---
kind: "section"
citation: "20 U.S.C. § 1099d"
title: "20"
title_heading: "Education"
number: "1099d"
heading: "Competitive loan auction pilot program"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/20/1099d"
units:
  - "Chapter 28 — Higher Education Resources and Student Assistance"
  - "Subchapter IV — Student Assistance"
  - "Part I — Competitive Loan Auction Pilot Program"
---

# §1099d. Competitive loan auction pilot program

- (a) **Definitions—** In this section:
  - (1) **Eligible Federal PLUS Loan—** The term “eligible Federal PLUS [Loan](/usc/20/1066a.md?p=2)” means a [loan](/usc/20/1066a.md?p=2) described in [section 1078–2 of this title](/usc/20/1078–2.md) made to a parent of a dependent student who is a [new borrower](/usc/20/1003.md?p=12) on or after July 1, 2009.
  - (2) **Eligible lender—** The term “[eligible lender](/usc/20/1019.md?p=4)” has the meaning given the term in [section 1085 of this title](/usc/20/1085.md).
- (b) **Pilot program—** The [Secretary](/usc/20/1003.md?p=17) shall carry out a pilot program under which the [Secretary](/usc/20/1003.md?p=17) establishes a mechanism for an auction of eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) in accordance with this subsection. The pilot program shall meet the following requirements:
  - (1) **Planning and implementation—** During the period beginning on September 27, 2007, and ending on June 30, 2009, the [Secretary](/usc/20/1003.md?p=17) shall plan and implement the pilot program under this subsection. During the planning and implementation, the [Secretary](/usc/20/1003.md?p=17) shall consult with other Federal agencies with knowledge of, and experience with, auction programs, including the Federal Communication Commission and the [Department](/usc/20/1003.md?p=4) of the Treasury.
  - (2) **Origination and disbursement; applicability of section 1078–2—** Beginning on July 1, 2009, the [Secretary](/usc/20/1003.md?p=17) shall arrange for the origination and disbursement of all eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) in accordance with the provisions of this subsection and the provisions of [section 1078–2 of this title](/usc/20/1078–2.md) that are not inconsistent with this subsection.
  - (3) **Loan origination mechanism—** The [Secretary](/usc/20/1003.md?p=17) shall establish a [loan](/usc/20/1066a.md?p=2) origination auction mechanism that meets the following requirements:
    - (A) **Auction for each State—** The [Secretary](/usc/20/1003.md?p=17) administers an auction under this paragraph for each [State](/usc/20/1003.md?p=21-A), under which [eligible lenders](/usc/20/1019.md?p=4) compete to originate eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) under this paragraph at all institutions of higher education within such [State](/usc/20/1003.md?p=21-A).
    - (B) **Prequalification process—** The [Secretary](/usc/20/1003.md?p=17) establishes a prequalification process for [eligible lenders](/usc/20/1019.md?p=4) desiring to participate in an auction under this paragraph that contains, at a minimum—
      - (i) a set of borrower benefits and servicing requirements each [eligible lender](/usc/20/1019.md?p=4) shall meet in order to participate in such an auction;
      - (ii) an assessment of each such [eligible lender](/usc/20/1019.md?p=4)’s capacity, including capital capacity, to participate effectively; and
      - (iii) a commitment from such [eligible lender](/usc/20/1019.md?p=4) that, if the [lender](/usc/20/1019.md?p=6) has a winning bid under [subparagraph (F)](#b-3-F), the [lender](/usc/20/1019.md?p=6) will enter into the agreement required under [subparagraph (G)](#b-3-G).
    - (C) **Timing and origination—** Each [State](/usc/20/1003.md?p=21-A) auction takes place every 2 years, and the [eligible lenders](/usc/20/1019.md?p=4) with the winning bids for the [State](/usc/20/1003.md?p=21-A) are the only [eligible lenders](/usc/20/1019.md?p=4) permitted to originate eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) made under this paragraph for the cohort of students at the institutions of higher education within the [State](/usc/20/1003.md?p=21-A) until the students [graduate](/usc/20/1061.md?p=1) from or leave the institutions of higher education.
    - (D) **Bids—** Each [eligible lender](/usc/20/1019.md?p=4)’s bid consists of the amount of the special allowance payment (after the application of [section 1087–1(b)(2)(I)(v) of this title](/usc/20/1087–1.md?p=b-2-I-v)) the [eligible lender](/usc/20/1019.md?p=4) proposes to accept from the [Secretary](/usc/20/1003.md?p=17) with respect to the eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) made under this paragraph in lieu of the amount determined under [section 1087–1(b)(2)(I) of this title](/usc/20/1087–1.md?p=b-2-I).
