Public Law 94–482

Section 101 of the Higher Education Act of 1965

20 USC 1001.

(hereafter in this title referred to as “the Act”) is amended to read as follows:

“Sec. 101. “appropriations authorized

(a)(a)

For the purpose of (1) assisting the people of the United States in the solution of community problems such as housing, poverty, government, recreation, employment, youth opportunities, transportation, health, and land use by enabling the Commissioner to make grants under this title to strengthen community service programs of colleges and universities, (2) supporting the expansion of continuing education in colleges and universities and (3) supporting resource materials sharing programs, there are authorized to be appropriated $49,000,000 for the fiscal years 1977, 1978, and 1979.

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“(b)“(b)

For the purpose of carrying out a program for the promotion of lifelong learning in accordance with the provisions of part B, there are authorized to lie appropriated, $20,000,000 for fiscal year 1977, $30,000,000 for fiscal year 1978, and $40,000,000 for fiscal year 1979.”.

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Title I of such Act is amended—

Section 107(a) of the Act is amended by striking out “$25,000”

20 USC 1006.

and inserting in lieu thereof “$40,000”.

Section 109 of the Act is amended to read as follows:

20 USC 1008.

“Sec. 109 “judicial review

If a State’s plan is not approved under section 105 (b) or a State’s eligibility to participate in (he program is suspended as a result of the Commissioner’s action under section 108(b),

20 USC 1007.

the State may within sixty days after notice of the Commissioner’s decision institute a civil action in an appropriate United States district court. In such an action, the court shall determine the matter de novo.”.

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Title I of the Act is further amended by redesignating sections 111, 112, and 113, and any references thereto, as sections 112, 113, and

20 USC 1009–1011.

114, respectively, and inserting immediately after section 110 the following new section:

“Sec. 111. “technical assistance and administration

(a)(a)

The Commissioner is authorized to reserve not to

20 USC 1008b.

exceed 10 per centum of the amount appropriated for any fiscal year pursuant to section 101(a) in excess of $14,500,000 for the purpose of

20 USC 1001.

this section.

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“(b)“(b)

From funds reserved under subsection (a) of this section, the Commissioner shall provide technical assistance to the States and to institutions of higher education. Such technical assistance shall—

(1)(1)

provide a national diffusion network to help assure that, effective programs are known among such States and institutions;

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(2)(2)

assist with the improvement of planning and evaluation procedures; and

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(3)(3)

provide information about the changing enrollment patterns in postsecondary institutions, and provide assistance, to such States and institutions in their efforts to understand these changing patterns and to accommodate them.”.

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“(c)“(c)

The Commissioner shall provide for coordination between community service and continuing education programs (including resource materials sharing programs) conducted by him with all other appropriate offices and agencies, including such offices and agencies which administer vocational education programs, adult education programs, career education programs, and student and institutional assistance programs.”.

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Title I of the Act is further amended—

Section 411(a)(1) of the Act is amended by striking

20 USC 1070a.

out “June 30, 1975” and inserting in lieu thereof “September 30, 1979”.

Divisions (i) and (ii) of section 411(a) (3) (A) of the Act are amended to read as follows:

“(3)“(3)

(A)(A)

(i)(i)

Not later than July 1 of each calendar year, the Commissioner

Publication in Federal Register.

shall publish in the Federal Register a schedule of expected family contributions for the academic year which begins after July 1 of the calendar year which succeeds such calendar year for various levels of family income, which, except as is otherwise provided in division (ii), together with any amendments thereto, shall become effective July 1 of the calendar year which succeeds such calendar year. During the thirty-day period following such publication the Commissioner shall provide interested parties with an opportunity’ to present their views and make recommendations with respect to such schedule.

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“(ii)“(ii)

The schedule of expected family contributions required by

Submittal to Congress.

Publication in Federal Register.

division (i) for each academic year shall be submitted to the President of the Senate and the Speaker of the House of Representatives not later than the time of its publication in the Federal Register. If either the Senate or the House of Representatives adopts, prior to the first day of October next following the submission of said Schedule as required by this division, a resolution of disapproval of such schedule, the Commissioner shall publish a new schedule of expected family contributions in the Federal Register’ not later than fifteen days after the adoption of such resolution of disapproval. Such new schedule shall take into consideration such recommendations as may be made in either House in connection with such resolution and shall become effective, together with any amendments thereto, with respect to grants to be made on or after the first day of July next following. The Commissioner shall publish together with such new schedule, a statement identifying the recommendations made in either House in connection with such resolution of disapproval and explaining his reasons for the new schedule.”.

