20 U.S. Code § 1099d - Competitive loan auction pilot program
The term “eligible Federal PLUS Loan” means a loan described in section 1078–2 of this title made to a parent of a dependent student who is a new borrower on or after July 1, 2009.
The term “eligible lender” has the meaning given the term in section 1085 of this title.
During the period beginning on September 27, 2007, and ending on June 30, 2009, the Secretary shall plan and implement the pilot program under this subsection. During the planning and implementation, the Secretary shall consult with other Federal agencies with knowledge of, and experience with, auction programs, including the Federal Communication Commission and the Department of the Treasury.
Beginning on July 1, 2009, the Secretary shall arrange for the origination and disbursement of all eligible Federal PLUS Loans in accordance with the provisions of this subsection and the provisions of section 1078–2 of this title that are not inconsistent with this subsection.
The Secretary administers an auction under this paragraph for each State, under which eligible lenders compete to originate eligible Federal PLUS Loans under this paragraph at all institutions of higher education within such State.
Each State auction takes place every 2 years, and the eligible lenders with the winning bids for the State are the only eligible lenders permitted to originate eligible Federal PLUS Loans made under this paragraph for the cohort of students at the institutions of higher education within the State until the students graduate from or leave the institutions of higher education.
Each eligible lender’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) the eligible lender proposes to accept from the Secretary with respect to the eligible Federal PLUS Loans made under this paragraph in lieu of the amount determined under section 1087–1(b)(2)(I) of this title.
The maximum bid allowable under this paragraph shall not exceed the amount of the special allowance payable on eligible Federal PLUS Loans made under this paragraph computed under section 1087–1(b)(2)(I) of this title (other than clauses (ii), (iii), (iv), and (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 shall be applied by substituting “1.79 percent” for “2.34 percent”.
The winning bids for each State auction shall be the 2 bids containing the lowest and the second lowest proposed special allowance payments, subject to subparagraph (E).
All bids are sealed and the Secretary keeps the bids confidential, including following the announcement of the winning bids.
In the event that there is no winning bid under subparagraph (F), the students at the institutions of higher education within the State that was the subject of the auction shall be served by an eligible lender of last resort, as determined by the Secretary.
Prior to the start of any auction under this paragraph, eligible lenders that desire to serve as an eligible lender of last resort shall submit an application to the Secretary at such time and in such manner as the Secretary may determine. Such application shall include an assurance that the eligible lender will meet the prequalification requirements described in subparagraph (B).
The Secretary shall identify an eligible lender of last resort for each State.
The Secretary shall not identify any eligible lender of last resort until after the announcement of all the winning bids for a State auction for any year.
The Secretary is authorized to set a special allowance payment that shall be payable to a lender of last resort for a State under this subparagraph, which special allowance payment shall be kept confidential, including following the announcement of winning bids. The Secretary 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 and the lowest bid submitted in a similar State, as determined by the Secretary.
Each eligible Federal PLUS Loan originated under this paragraph shall be insured by a guaranty agency in accordance with part B, except that, notwithstanding section 1078(b)(1)(G) of this title, such insurance shall be in an amount equal to 99 percent of the unpaid principal and interest due on the loan.
The Secretary shall not collect a loan fee under section 1087–1(d) of this title with respect to an eligible Federal Plus Loan originated under this paragraph.
An eligible lender who is permitted to originate eligible Federal PLUS Loans for a borrower under this paragraph shall have the option to consolidate such loans into 1 loan.
In the event a borrower with eligible Federal PLUS Loans made under this paragraph wishes to consolidate the loans, the borrower shall notify the eligible lender who originated the loans under this paragraph.
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.
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).
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