    - (E) **Maximum bid—** The maximum bid allowable under this paragraph shall not exceed the amount of the special allowance payable on eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) made under this paragraph computed under [section 1087–1(b)(2)(I) of this title](/usc/20/1087–1.md?p=b-2-I) (other than clauses [(ii)](/usc/20/1087–1.md?p=b-2-I-ii), [(iii)](/usc/20/1087–1.md?p=b-2-I-iii), [(iv)](/usc/20/1087–1.md?p=b-2-I-iv), and [(vi)](/usc/20/1087–1.md?p=b-2-I-vi) of such section), except that for purposes of the computation under this subparagraph, [section 1087–1(b)(2)(I)(i)(III) of this title](/usc/20/1087–1.md?p=b-2-I-i-III) shall be applied by substituting “1.79 percent” for “2.34 percent”.
    - (F) **Winning bids—** The winning bids for each [State](/usc/20/1003.md?p=21-A) auction shall be the 2 bids containing the lowest and the second lowest proposed special allowance payments, subject to [subparagraph (E)](#b-3-E).
    - (G) **Agreement with Secretary; compliance—**
      - (i) **Agreement—** Each [eligible lender](/usc/20/1019.md?p=4) having a winning bid under [subparagraph (F)](#b-3-F) shall enter into an agreement with the [Secretary](/usc/20/1003.md?p=17) under which the [eligible lender](/usc/20/1019.md?p=4)—
        - (I) agrees to originate eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) under this paragraph to each borrower who—
          - (aa) seeks an eligible Federal PLUS [Loan](/usc/20/1066a.md?p=2) under this paragraph to enable a dependent student to attend an [institution of higher education](/usc/20/1001.md?p=a) within the [State](/usc/20/1003.md?p=21-A);
          - (bb) is eligible for an eligible Federal PLUS [Loan](/usc/20/1066a.md?p=2); and
          - (cc) elects to borrow from the [eligible lender](/usc/20/1019.md?p=4); and
        - (II) agrees to accept a special allowance payment (after the application of [section 1087–1(b)(2)(I)(v) of this title](/usc/20/1087–1.md?p=b-2-I-v)) from the [Secretary](/usc/20/1003.md?p=17) with respect to the eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) originated under [subclause (I)](#b-3-G-i-I) in the amount proposed in the second lowest winning bid described in [subparagraph (F)](#b-3-F) for the applicable [State](/usc/20/1003.md?p=21-A) auction.
      - (ii) **Compliance—** If an [eligible lender](/usc/20/1019.md?p=4) with a winning bid under [subparagraph (F)](#b-3-F) fails to enter into the agreement required under [clause (i)](#b-3-G-i), or fails to comply with the terms of such agreement, the [Secretary](/usc/20/1003.md?p=17) may sanction such [eligible lender](/usc/20/1019.md?p=4) through one or more of the following:
        - (I) The assessment of a penalty on such [eligible lender](/usc/20/1019.md?p=4) for any eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) that such [eligible lender](/usc/20/1019.md?p=4) fails to originate under this paragraph in accordance with the agreement required under [clause (i)](#b-3-G-i), in the amount of the additional costs (including the amounts of any increase in special allowance payments) incurred by the [Secretary](/usc/20/1003.md?p=17) in obtaining another [eligible lender](/usc/20/1019.md?p=4) to originate such eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2). The [Secretary](/usc/20/1003.md?p=17) shall collect such penalty by—
          - (aa) reducing the amount of any payments otherwise due to such [eligible lender](/usc/20/1019.md?p=4) from the [Secretary](/usc/20/1003.md?p=17) by the amount of the penalty; or
          - (bb) requesting any other Federal agency to reduce the amount of any payments due to such [eligible lender](/usc/20/1019.md?p=4) from such agency by the amount of the penalty, in accordance with [section 3716 of title 31](/usc/31/3716.md).
        - (II) A prohibition of bidding by such [lender](/usc/20/1019.md?p=6) in other auctions under this section.
        - (III) The limitation, suspension, or termination of such [eligible lender](/usc/20/1019.md?p=4)’s participation in the [loan](/usc/20/1066a.md?p=2) program under part B.
        - (IV) Any other enforcement action the [Secretary](/usc/20/1003.md?p=17) is authorized to take under part B.
    - (H) **Sealed bids; confidentiality—** All bids are sealed and the [Secretary](/usc/20/1003.md?p=17) keeps the bids confidential, including following the announcement of the winning bids.
    - (I) **Eligible lender of last resort—**
      - (i) **In general—** In the event that there is no winning bid under [subparagraph (F)](#b-3-F), the students at the institutions of higher education within the [State](/usc/20/1003.md?p=21-A) that was the subject of the auction shall be served by an [eligible lender](/usc/20/1019.md?p=4) of last resort, as determined by the [Secretary](/usc/20/1003.md?p=17).