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Section 411(a) (3) (B) of the Act is amended—

Section 411(b) of the Act is amended by striking division (ii) of paragraph (3) (U) and redesignating subsequent divisions accordingly, and by redesignating paragraph (4) and any references thereto as paragraph (5) and inserting after paragraph (3) a new paragraph as follows:

“(4)“(4)

(A)(A)

If the funds available for making payments under this subpart exceed the amount necessary to make the payments required under this subpart to eligible students by 15 per centum or less, then all of excess funds shall remain available for making payments under this subpart during the next succeeding fiscal year.

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“(B)“(B)

If the funds available for making payments under this subpart exceed the amount necessary to make the payments required under this subpart to eligible students by more than 15 per centum, then all of such funds shrill remain available for making such payments but payments may be made under this division only with respect to entitlements for that fiscal year.”.

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Section 411 (b) (3) (C) of the Act is repealed.

Section 411(b)(5) of the Act (as redesignated by subsection (e) ) is amended by striking out “July 1, 1975” and inserting in lieu thereof “October 1, 1979”.

Section 411 of the Act is amended by adding at the end thereof the following new subsection:

“(d)“(d)

(1)(1)

In addition to payments made with respect to entitlements under this sub part, each institution of higher education shall be eligible to receive from the Commissioner the payment of $10 per academic year for each student enrolled in that institution who is receiving a basic grant under this subpart for that year. Payment received by an institution under this subsection shall he used first to

Post, p. 2148.

carry out the provisions of section 493A of this Act and then for such additional administrative costs as the institution of higher education determines necessary.

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“(2)“(2)

There are authorized to be appropriated such sums as may be

Appropriation authorization.

necessary to carry out the provisions of this subsection. If the sums appropriated for any fiscal year for making payments under this subsection are not sufficient to pay in full the amounts provided for in paragraph (1), then such amount will be ratably reduced. In case additional funds become available for making payments for any fiscal year during which the preceding sentence has been applied, such reduced amounts shall be increased on the same basis as they were reduced.”

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Section 411 of the Act is further amended by adding at the end

20 USC 1070a.

thereof the following additional subsection:

“(e)“(e)

(1)(1)

The Commissioner shall enter into agreements with not

Agreement.

less than two nor more than five States for the processing by such States of all applications of their residents (through an instrumentality or agent selected by such State) for grants made under this subpart for the academic year beginning after July 1, 1977. on condition that any State giants which are subsidized in part by Federal funds, during the period for which State processing of basic education opportunity grant applications is carried out by the State, will be available to eligible State residents for use at the majority of educational institutions outside that State which are eligible institutions under subpart 1 of this part. No later than ninety days after

Report to Congress.

termination of the agreements, the Commissioner shall report to the Congress on the experience with multiple State processing, including its impact on the delivery of student aid to students, and including recommendations concerning whether the option of processing applications for grants under this subpart should be made available to all States having the capacity to do so.

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“(2)“(2)

Any State entering into an agreement with the Commissioner shall—

“(A)“(A)

not be required, without the State’s consent, to perform services in excess of those required of any private agency or organization with whom the Commissioner has a contract to perform similar application processing, except such additional services as may be necessary to produce processing services of a type and quality equivalent to those produced, through the same or other means; and

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“(B)“(B)

be required to determine student eligibility for awards under this submit solely on the basis of criteria set forth in this subpart and regulations promulgated by the Commissioner pursuant thereto.

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“(3)“(3)

The Commissioner shall promulgate such regulations as may

Regulations.

be necessary—

“(A)“(A)

to determine a fair per unit fee for application processing

Fees for processing applications.

which, if the Commissioner has a contract with an agency or organization to perform similar application processing, shall be no more than the amount paid by the Commissioner per application for the same academic year to any such agency or organization; and

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“(B)“(B)

to otherwise carry out the purposes of this subsection.

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“(4)“(4)

Nothing contained in this section or other enactments of law shall be construed to prohibit any eligible State under subsection (c) of this section from—

“(A)“(A)

employing student application forms that solicit information required for both the determination of eligibility under this subpart and for the determination of eligibility under the postsecondary educational grant programs of such State; and

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“(B)“(B)

coordinating the eligibility announcements of State post-secondary educational grants and grants under this subpart.

