---
kind: "section"
citation: "42 U.S.C. § 291j–7"
title: "42"
title_heading: "The Public Health and Welfare"
number: "291j–7"
heading: "Loans to public facilities"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/42/291j-7"
units:
  - "Chapter 6A — Public Health Service"
  - "Subchapter IV — Construction and Modernization of Hospitals and Other Medical Facilities"
  - "Part B — Loan Guarantees and Loans for Modernization and Construction of Hospitals and Other Medical Facilities"
---

# §291j–7. Loans to public facilities

- (a) **Interest rates; security; equitable geographical distribution—**
  - (1) Any loan made by the [Secretary](/usc/42/201.md?p=c) to a [public agency](/usc/42/11851.md?p=8) under this part for the [modernization](/usc/42/300s–3.md?p=9) or [construction](/usc/42/300s–3.md?p=7) of a public [hospital](/usc/42/300s–3.md?p=1) or other health facility shall require such [public agency](/usc/42/11851.md?p=8) to pay interest thereon at a rate comparable to the current rate of interest prevailing with respect to loans, to [nonprofit](/usc/42/300s–3.md?p=3) private [agencies](/usc/42/8262.md?p=1), which are guaranteed under this part, for the [modernization](/usc/42/300s–3.md?p=9) or [construction](/usc/42/300s–3.md?p=7) of similar facilities in the same or similar areas, minus 3 per centum per annum.
  - (2)
    - (A) No loan to a [public agency](/usc/42/11851.md?p=8) shall be made under this part unless—
      - (i) the [Secretary](/usc/42/201.md?p=c) is reasonably satisfied that such [agency](/usc/42/8262.md?p=1) will be able to make payments of principal and interest thereon when due, and
      - (ii) such [agency](/usc/42/8262.md?p=1) provides the [Secretary](/usc/42/201.md?p=c) with reasonable assurances that there will be available to such [agency](/usc/42/8262.md?p=1) such additional funds as may be necessary to complete the [project](/usc/42/13641.md?p=2) with respect to which such loan is requested.
    - (B) Any loan to a [public agency](/usc/42/11851.md?p=8) shall have such security, have such maturity date, be repayable in such installments, and be subject to such other terms and conditions (including provision for recovery in case of default) as the [Secretary](/usc/42/201.md?p=c) determines to be necessary to carry out the purposes of this part while adequately protecting the financial interests of the United States.
  - (3) In making loans to [public agencies](/usc/42/11851.md?p=8) under this part, the [Secretary](/usc/42/201.md?p=c) shall give due regard to achieving an equitable geographical distribution of such loans.
- (b) **Sale—**
  - (1) The [Secretary](/usc/42/201.md?p=c) shall from time to time, but with due regard to the financial interests of the United States, sell loans referred to in [subsection (a)(1)](#a-1) either on the private market or to the Federal National Mortgage Association in accordance with [section 1717 of title 12](/usc/12/1717.md).
  - (2) Any loan so sold shall be sold for an amount which is equal (or approximately equal) to the amount of the unpaid principal of such loan as of the time of sale.
- (c) **Agreements—**
  - (1) The [Secretary](/usc/42/201.md?p=c) is authorized to enter into an agreement with the purchaser of any loan sold under this part under which the [Secretary](/usc/42/201.md?p=c) agrees—
    - (A) to guarantee to such purchaser (and any successor in interest to such purchaser) payment of the principal and interest payable under such loan, and
    - (B) to pay as an interest subsidy to such purchaser (and any successor in interest of such purchaser) amounts which when added to the amount of interest payable on such loan, are equivalent to a reasonable rate of interest on such loan as determined by the [Secretary](/usc/42/201.md?p=c), after taking into account the range of prevailing interest rates in the private market on similar loans and the risks assumed by the United States.
  - (2) Any such agreement—
    - (A) may provide that the [Secretary](/usc/42/201.md?p=c) shall act as agent of any such purchaser, for the purpose of collecting from the [public agency](/usc/42/11851.md?p=8) to which such loan was made and paying over to such purchaser, any payments of principal and interest payable by such [agency](/usc/42/8262.md?p=1) under such loan;