      - (ii) **Determination of eligible lender of last resort—** Prior to the start of any auction under this paragraph, [eligible lenders](/usc/20/1019.md?p=4) that desire to serve as an [eligible lender](/usc/20/1019.md?p=4) of last resort shall submit an application to the [Secretary](/usc/20/1003.md?p=17) at such time and in such manner as the [Secretary](/usc/20/1003.md?p=17) may determine. Such application shall include an assurance that the [eligible lender](/usc/20/1019.md?p=4) will meet the prequalification requirements described in [subparagraph (B)](#b-3-B).
      - (iii) **Geographic location—** The [Secretary](/usc/20/1003.md?p=17) shall identify an [eligible lender](/usc/20/1019.md?p=4) of last resort for each [State](/usc/20/1003.md?p=21-A).
      - (iv) **Notification timing—** The [Secretary](/usc/20/1003.md?p=17) shall not identify any [eligible lender](/usc/20/1019.md?p=4) of last resort until after the announcement of all the winning bids for a [State](/usc/20/1003.md?p=21-A) auction for any year.
      - (v) **Maximum special allowance—** The [Secretary](/usc/20/1003.md?p=17) is authorized to set a special allowance payment that shall be payable to a [lender](/usc/20/1019.md?p=6) of last resort for a [State](/usc/20/1003.md?p=21-A) under this subparagraph, which special allowance payment shall be kept confidential, including following the announcement of winning bids. The [Secretary](/usc/20/1003.md?p=17) shall set such special allowance payment so that it incurs the lowest possible cost to the Federal Government, taking into consideration the lowest bid that was submitted in an auction for such [State](/usc/20/1003.md?p=21-A) and the lowest bid submitted in a similar [State](/usc/20/1003.md?p=21-A), as determined by the [Secretary](/usc/20/1003.md?p=17).
    - (J) **Guarantee against losses—** Each eligible Federal PLUS [Loan](/usc/20/1066a.md?p=2) originated under this paragraph shall be insured by a [guaranty agency](/usc/20/1085.md?p=j) in accordance with part B, except that, notwithstanding [section 1078(b)(1)(G) of this title](/usc/20/1078.md?p=b-1-G), such insurance shall be in an amount equal to 99 percent of the unpaid principal and [interest](/usc/20/1066a.md?p=6) due on the [loan](/usc/20/1066a.md?p=2).
    - (K) **Loan fees—** The [Secretary](/usc/20/1003.md?p=17) shall not collect a [loan](/usc/20/1066a.md?p=2) fee under [section 1087–1(d) of this title](/usc/20/1087–1.md?p=d) with respect to an eligible Federal Plus [Loan](/usc/20/1066a.md?p=2) originated under this paragraph.
    - (L) **Consolidation—**
      - (i) **In general—** An [eligible lender](/usc/20/1019.md?p=4) who is permitted to originate eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) for a borrower under this paragraph shall have the option to consolidate such [loans](/usc/20/1066a.md?p=2) into 1 [loan](/usc/20/1066a.md?p=2).
      - (ii) **Notification—** In the event a borrower with eligible Federal PLUS [Loans](/usc/20/1066a.md?p=2) made under this paragraph wishes to consolidate the [loans](/usc/20/1066a.md?p=2), the borrower shall notify the [eligible lender](/usc/20/1019.md?p=4) who originated the [loans](/usc/20/1066a.md?p=2) under this paragraph.
      - (iii) **Limitation on eligible lender option to consolidate—** The option described in [clause (i)](#b-3-L-i) shall not apply if—
        - (I) the borrower includes in the notification in [clause (ii)](#b-3-L-ii) verification of consolidation terms and conditions offered by an [eligible lender](/usc/20/1019.md?p=4) other than the [eligible lender](/usc/20/1019.md?p=4) described in [clause (i)](#b-3-L-i); and
        - (II) not later than 10 days after receiving such notification from the borrower, the [eligible lender](/usc/20/1019.md?p=4) described in [clause (i)](#b-3-L-i) does not agree to match such terms and conditions, or provide more favorable terms and conditions to such borrower than the offered terms and conditions described in [subclause (I)](#b-3-L-iii-I).
      - (iv) **Consolidation of additional loans—** If a borrower has a Federal Direct PLUS [Loan](/usc/20/1066a.md?p=2) or a [loan](/usc/20/1066a.md?p=2) made on behalf of a dependent student under [section 1078–2 of this title](/usc/20/1078–2.md) and seeks to consolidate such [loan](/usc/20/1066a.md?p=2) with an eligible Federal PLUS [Loan](/usc/20/1066a.md?p=2) made under this paragraph, then the [eligible lender](/usc/20/1019.md?p=4) that originated the borrower’s [loan](/usc/20/1066a.md?p=2) under this paragraph may include in the consolidation under this subparagraph a Federal Direct PLUS [Loan](/usc/20/1066a.md?p=2) or a [loan](/usc/20/1066a.md?p=2) made on behalf of a dependent student under [section 1078–2 of this title](/usc/20/1078–2.md), but only if—
        - (I) in the case of a Federal Direct PLUS [Loan](/usc/20/1066a.md?p=2), the [eligible lender](/usc/20/1019.md?p=4) agrees, not later than 10 days after the borrower requests such consolidation from the [lender](/usc/20/1019.md?p=6), to match the consolidation terms and conditions that would otherwise be available to the borrower if the borrower consolidated such [loans](/usc/20/1066a.md?p=2) in the [loan](/usc/20/1066a.md?p=2) program under part D; or