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“(5)“(5)

No State which enters into an agreement with the Commissioner may impose any fee or other charge upon a student for processing of the student’s application for a grant under this subpart.”.

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Section 413A(b) (1) of the Act is amended by striking out “ July 1, 1975” and inserting in lieu thereof “October 1, 1979”.

Section 413C(b) (4) of the Act is amended by striking out “464” and inserting in lieu thereof “494”.

Section 415A(b) of the Act is amended by striking out “July 1, 1975” and inserting in lieu thereof “October 1, 1979”, and by adding at the end thereof the following new paragraph:

“(3)“(3)

Sums appropriated pursuant to paragraphs (1) and (2) for any fiscal year shall remain available for payments to States for the award of student grants under this subpart until the end of the fiscal year succeeding the fiscal year for which such sums were appropriated.”.

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Section 4150 (b) of the Act is amended by redesignating clauses (4) and (5) of such section, and all references thereto, as clauses (5) and (6), respectively, and by inserting after clause (3) thereof the following new clause:

“(4)“(4)

provides that, effective with respect to any academic year beginning on or after July 1, 1977, all nonprofit institutions of higher education in the State are eligible to participate in the State program;”.

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Section 417A(b) of the Act is amended by inserting before the period a comma and the following: “and $200,000,000 for each of the fiscal years ending prior to October 1, 1979”.

Section 417B of the Act is amended by adding at the end thereof the following new subsections:

“(e)“(e)

In making grants or entering into contracts under clause (1) or (5) of subsection (b) of this section the Commissioner may permit students or youths from other than low-income families, not to exceed one-third of the total served, to benefit by the projects to be assisted pursuant to that grant or contract.

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“(f)“(f)

(1)(1)

The Commissioner is authorized to enter into contracts

Contracts.

with institutions of higher education and other appropriate public agencies and nonprofit private organizations to provide training for staff and leadership personnel who will specialize in improving the delivery of services to students assisted under this subpart.

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“(2)“(2)

Financial assistance under this subsection may be used for (A) the operation of short-term training institutes designed to improve the skills of participants in such institutes, and (B) the development of in-service training programs for such personnel.”.

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“(g)“(g)

The Commissioner shall not make grants to programs authorized under clause (5) of subsection (b) of this section in any fiscal year in which the amount appropriated for carrying out this subpart is less than $70,331,000.

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“(h)“(h)

It is the intention of the Congress to encourage, whenever feasible, the development of individualized programs for disadvantaged students assisted under this subpart.”.

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Section 420(c) (1) (B) (iii) of the Act is amended by inserting “(with special emphasis on educationally disadvantaged veterans)” after “outreach”, and by inserting “(with special emphasis on the veteran-student services program under section 1685 of such title 38)” after “programs”.

Section 420 of the Act is amended by adding at the end thereof the following new subsections:

“(f)“(f)

The Commissioner, in carrying out the provisions of this section, shall seek to assure the coordination of programs assisted under this section with programs carried out by the Veterans’ Administration pursuant to title 38 of the United States Code, and the Administrator of Veterans’ Affairs shall provide all assistance, technical consultation, and information otherwise authorized by law as necessary to promote the maximum effectiveness of the activities and programs assisted under this section.

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“(g)“(g)

The program provided for in this section shall lie administered by an identifiable administrative unit in the Office of Education.”.

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Not later than ninety days after the enactment of this Act, the Commissioner shall prepare and submit to the Congress a report containing a summary of the activities and programs (including the number and characteristics of veterans served) at institutions of higher education receiving assistance under section 420 of the Higher Education Act of 1965 (relating to veterans’ cost-of-instruction payments) and a description of the steps taken (and the results thereof) to carry out his responsibility under subsection (c) (1) of that section to monitor and determine the adequacy of efforts by such institutions.

