---
kind: "section"
citation: "42 U.S.C. § 292f"
title: "42"
title_heading: "The Public Health and Welfare"
number: "292f"
heading: "Default of borrower"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/42/292f"
units:
  - "Chapter 6A — Public Health Service"
  - "Subchapter V — Health Professions Education"
  - "Part A — Student Loans"
  - "Subpart i — insured health education assistance loans to graduate students"
---

# §292f. Default of borrower

- (a) **Conditions for payment to beneficiary—**
  - (1) **In general—** Upon default by the borrower on any loan covered by Federal loan insurance pursuant to this subpart, and after a substantial collection effort (including, subject to [subsection (h)](#h), commencement and prosecution of an action) as determined under [regulations](/usc/42/201.md?p=d) of the [Secretary](/usc/42/292o.md?p=6), the insurance [beneficiary](/usc/42/300gg–91.md?p=d-2) shall promptly notify the [Secretary](/usc/42/292o.md?p=6) and the [Secretary](/usc/42/292o.md?p=6) shall, if requested (at that time or after further collection efforts) by the [beneficiary](/usc/42/300gg–91.md?p=d-2), or may on his own motion, if the insurance is still in effect, pay to the [beneficiary](/usc/42/300gg–91.md?p=d-2) the amount of the loss sustained by the insured upon that loan as soon as that amount has been determined, except that, if the insurance [beneficiary](/usc/42/300gg–91.md?p=d-2) including any servicer of the loan is not designated for “exceptional performance”, as set forth in [paragraph (2)](#a-2), the [Secretary](/usc/42/292o.md?p=6) shall pay to the [beneficiary](/usc/42/300gg–91.md?p=d-2) a sum equal to 98 percent of the amount of the loss sustained by the insured upon that loan.
  - (2) **Exceptional performance—**
    - (A) **Authority—** Where the [Secretary](/usc/42/292o.md?p=6) determines that an [eligible lender](/usc/42/292o.md?p=2), holder, or servicer has a compliance performance rating that equals or exceeds 97 percent, the [Secretary](/usc/42/292o.md?p=6) shall designate that [eligible lender](/usc/42/292o.md?p=2), holder, or servicer, as the case may be, for exceptional performance.
    - (B) **Compliance performance rating—** For purposes of [subparagraph (A)](#a-2-A), a compliance performance rating is determined with respect to compliance with due diligence in the disbursement, servicing, and collection of loans under this subpart for each year for which the determination is made. Such rating shall be equal to the percentage of all due diligence requirements applicable to each loan, on average, as established by the [Secretary](/usc/42/292o.md?p=6), with respect to loans serviced during the period by the [eligible lender](/usc/42/292o.md?p=2), holder, or servicer.
    - (C) **Annual audits for lenders, holders, and servicers—** Each [eligible lender](/usc/42/292o.md?p=2), holder, or servicer desiring a designation under [subparagraph (A)](#a-2-A) shall have an annual financial and compliance audit conducted with respect to the loan portfolio of such [eligible lender](/usc/42/292o.md?p=2), holder, or servicer, by a qualified independent organization from a list of qualified organizations identified by the [Secretary](/usc/42/292o.md?p=6) and in accordance with standards established by the [Secretary](/usc/42/292o.md?p=6). The standards shall measure the lender’s, holder’s, or servicer’s compliance with due diligence standards and shall include a defined statistical sampling technique designed to measure the performance rating of the [eligible lender](/usc/42/292o.md?p=2), holder, or servicer for the purpose of this section. Each [eligible lender](/usc/42/292o.md?p=2), holder, or servicer shall submit the audit required by this section to the [Secretary](/usc/42/292o.md?p=6).
    - (D) **Secretary’s determinations—** The [Secretary](/usc/42/292o.md?p=6) shall make the determination under [subparagraph (A)](#a-2-A) based upon the audits submitted under this paragraph and any information in the [possession](/usc/42/201.md?p=g) of the [Secretary](/usc/42/292o.md?p=6) or submitted by any other [agency](/usc/42/8262.md?p=1) or office of the Federal Government.
    - (E) **Quarterly compliance audit—** To maintain its status as an exceptional performer, the lender, holder, or servicer shall undergo a quarterly compliance audit at the end of each quarter (other than the quarter in which status as an exceptional performer is established through a financial and compliance audit, as described in [subparagraph (C)](#a-2-C)), and submit the results of such audit to the [Secretary](/usc/42/292o.md?p=6). The compliance audit shall review compliance with due diligence requirements for the period beginning on the day after the ending date of the previous audit, in accordance with standards determined by the [Secretary](/usc/42/292o.md?p=6).
    - (F) **Revocation authority—** The [Secretary](/usc/42/292o.md?p=6) shall revoke the designation of a lender, holder, or servicer under [subparagraph (A)](#a-2-A) if any quarterly audit required under [subparagraph (E)](#a-2-E) is not received by the [Secretary](/usc/42/292o.md?p=6) by the date established by the [Secretary](/usc/42/292o.md?p=6) or if the audit indicates the lender, holder, or servicer has failed to meet the standards for designation as an exceptional performer under [subparagraph (A)](#a-2-A). A lender, holder, or servicer receiving a compliance audit not meeting the standard for designation as an exceptional performer may reapply for designation under [subparagraph (A)](#a-2-A) at any time.
