/usc/20/1066a.md?p=2) under this part— - (1) directly to an [institution of higher education](/usc/20/1001.md?p=a) that has an agreement with the [Secretary](/usc/20/1003.md?p=17) under [section 1087d(a) of this title](/usc/20/1087d.md?p=a) to participate in the direct student [loan](/usc/20/1066a.md?p=2) programs under this part and that also has an agreement with the [Secretary](/usc/20/1003.md?p=17) under [section 1087d(b) of this title](/usc/20/1087d.md?p=b) to originate [loans](/usc/20/1066a.md?p=2) under this part; or - (2) through an alternative originator designated by the [Secretary](/usc/20/1003.md?p=17) to students (and parents of students) attending institutions of higher education that have an agreement with the [Secretary](/usc/20/1003.md?p=17) under [section 1087d(a) of this title](/usc/20/1087d.md?p=a) but that do not have an agreement with the [Secretary](/usc/20/1003.md?p=17) under [section 1087d(b) of this title](/usc/20/1087d.md?p=b). - (b) **No entitlement to participate or originate—** No [institution of higher education](/usc/20/1001.md?p=a) shall have a right to participate in the programs authorized by this part, to originate [loans](/usc/20/1066a.md?p=2), or to perform any program function under this part. Nothing in this subsection shall be construed so as to limit the entitlement of an eligible student attending a participating institution (or the eligible parent of such student) to borrow under this part. - (c) **Delivery of loan funds—** [Loan](/usc/20/1066a.md?p=2) funds shall be paid and delivered to an institution by the [Secretary](/usc/20/1003.md?p=17) prior to the beginning of the payment period established by the [Secretary](/usc/20/1003.md?p=17) in a manner that is consistent with payment and delivery of Federal Pell Grants under subpart 1 of part A of this subchapter. - (d) **Institutions outside the United States—** [Loan](/usc/20/1066a.md?p=2) funds for students (and parents of students) attending institutions outside the United States shall be disbursed through a financial institution located or operating in the United States and designated by the [Secretary](/usc/20/1003.md?p=17) to serve as the [agent](/usc/20/1019.md?p=1) of such institutions with respect to the receipt of the disbursements of such [loan](/usc/20/1066a.md?p=2) funds and the transfer of such funds to such institutions. To be eligible to receive funds under this part, an institution outside the United States shall make arrangements with the [agent](/usc/20/1019.md?p=1) designated by the [Secretary](/usc/20/1003.md?p=17) under this subsection to receive funds under this part. ## Source credit (Pub. L. 89–329, title IV, § 452, as added Pub. L. 99–498, title IV, § 404, Oct. 17, 1986, 100 Stat. 1437; amended Pub. L. 102–325, title IV, § 451, July 23, 1992, 106 Stat. 569; Pub. L. 103–66, title IV, § 4021, Aug. 10, 1993, 107 Stat. 341; Pub. L. 105–33, title VI, § 6102, Aug. 5, 1997, 111 Stat. 652; Pub. L. 105–244, title IV, § 401(g)(5), Oct. 7, 1998, 112 Stat. 1652; Pub. L. 111–152, title II, § 2209(a), Mar. 30, 2010, 124 Stat. 1077.) ## Notes ### Editorial Notes ### Prior Provisions A prior section 1087b, Pub. L. 89–329, title IV, § 452, as added Pub. L. 90–575, title I, § 141, Oct. 16, 1968, 82 Stat. 1031, authorized grants for programs of cooperative education, prior to repeal by Pub. L. 94–482, title I, § 129(a), Oct. 12, 1976, 90 Stat. 2144, eff. 30 days after Oct. 12, 1976. ### Amendments 2010—Subsec. (d). Pub. L. 111–152 added subsec. (d). 1998—Subsec. (c). Pub. L. 105–244 substituted “Federal Pell Grants” for “basic grants”. 1997—Subsecs. (b) to (d). Pub. L. 105–33 redesignated subsecs. (c) and (d) as (b) and (c), respectively, and struck out former subsec. (b) which required the Secretary to pay fees to institutions of higher education and alternative loan originators to assist in meeting the cost of loan origination. 1993—Pub. L. 103–66 amended section generally, substituting provisions relating to funds for origination of direct student loans for former provisions relating to payment rules. 1992—Pub. L. 102–325 amended section generally, substituting provisions relating to payment rules for former provisions authorizing demonstration projects. ### 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 1992 Amendment Amendment by Pub. L. 102–325 effective Oct. 1, 1992, see section 2 of Pub. L. 102–325, set out as a note under section 1001 of this title.