Part B of title IV of the Act is amended to read as follows:

“Part B— Federal, State, and Private Programs or Low-Interest Insured Loans to Students in Institutions of Higher Education

“Sec. 421. “statement of purpose and appropriations authorized

(a)(a)

The purpose of this part is to enable the Commissioner

20 USC 1071.

(1) to encourage States and nonprofit private institutions and organizations to establish adequate loan insurance programs for students in eligible institutions (as defined in section 435), (2) to provide a Federal program of student loan insurance for students or lender’s who do not nave reasonable access to a State or private non-profit program of student loan insurance covered by an agreement under section 428(b) (3) to pay a portion of the interest on loans to qualified students which are made by a State under a direct loan program meeting the requirements of section 428(a) (1) (B), or which are insured under this part or under a program of a State or of a non-profit private institution or organization which meets the requirements of section 428(c)(1)(A), and (4) to guarantee a portion of each loan insured under a program of a State or of a nonprofit private institution or organization which meets the requirements of section 428(a)(1)(C).

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“(b)“(b)

For the purpose of carrying out this part—

“(1)“(1)

there are authorized to be appropriated to the student loan insurance fund (established by section 431) (A) the sum of $1,000,000, and (B) such further sums, if any, as may become necessary for the adequacy of the student loan insurance fund,

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“(2)“(2)

there are authorized to be appropriated, for payments under section 428 with respect to interest on student loans and for payments under section 437, such sums for the fiscal year ending June 30, 1966, and succeeding fiscal years, as may be required therefor,

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“(3)“(3)

there is authorized to be appropriated the sum of $17,500,000 for making advances pursuant to section 422 for the reserve funds of State and nonprofit private student loan insurance programs.

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“(4)“(4)

there are authorized to be appropriated (A) the sum of $12,500,000 for making advances after June 30, 1968. pursuant to sections 422 (a) and (b),and (B) such sums as may be necessary for making advances pursuant to section 422(c), for the reserve funds of State and nonprofit private student loan insurance programs, and

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“(5)“(5)

there are authorized to be appropriated such sums as may be necessary for the purpose of paying an administrative cost allowance in accordance with section 428(f) to State and non-profit institutions and organizations with which the Commissioner has an agreement under section 428(b).

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Sums appropriated under clauses (1), (2), (4), and (5) of this subsection shall remain available until expended, and sums appropriated under clause (3) of this subsection shall remain available for advances under section 422 until the close of the fiscal year ending June 30, 1968.

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“(c)“(c)

For purposes of currying out this part—

“(1)“(1)

the Commissioner shall develop and execute a plan designed to encourage the establishment of student loan insurance program by each State which does not have such a program covered by an agreement pursuant to section 428(b);

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“(2)“(2)

the Commissioner shall make a report to the Congress within 180 days after the enactment of the Education Amendments of 1976. containing a description of the plan developed according to paragraph (1) accompanied by a timetable for the execution of such plan; and

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“(3)“(3)

the Commissioner shall make a report to the Congress before June 30, 1977, which shall include—

“(A)“(A)

a description of the activities the Commissioner and his designees have undertaken pursuant to paragraph (1),

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“(B)“(B)

a description of such State’s plans to establish a program meeting the requirements of section 428(b), and

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“(C)“(C)

the Commissioner’s recommendations to the Congress as to what changes in law, or policy would encourage the establishment of such a program in all States without such programs.

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“Sec. 422. “advances for reserve funds of state and nonprofit private loan insurance programs

(a)(a)

(1)(1)

From the sums appropriated pursuant to clauses (3) and (4) (A) of section 421(b). the Commissioner is authorized to make advances to any State with which he has made an agreement pursuant to section 428(b) for the purpose of helping to establish or strengthen the reserve fund of the student loan insurance program covered by that agreement. If for any fiscal year a State docs not have a student loan insurance program covered by an agreement made pursuant to section 428(b), and the Commissioner determines after consultation with the chief executive officer of that State that there is no reasonable likelihood that the State will have such a student loan insurance program for such year, the Commissioner may make advances for such year for the same purpose to one or more nonprofit private institutions or organizations with which he has made an agreement pursuant to section 428(b) in order to enable students in the State to participate in a program of student loan insurance covered by such an agreement. The Commissioner may make advances under this subsection both to a State program (with which he has such an agreement) and to one or more nonprofit private institutions or organizations (with which he has such an agreement) in that State if he determines that such advances are necessary in order that students in each eligible institution have access through such institution to a student loan insurance program which meets the requirement of section 428(b) (1).