    - (G) **Documentation—** Nothing in this section shall restrict or limit the authority of the [Secretary](/usc/42/292o.md?p=6) to require the submission of claims documentation evidencing servicing performed on loans, except that the [Secretary](/usc/42/292o.md?p=6) may not require exceptional performers to submit greater documentation than that required for lenders, holders, and servicers not designated under [subparagraph (A)](#a-2-A).
    - (H) **Cost of audits—** Each [eligible lender](/usc/42/292o.md?p=2), holder, or servicer shall pay for all the costs associated with the audits required under this section.
    - (I) **Additional revocation authority—** Notwithstanding any other provision of this section, a designation under [subparagraph (A)](#a-2-A) may be revoked at any time by the [Secretary](/usc/42/292o.md?p=6) if the [Secretary](/usc/42/292o.md?p=6) determines that the [eligible lender](/usc/42/292o.md?p=2), holder, or servicer has failed to maintain an overall level of compliance consistent with the audit submitted by the [eligible lender](/usc/42/292o.md?p=2), holder, or servicer under this paragraph or if the [Secretary](/usc/42/292o.md?p=6) asserts that the lender, holder, or servicer may have engaged in fraud in securing designation under [subparagraph (A)](#a-2-A) or is failing to [service](/usc/42/201.md?p=a) loans in accordance with [program](/usc/42/274l–1.md?p=4) requirements.
    - (J) **Noncompliance—** A lender, holder, or servicer designated under [subparagraph (A)](#a-2-A) that fails to [service](/usc/42/201.md?p=a) loans or otherwise comply with applicable [program](/usc/42/274l–1.md?p=4) [regulations](/usc/42/201.md?p=d) shall be considered in [violation](/usc/42/2000e–16a.md?p=c) of the Federal False Claims Act.
- (b) **Subrogation—** Upon payment by the [Secretary](/usc/42/292o.md?p=6) 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 of the obligation upon the insured loan and shall be entitled to an assignment of the note or other evidence of the insured loan by the insurance [beneficiary](/usc/42/300gg–91.md?p=d-2). If the net recovery made by the [Secretary](/usc/42/292o.md?p=6) on a loan after deduction of the cost of that recovery (including reasonable administrative costs) exceeds the amount of the loss, the excess shall be paid over to the insured. The [Secretary](/usc/42/292o.md?p=6) may sell without recourse to [eligible lenders](/usc/42/292o.md?p=2) (or other entities that the [Secretary](/usc/42/292o.md?p=6) determines are capable of dealing in such loans) notes or other evidence of loans received through assignment under the first sentence.
- (c) **Forbearance—** Nothing in this section or in this subpart shall be construed to preclude any forbearance for the benefit of the borrower which may be agreed upon by the parties to the insured loan and approved by the [Secretary](/usc/42/292o.md?p=6) or to preclude forbearance by the [Secretary](/usc/42/292o.md?p=6) in the enforcement of the insured obligation after payment on that insurance.
- (d) **Reasonable care and diligence regarding loans—** Nothing in this section or in this subpart shall be construed to excuse the [eligible lender](/usc/42/292o.md?p=2) or holder of a federally insured loan from exercising reasonable care and diligence in the making of loans under the provisions of this subpart and from exercising a substantial effort in the collection of loans under the provisions of this subpart. If the [Secretary](/usc/42/292o.md?p=6), after reasonable notice and opportunity for hearing to an [eligible lender](/usc/42/292o.md?p=2), finds that the lender has failed to exercise such care and diligence, to exercise such substantial efforts, to make the reports and statements required under [section 292e(a)(3) of this title](/usc/42/292e.md?p=a-3), or to pay the required Federal loan insurance premiums, he shall disqualify that lender from obtaining further Federal insurance on loans granted pursuant to this subpart until he is satisfied that its failure has ceased and finds that there is reasonable assurance that the lender will in the future exercise necessary care and diligence, exercise substantial effort, or comply with such requirements, as the case may be.
- (e) **Definitions—** For purposes of this section:
  - (1) The term “insurance [beneficiary](/usc/42/300gg–91.md?p=d-2)” means the insured or its authorized assignee in accordance with [section 292e(c) of this title](/usc/42/292e.md?p=c).
  - (2) The term “amount of the loss” means, with respect to a loan, unpaid balance of the principal amount and interest on such loan, less the amount of any judgment collected pursuant to default proceedings commenced by the [eligible lender](/usc/42/292o.md?p=2) or holder involved.
  - (3) The term “default” includes only such defaults as have existed for 120 days.
  - (4) The term “servicer” means any [agency](/usc/42/8262.md?p=1) acting on behalf of the insurance [beneficiary](/usc/42/300gg–91.md?p=d-2).
