Each guaranty agency shall, not later than 60 days after October 7, 1998, establish a fund designated as the Operating Fund.
Funds deposited into the Operating Fund shall be invested at the discretion of the guaranty agency in accordance with prudent investor standards.
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.
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.
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.