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“(2)“(2)

No advance shall me made, after June 30, 1968, unless matched by unequal amount from non-Federal sources. Such equal amount may

“Unencumbered non-Federal portion.”

include the unencumbered non-Federal portion of a reserve fund. As used in the preceding sentence, the term ‘unencumbered non-Federal portion’ means the amount (determined as of the time immediately preceding the making of the advance) of the reserve fund less the greater of (A) the sum of (i) advances made under this section prior to July 1, 1968, (ii) an amount equal to twice the amount of advances made under this section after June 30, 1968, and before the advance for purposes of which the determination is made, and (iii) the proceeds of earnings on advances made under this section, or (B) any amount which is required to he maintained in such fund pursuant to State law or regulation, or by agreement with lenders, as a reserve against the insurance of outstanding loans.

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“(3)“(3)

Advances pursuant to this subsection shall lie upon such terms and conditions (including conditions relating to the time or times of payment) consistent with the requirements of section 428(b) as the Commissioner determines will best carry out the purposes of this section. Advances made by the Commissioner under this subsection shall be repaid within such period as the Commissioner may deem to be appropriate in each case in the light of the maturity and solvency of the reserve fund for which the advance was made.

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“(b)“(b)

(1)(1)

The total of the advances to any State prior to July 1, 1968, pursuant to subsection (a) may not exceed an amount which bears the same ratio to 2½ per centum of $700,000,000 as the population of that State aged eighteen to twenty-two, inclusive, bears to the total population of all the States aged eighteen to twenty-two inclusive. The amount available, however, for advances to any State for each fiscal year ending prior to July 1, 1968, shall riot be less than $25,000, and any additional funds needed to meet this requirement shall be derived by proportionately reducing (but not below $25,000 per year) the amount available for advances to each of the remaining States. Advances to nonprofit private institutions and organizations prior to July 1, 1968, pursuant to subsection (a) may be in such amounts as the Commissioner determines will best achieve the purposes for which they are made, except that the sum of (1) advances to such institutions and organizations for the-benefit of students in any State plus (2) the amounts advanced to such State, may not exceed the maximum amount which may be advanced to that State pursuant to the first two sentences of this subsection.

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“(2)“(2)

The total of the advances from the sums appropriated pursuant to clause (4) (A) of section 421(b) to nonprofit private institutions and organizations for the benefit of students in any State and (B) to such State may not exceed an amount which bears the same ratio to such sums as the population of such State aged eighteen to twenty-two, inclusive, bears to the population of all the States aged eighteen to twenty-two, inclusive, but such advances may otherwise be in such amounts as the Commissioner’ determines will best achieve the purposes for which they are made. The amount available, how-ever, for advances to any State shall not be less than $25,000, and any additional funds needed to meet this requirement shall be derived by proportionately reducing (but not below $25,000) the amount available for advances to each of the remaining States.

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“(3)“(3)

For the purposes of this subsection, the population aged eighteen to twenty-two, inclusive, of each State and of all the States shall be determined by the Commissioner on the basis of the most recent satisfactory data available to him.

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“(c)“(c)

(1)(1)

From sums appropriated pursuant to section 421(b)(4) (B), the Commissioner shall advance to each State which has an agreement with the Commissioner under section 428(c) with respect to a student loan insurance program, an amount determined in accordance with paragraph (2) of this subsection to be used for the purpose of making payments under the State’s insurance obligations under such program.

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“(2)“(2)

(A)(A)

Except as provided in subparagraph (B), the amount to be advanced to each such State shall be equal to the greater of (i) $50,000, or (ii) 10 per centum of the principal amount insured by such agency on those loans on which the first payment of principal became due during the fiscal year immediately preceding the fiscal year in which the advance is made.

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“(B)“(B)

The amount of any advance determined according to subparagraph (A) of this paragraph shall be reduced by (i) the amount of any advance or advances made to such State pursuant to this subsection at an earlier date, and (ii) the amount or the unspent balance of the advances made to a State pursuant to subsection (a).

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“(C)“(C)

For purposes of subparagraph (B) the unspent balance of the advances made to a State pursuant to subsection (a) shall be that portion of the balance of the State’s reserve fund (remaining at the time of the State’s first request for an advance pursuant to this subsection) which bears the same ratio to such balance as the Federal advances made and not returned by such State, pursuant to subsection (a), bears to the total of all past contributions to such reserve fund from all sources (other than interest on investment of any portion of the reserve fund) contributed since the date such State executed an agreement pursuant to section 428(b).