- (f) **Reductions in Federal reimbursements or payments for defaulting borrowers—** The [Secretary](/usc/42/292o.md?p=6) shall, after notice and opportunity for a hearing, cause to be reduced Federal reimbursements or payments for health [services](/usc/42/201.md?p=a) under any Federal law to borrowers who are practicing their professions and have defaulted on their loans insured under this subpart in amounts up to the remaining balance of such loans. Procedures for reduction of payments under the medicare [program](/usc/42/274l–1.md?p=4) are provided under [section 1395ccc of this title](/usc/42/1395ccc.md). Notwithstanding such [section 1395ccc of this title](/usc/42/1395ccc.md), any funds recovered under this subsection shall be deposited in the insurance fund established under [section 292i of this title](/usc/42/292i.md).
- (g) **Conditions for discharge of debt in bankruptcy—** Notwithstanding any other provision of Federal or [State](/usc/42/201.md?p=f) law, a debt that is a loan insured under the authority of this subpart may be released by a discharge in bankruptcy under any chapter of [title 11](/usc/11.md), only if such discharge is granted—
  - (1) after the expiration of the seven-year period beginning on the first date when repayment of such loan is required, exclusive of any period after such date in which the obligation to pay installments on the loan is suspended;
  - (2) upon a finding by the Bankruptcy Court that the nondischarge of such debt would be unconscionable; and
  - (3) upon the condition that the [Secretary](/usc/42/292o.md?p=6) shall not have waived the [Secretary](/usc/42/292o.md?p=6)’s rights to apply [subsection (f)](#f) to the borrower and the discharged debt.
- (h) **Requirement regarding actions for default—**
  - (1) **In general—** With respect to the default by a borrower on any loan covered by Federal loan insurance under this subpart, the [Secretary](/usc/42/292o.md?p=6) shall, under [subsection (a)](#a), require an [eligible lender](/usc/42/292o.md?p=2) or holder to commence and prosecute an action for such default unless—
    - (A) in the determination of the [Secretary](/usc/42/292o.md?p=6)—
      - (i) the [eligible lender](/usc/42/292o.md?p=2) or holder has made reasonable efforts to serve process on the borrower involved and has been unsuccessful with respect to such efforts, or
      - (ii) prosecution of such an action would be fruitless because of the financial or other circumstances of the borrower;
    - (B) for such loans made before November 4, 1988, the loan involved was made in an amount of less than $5,000; or
    - (C) for such loans made after November 4, 1988, the loan involved was made in an amount of less than $2,500.
  - (2) **Relationship to claim for payment—** With respect to an [eligible lender](/usc/42/292o.md?p=2) or holder that has commenced an action pursuant to [subsection (a)](#a), the [Secretary](/usc/42/292o.md?p=6) shall make the payment required in such subsection, or deny the claim for such payment, not later than 60 days after the date on which the [Secretary](/usc/42/292o.md?p=6) determines that the lender or holder has made reasonable efforts to secure a judgment and collect on the judgment entered into pursuant to this subsection.
  - (3) **State court judgments—** With respect to any [State](/usc/42/201.md?p=f) court judgment that is obtained by a lender or holder against a borrower for default on a loan insured under this subpart and that is subrogated to the United States under [subsection (b)](#b), any United States attorney may register such judgment with the Federal courts for enforcement.
- (i) **Inapplicability of Federal and State statute of limitations on actions for loan collection—** Notwithstanding any other provision of Federal or [State](/usc/42/201.md?p=f) law, there shall be no limitation on the period within which suit may be filed, a judgment may be enforced, or an offset, garnishment, or other action may be initiated or taken by the [Secretary](/usc/42/292o.md?p=6), the Attorney General, or other administrative head of another Federal [agency](/usc/42/8262.md?p=1), as the case may be, for the repayment of the amount due from a borrower on a loan made under this subpart that has been assigned to the [Secretary](/usc/42/292o.md?p=6) under [subsection (b)](#b).
- (j) **School collection assistance—** An institution or postgraduate training [program](/usc/42/274l–1.md?p=4) attended by a borrower may assist in the collection of any loan of that borrower made under this subpart which becomes delinquent, including providing information concerning the borrower to the [Secretary](/usc/42/292o.md?p=6) and to past and present lenders and holders of the borrower’s loans, contacting the borrower in order to encourage repayment, and withholding [services](/usc/42/201.md?p=a) in accordance with [regulations](/usc/42/201.md?p=d) issued by the [Secretary](/usc/42/292o.md?p=6) under [section 292n(a)(7) of this title](/usc/42/292n.md?p=a-7). The institution or postgraduate training [program](/usc/42/274l–1.md?p=4) shall not be subject to [section 1692g of title 15](/usc/15/1692g.md) for purposes of carrying out activities authorized by this section.