        - (II) in the case of a [loan](/usc/20/1066a.md?p=2) made on behalf of a dependent student under [section 1078–2 of this title](/usc/20/1078–2.md), the [eligible lender](/usc/20/1019.md?p=4) agrees, not later than 10 days after the borrower requests such consolidation from the [lender](/usc/20/1019.md?p=6), to match the consolidation terms and conditions offered by an [eligible lender](/usc/20/1019.md?p=4) other than the [eligible lender](/usc/20/1019.md?p=4) that originated the borrower’s [loans](/usc/20/1066a.md?p=2) under this paragraph.
      - (v) **Special allowance on consolidation loans that include loans made under this paragraph—** The applicable special allowance payment for [loans](/usc/20/1066a.md?p=2) consolidated under this paragraph shall be equal to the lesser of—
        - (I) the weighted average of the special allowance payment on such [loans](/usc/20/1066a.md?p=2), except that in calculating such weighted average the [Secretary](/usc/20/1003.md?p=17) shall exclude any Federal Direct PLUS [Loan](/usc/20/1066a.md?p=2) included in the consolidation; or
        - (II) the result of—
          - (aa) the average of the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates in effect for each of the days in such quarter as reported by the Federal Reserve in Publication H–15 (or its successor) for such 3-month period; plus
          - (bb) 1.59 percent.
      - (vi) **Interest payment rebate fee—** Any [loan](/usc/20/1066a.md?p=2) under [section 1078–3 of this title](/usc/20/1078–3.md) consolidated under this paragraph shall not be subject to the [interest](/usc/20/1066a.md?p=6) payment rebate fee under [section 1078–3(f) of this title](/usc/20/1078–3.md?p=f).
- (c) **Required initial evaluation—** The [Secretary](/usc/20/1003.md?p=17) and [Secretary](/usc/20/1003.md?p=17) of the Treasury shall jointly conduct an evaluation, in consultation with the Office of Management and Budget, the Congressional Budget Office, and the Comptroller General, of the pilot program carried out by the [Secretary](/usc/20/1003.md?p=17) under this section. The evaluation shall determine—
  - (1) the extent of the savings to the Federal Government that are generated through the pilot program, compared to the cost the Federal Government would have incurred in operating the PLUS [loan](/usc/20/1066a.md?p=2) program under [section 1078–2 of this title](/usc/20/1078–2.md) in the absence of the pilot program;
  - (2) the number of [lenders](/usc/20/1019.md?p=6) that participated in the pilot program, and the extent to which the pilot program generated competition among [lenders](/usc/20/1019.md?p=6) to participate in the auctions under the pilot program;
  - (3) the number and volume of [loans](/usc/20/1066a.md?p=2) made under the pilot program in each [State](/usc/20/1003.md?p=21-A);
  - (4) the effect of the transition to and operation of the pilot program on the ability of—
    - (A) [lenders](/usc/20/1019.md?p=6) participating in the pilot program to originate [loans](/usc/20/1066a.md?p=2) made through the pilot program smoothly and efficiently;
    - (B) institutions of higher education participating in the pilot program to disburse [loans](/usc/20/1066a.md?p=2) made through the pilot program smoothly and efficiently; and
    - (C) parents to obtain [loans](/usc/20/1066a.md?p=2) made through the pilot program in a timely and efficient manner;
  - (5) the differential impact, if any, of the auction among the [States](/usc/20/1003.md?p=21-A), including between rural and non-rural [States](/usc/20/1003.md?p=21-A); and
  - (6) the feasibility of using the mechanism piloted to operate the other [loan](/usc/20/1066a.md?p=2) programs under part B of this subchapter.
- (d) **Reports—**
  - (1) **In general—** The [Secretary](/usc/20/1003.md?p=17) and the [Secretary](/usc/20/1003.md?p=17) of the Treasury shall submit to the [authorizing committees](/usc/20/1003.md?p=1)—
    - (A) not later than September 1, 2010, a preliminary report regarding the findings of the evaluation described in [subsection (c)](#c);
    - (B) not later than September 1, 2012, an interim report regarding such findings; and
    - (C) not later than September 1, 2013, a final report regarding such findings.
  - (2) **Contents—** The [Secretary](/usc/20/1003.md?p=17) shall include, in each report required under subparagraphs [(A)](#d-1-A), [(B)](#d-1-B), and [(C)](#d-1-C) of paragraph (1), any recommendations, that are based on the findings of the evaluation under [subsection (c)](#c), for—
    - (A) improving the operation and administration of the auction; and
    - (B) improving the operation and administration of other [loan](/usc/20/1066a.md?p=2) programs under part B.

