Each guaranty agency shall, not later than 60 days after October 7, 1998, establish a fund designated as the Operating Fund.
(b) Investment of funds
Funds deposited into the Operating Fund shall be invested at the discretion of the guaranty agency in accordance with prudent investor standards.
(c) Additional deposits
After the establishment of the Operating Fund, the guaranty agency shall deposit into the Operating Fund—
(1)the loan processing and issuance fee paid by the Secretary pursuant to section
1078(f) of this title;
(2)30 percent of amounts received after October 7, 1998, from the Secretary as payment for administrative cost allowances for loans upon which insurance was issued prior to October 7, 1998;
(3)the account maintenance fee paid by the Secretary in accordance with section
1087h of this title;
(4)the default aversion fee paid in accordance with section
1078(l) of this title;
(5)amounts remaining pursuant to section
1078(c)(6)(B) of this title from collection on defaulted loans held by the agency, after payment of the Secretary’s equitable share, excluding amounts deposited in the Federal Fund pursuant to section
1072a(c)(2) of this title; and
(6)other receipts as specified in regulations of the Secretary.
(d) Uses of funds
(1) In general
Funds in the Operating Fund shall be used for application processing, loan disbursement, enrollment and repayment status management, default aversion activities (including those described in section
1072(h)(8) of this title), default collection activities, school and lender training, financial aid awareness and related outreach activities, compliance monitoring, and other student financial aid related activities, as selected by the guaranty agency.
(2) Special rule
The guaranty agency may, in the agency’s discretion, transfer funds from the Operating Fund to the Federal Fund for use pursuant to section
1072a of this title. Such transfer shall be irrevocable, and any funds so transferred shall become the sole property of the United States.
For purposes of this subsection:
(A) Default collection activities
The term “default collection activities” means activities of a guaranty agency that are directly related to the collection of the loan on which a default claim has been paid to the participating lender, including the due diligence activities required pursuant to regulations of the Secretary.
(B) Default aversion activities
The term “default aversion activities” means activities of a guaranty agency that are directly related to providing collection assistance to the lender on a delinquent loan, prior to the loan’s being legally in a default status, including due diligence activities required pursuant to regulations of the Secretary.
(C) Enrollment and repayment status management
The term “enrollment and repayment status management” means activities of a guaranty agency that are directly related to ascertaining the student’s enrollment status, including prompt notification to the lender of such status, an audit of the note or written agreement to determine if the provisions of that note or agreement are consistent with the records of the guaranty agency as to the principal amount of the loan guaranteed, and an examination of the note or agreement to assure that the repayment provisions are consistent with the provisions of this part.
(e) Ownership and regulation of Operating Fund
The Operating Fund, with the exception of funds transferred from the Federal Fund in accordance with section
1072a(f) of this title, shall be considered to be the property of the guaranty agency.
Except as provided in paragraph (3), the Secretary may not regulate the uses or expenditure of moneys in the Operating Fund, but the Secretary may require such necessary reports and audits as provided in section
1078(b)(2) of this title.
Notwithstanding paragraphs (1) and (2), during any period in which funds are owed to the Federal Fund as a result of transfer under section
1072a(f) of this title—
(A)moneys in the Operating Fund may only be used for expenses related to the student loan programs authorized under this part; and
(B)the Secretary may regulate the uses or expenditure of moneys in the Operating Fund.
Section effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 ofPub. L. 105–244, set out as an Effective Date of 1998 Amendment note under section
1001 of this title.
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The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
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