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“(3)“(3)

The earnings, if any, on any investments of advances received pursuant to this subsection must be used for making payments under the State’s insurance obligations.

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“(4)“(4)

(A)(A)

No repayment of any advances made pursuant to this subsection shall be required until such time as the sum of the advances under this subsection exceeds 20 per centum of the State’s outstanding insurance obligation determined in accordance with subparagraph (B) of this paragraph.

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“(B)“(B)

For purposes of tills paragraph, a State’s outstanding insurance obligation shall be determined by subtracting from the total principal amount of loans insured by the State since it entered into an agreement pursuant to section 428 (b), the total principal amount of loans insured by such State which have been fully repaid by the borrower, the State itself, or the Commissioner, and loans which have been canceled.

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“(C)“(C)

At such time as advances pursuant to this subsection reach the level indicated in subparagraph (A) of this paragraph, the amount of any excess shall be paid over to the Commissioner in a lump sum at the beginning of each fiscal year for deposit in the fund established by section 431.

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“(5)“(5)

Advances pursuant to this subsection shall be made to a State—

“(A)“(A)

in the ease of a State which is actively carrying on a program under an agreement pursuant to section 428(b) which was entered into before the effective date of this subsection, upon such date as such State may request, but not before October 1, 1977, and on the same day of each of the two succeeding cal end a r years after the date so requested; and

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“(B)“(B)

in the case of a State which enters into an agreement pursuant to section 428(b) on or after the effective date of this subsection, upon such date as such State may request, but not before October 1, 1977, and on the same day of each of the four succeeding calendar years after the date so requested of the advance.

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“(6)“(6)

(A)(A)

If for any fiscal year a State does not have a student loan insurance program covered by an agreement made pursuant to section 428(b), and the Commissioner determines after consultation with the chief executive officer of that State that there is no reasonable likelihood that the State will have such a student loan insurance program for such year, the Commissioner may make advances pursuant to this subsection for such year for the same, purpose to one or more nonprofit private institutions or organizations with which lie has made an agreement pursuant to subsection (c), as well as subsection (b), of section 428 and subparagraph (B) of this paragraph in order to enable students in that State to participate in a program of student loan insurance covered by such agreements.

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“(B)“(B)

The Commissioner may enter into an agreement with a private

Agreement with private nonprofit institution or organization.

nonprofit institution or organization for purposes of this paragraph under which such institution or organization—

“(i)“(i)

agrees to establish within such State at least one office with sufficient staff to handle written and telephone inquiries from students, eligible lenders, and other persons in the State, to encourage, maximum commercial lender participation within the State, and to conduct periodic visits to at least the major eligible lenders within the State,

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“(ii)“(ii)

agrees that its insurance will not be denied any student because of his choice of eligible institutions or the student’s lack of need, and

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“(iii)“(iii)

certifies that it is neither an institution, nor has any substantial affiliation with an institution.

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“Sec. 423. “effects of adequate non-federal programs

(a)(a)

Except as provided in subsections (b) and (c), the

20 USC 1073.

Commissioner shall not issue certificates of insurance under section 429 to lenders in a State if he determines that every eligible institution has reasonable access in that State to a State or private nonprofit student loan insurance program which is covered by an agreement under section 428(b).

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“(b)“(b)

The Commissioner may issue certificates of insurance under section 429 to a lender in a State—

“(1)“(1)

for insurance of a loan made to a student borrower who does not, by reason of his residence, have access to loan insurance under the loan insurance program of such State (or under any private nonprofit loan insurance program which has received an advance under section 422 for the benefit of students in such State), or

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“(2)“(2)

for insurance of all of the loans made to student borrowers by a lender who satisfies the Commissioner that, by reason of the residence of such borrowers, such lender will not nave access to any single State or nonprofit private loan insurance program which will insure substantially all of the loans such lender intends to make to such student borrowers.

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“(c)“(c)

The Commissioner shall not deny, because of any provision of this section, a certificate, of insurance under section 429 to any eligible lender which is an eligible institution if such lender has previously executed an agreement with the Commissioner pursuant to section 433 of this part, unless the Commissioner determines, based upon studies and surveys satisfactory to him, that access to a loan by all eligible students who make an active, and diligent effort to obtain a loan under this part will be otherwise available. In order to carry out the provisions of the preceding sentence the Commissioner shall periodically assess the availability of loans to eligible, students through studies and surveys undertaken by him and through review of properly conducted studies and surveys made available to him.