## Source credit

(Pub. L. 89–329, title IV, § 499, as added Pub. L. 110–84, title VII, § 701, Sept. 27, 2007, 121 Stat. 808; amended Pub. L. 110–315, title IV, § 499, Aug. 14, 2008, 122 Stat. 3328.)

## Notes

### Editorial Notes

### Prior Provisions

A prior section 1099e, Pub. L. 89–329, title IV, § 499A, as added Pub. L. 110–84, title VIII, § 802, Sept. 27, 2007, 121 Stat. 817, which comprised part J of title IV of Pub. L. 89–329 and related to investment in historically Black colleges and universities and other minority-serving institutions, was transferred to section 1067q of this title.

### Amendments

2008—Subsec. (b)(3)(B)(iii). Pub. L. 110–315, § 499(1)(A), added cl. (iii).

Subsec. (b)(3)(G). Pub. L. 110–315, § 499(1)(B), added subpar. (G) and struck out former subpar. (G). Text of former subpar. (G) read as follows: “Each eligible lender having a winning bid under subparagraph (F) enters into an agreement with the Secretary under which the eligible lender—

“(i) agrees to originate eligible Federal PLUS Loans under this paragraph to each borrower who—

“(I) seeks an eligible Federal PLUS Loan under this paragraph to enable a dependent student to attend an institution of higher education within the State;

“(II) is eligible for an eligible Federal PLUS Loan; and

“(III) elects to borrow from the eligible lender; and

“(ii) agrees to accept a special allowance payment (after the application of section 1087–1(b)(2)(I)(v) of this title) from the Secretary with respect to the eligible Federal PLUS Loans originated under clause (i) in the amount proposed in the second lowest winning bid described in subparagraph (F) for the applicable State auction.”

Subsec. (b)(3)(J). Pub. L. 110–315, § 499(1)(C), added subpar. (J) and struck out former subpar. (J). Text of former subpar. (J) read as follows: “The Secretary guarantees the eligible Federal PLUS Loans made under this paragraph against losses resulting from the default of a parent borrower in an amount equal to 99 percent of the unpaid principal and interest due on the loan.”

Subsecs. (c), (d). Pub. L. 110–315, § 499(2), added subsecs. (c) and (d).

### Statutory Notes and Related Subsidiaries

### Effective Date

Section effective Oct. 1, 2007, see section 1(c) of Pub. L. 110–84, set out as an Effective Date of 2007 Amendment note under section 1070a of this title.