    - (B) may provide for the repurchase by the [Secretary](/usc/42/201.md?p=c) of any such loan on such terms and conditions as may be specified in the agreement;
    - (C) shall provide that, in the event of any default by the [public agency](/usc/42/11851.md?p=8) to which such loan was made in payment of principal and interest due on such loan, the [Secretary](/usc/42/201.md?p=c) shall, upon notification to the purchaser (or to the successor in interest of such purchaser), have the option to close out such loan (and any obligations of the [Secretary](/usc/42/201.md?p=c) with respect thereto) by paying to the purchaser (or his successor in interest) the total amount of outstanding principal and interest due thereon at the time of such notification; and
    - (D) shall provide that, in the event such loan is closed out as provided in [subparagraph (C)](#c-2-C), or in the event of any other loss incurred by the [Secretary](/usc/42/201.md?p=c) by reason of the failure of such [public agency](/usc/42/11851.md?p=8) to make payments of principal and interest on such loan, the [Secretary](/usc/42/201.md?p=c) shall be subrogated to all rights of such purchaser for recovery of such loss from such [public agency](/usc/42/11851.md?p=8).
- (d) **Right of recovery; waiver—** The [Secretary](/usc/42/201.md?p=c) may, for good cause, waive any right of recovery which he has against a [public agency](/usc/42/11851.md?p=8) by reason of the failure of such [agency](/usc/42/8262.md?p=1) to make payments of principal and interest on a loan made to such [agency](/usc/42/8262.md?p=1) under this part.
- (e) **Interest and interest subsidies as gross income under Internal Revenue Code—** After any loan to a [public agency](/usc/42/11851.md?p=8) under this part has been sold and guaranteed, interest paid on such loan and any interest subsidy paid by the [Secretary](/usc/42/201.md?p=c) with respect to such loan which is received by the purchaser thereof (or his successor in interest) shall be included in gross income for the purposes of chapter 1 of title 26.
- (f) **Sales proceeds; deposit and use—** Amounts received by the [Secretary](/usc/42/201.md?p=c) as proceeds from the sale of loans under this section shall be deposited in the loan fund established by [section 291j–6 of this title](/usc/42/291j–6.md), and shall be available to the [Secretary](/usc/42/201.md?p=c) for the making of further loans under this part in accordance with the provisions of [subsection (a)(2)](/usc/42/291j–6.md?p=a-2) of such section.
- (g) **Authorization of appropriations—** There is authorized to be appropriated to the [Secretary](/usc/42/201.md?p=c), for deposit in the loan fund established by [section 291j–6 of this title](/usc/42/291j–6.md), $30,000,000 to provide initial capital for the making of direct loans by the [Secretary](/usc/42/201.md?p=c) to [public agencies](/usc/42/11851.md?p=8) for the [modernization](/usc/42/300s–3.md?p=9) or [construction](/usc/42/300s–3.md?p=7) of facilities referred to in [subsection (a)(1)](#a-1).

## Source credit

(July 1, 1944, ch. 373, title VI, § 627, as added Pub. L. 91–296, title II, § 201, June 30, 1970, 84 Stat. 349; amended Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095.)

## Notes

### Editorial Notes

### Amendments

1986—Subsec. (e). Pub. L. 99–514 substituted “Internal Revenue Code of 1986” for “Internal Revenue Code of 1954”, which for purposes of codification was translated as “title 26” thus requiring no change in text.

### Statutory Notes and Related Subsidiaries

### Commitments for Direct Loans to Public Agencies

Pub. L. 91–667, title II, § 200, Jan. 11, 1971, 84 Stat. 2007, provided: “That the Secretary is authorized to issue commitments for direct loans to public agencies in accordance with section 627 of the Public Health Service Act [42 U.S.C. 291j–7] which shall constitute contractual obligations of the United States, the total of such outstanding commitments not to exceed $30,000,000 at any given time; to sell obligations received pursuant to such commitments as provided in section 627, and the proceeds of any such sale shall be used to make a direct loan pursuant to the outstanding commitment under which the obligations were received.”