## Source credit

(July 1, 1944, ch. 373, title VII, § 707, as added Pub. L. 102–408, title I, § 102, Oct. 13, 1992, 106 Stat. 2002; amended Pub. L. 103–43, title XX, § 2014(a)(2), June 10, 1993, 107 Stat. 215; Pub. L. 105–392, title I, §§ 142(a), (b), 144(a), Nov. 13, 1998, 112 Stat. 3579, 3581.)

## Notes

### Editorial Notes

### References in Text

The Federal False Claims Act, referred to in subsec. (a)(2)(J), probably means the False Claims Act which was the popular name for sections 231, 232, 233, and 235 of former Title 31, Money and Finance. Sections 231, 232, 233, and 235 were repealed by Pub. L. 97–258, § 5(b), Sept. 13, 1982, 96 Stat. 1084, and reenacted by the first section thereof as sections 3729 to 3731 of Title 31, Money and Finance.

### Prior Provisions

A prior section 292f, act July 1, 1944, ch. 373, title VII, § 706, as added Oct. 12, 1976, Pub. L. 94–484, title II, § 204, 90 Stat. 2249, authorized contracts under this subchapter without regard to certain provisions, prior to the general revision of this subchapter by Pub. L. 102–408.

Another prior section 292f, act July 1, 1944, ch. 373, title VII, § 707, as added July 30, 1956, ch. 779, § 2, 70 Stat. 720; amended Oct. 5, 1961, Pub. L. 87–395, § 8(d), 75 Stat. 827; Sept. 24, 1963, Pub. L. 88–129, § 2(a), 77 Stat. 164; Nov. 18, 1971, Pub. L. 92–157, title I, § 102(k)(2)(A), 85 Stat. 437, provided for recapture of payments relating to grants for construction of health research facilities, prior to repeal by Pub. L. 94–484, title II, § 201(a), Oct. 12, 1976, 90 Stat. 2246.

A prior section 707 of act July 1, 1944, was classified to section 292g of this title prior to the general revision of this subchapter by Pub. L. 102–408.

### Amendments

1998—Subsec. (a). Pub. L. 105–392, § 142(a), designated existing provisions as par. (1), inserted heading, substituted “determined, except that, if the insurance beneficiary including any servicer of the loan is not designated for ‘exceptional performance’, as set forth in paragraph (2), the Secretary shall pay to the beneficiary a sum equal to 98 percent of the amount of the loss sustained by the insured upon that loan.” for “determined.”, struck out at end “Not later than one year after October 13, 1992, the Secretary shall establish performance standards for lenders and holders of loans under this subpart, including fees to be imposed for failing to meet such standards.”, and added par. (2).

Subsec. (e)(4). Pub. L. 105–392, § 142(b), added par. (4).

Subsec. (g). Pub. L. 105–392, § 144(a), substituted “Notwithstanding any other provision of Federal or State law, a debt that is a loan insured” for “A debt which is a loan insured” in introductory provisions.

1993—Subsec. (g)(1). Pub. L. 103–43, § 2014(a)(2)(A), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “after the expiration of the five-year period beginning on the first date, as specified in subparagraphs (B) and (C) of section 292d(a)(2) of this title, when repayment of such loan is required;”.

Subsec. (j). Pub. L. 103–43, § 2014(a)(2)(B), added subsec. (j).

### Statutory Notes and Related Subsidiaries

### Effective Date of 1998 Amendment

Pub. L. 105–392, title I, § 142(c), Nov. 13, 1998, 112 Stat. 3581, provided that: “The amendments made by subsections (a) and (b) [amending this section] shall apply with respect to loans submitted to the Secretary for payment on or after the first day of the sixth month that begins after the date of enactment of this Act [Nov. 13, 1998].”

Pub. L. 105–392, title I, § 144(b), Nov. 13, 1998, 112 Stat. 3581, provided that: “The amendment made by subsection (a) [amending this section] shall apply to any loan insured under the authority of subpart I of part A of title VII of the Public Health Service Act (42 U.S.C. 292 et seq.) that is listed or scheduled by the debtor in a case under title XI, United States Code [Title 11, Bankruptcy], filed— on or after the date of enactment of this Act [Nov. 13, 1998]; or prior to such date of enactment in which a discharge has not been granted.”