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“Sec. 424. “scope and duration of federal loan insurance program

(a)(a)

The total principal amount of new loans made and

20 USC 1074.

installments paid pursuant to lines of credit (as defined in section 435) to students covered by Federal loan insurance under this part shall not exceed $1,400,000,006 for the fiscal year ending June 30, 1972, $1.600,000,000 for the fiscal year ending June 30, 1973, $1,800,000,000 for the fiscal year ending June 30, 1974, $2,000,000,000 for each of the fiscal years ending June 30, 1975, and 1976, and $2,000,000,000 for the period from July 1, 1976, to September 30, 1976, and for each of the succeeding fiscal years ending prior to October 1, 1981. Thereafter, Federal loan insurance pursuant to this part may be granted only for loans made (or for loan installments paid pursuant to lines of credit) to enable students, who have obtained prior loans insured under this part, to continue or complete their educational program; but no insurance may be granted for any loan made or installment paid after September 30, 1985.

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“(b)“(b)

The Commissioner may, if he finds it necessary to do so in order to assure an equitable distribution of the benefits of this pa it, assign, within the maximum amounts specified in subsection (a), Federal loan insurance quotas applicable to eligible lenders, or to States or areas, and may from time to time reassign unused portions of these quotas.

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“Sec. 425. “limitations on individual federally insured loans and on federal loan insurance

(a)(a)

(1)(1)

The total of loans made to a student in any academic year or its equivalent (as determined by the Commissioner) which may lie covered by Federal loan insurance under this part may not exceed $2,500 in the case of a student who has not successfully completed a program of undergraduate education, or $5,000 in the case of a graduate or professional student (as defined in regulations of the Commissioner), except—

“(A)“(A)

that in the case of a loan to a student who is or will be in his first year of a program of undergraduate education, and who has not previously enrolled in such a program which is made by an eligible lender as described in section 435(g)(1)(D) or which is made or originated (as defined in section 433(b) ) by an eligible institution, the loan may not exceed the lesser of $2,500 or 50 per centum of the estimated cost of attendance (calculated in accordance with the provisions of section 428(a) (2)(C)(i)),

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“(B)“(B)

that in the case of a loan made or originated (as defined in section 433(b)) by an eligible institution which is made to a student for his first academic year of postsecondary education, the loan may exceed $1,500 only if it is to be, disbursed in two or more installments none of which exceeds one-half of the loan, with the interval between the first and second of such installments being not less than one-third of the period of enrollment for which the student received the loan, and

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“(C)“(C)

in cases where the Commissioner determines, pursuant to regulations prescribed by him, that, a higher amount is warranted in order to carry out the purposes of this part with respect to students engaged in specialized training requiring exceptionally high cost of education.

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The annual insurable limit per student shall not be deemed to be exceeded by a line of credit under which actual payments by the lender to the borrower will not be made, in any year in excess of the annual limit.

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“(2)“(2)

The aggregate insured unpaid principal amount for all such insured loans made to any student shall not at any time exceed $7,500, in the case of any student who has not successfully completed a program of undergraduate education, and $15,000 in the case of any graduate or professional student (as defined by regulations of the Commissioner and including any loans which are insured by the Commissioner under this part, or by a State or nonprofit institution or organization with which the Commissioner has an agreement under section 428(b), made to such person before he became a graduate or professional student).

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“(b)“(b)

(1)(1)

(A)(A)

Except as provided in subparagraph (B), the insurance liability on any loan insured by the (Commissioner under this part shall be 100 per centum of the unpaid balance of the principal amount of the loan plus interest, except that—

“(i)“(i)

if, for any fiscal year, the total amount of payments under section 430 by the Commissioner to any eligible lender as described in section 435(g) (1) (D) exceeds 5 per centum of the sum of the loans made by such lender which are insured by the Commissioner and which were in repayment at the end of the preceding fiscal year, the insurance liability under this subsection for that portion of such excess which represents loans insured after the applicable date with respect to such loans, as determined under subparagraph (C), shall be equal to 90 per centum of the amount of such portion :

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“(ii)“(ii)

if, for any fiscal year, the total amount of such payments to such a lender exceeds 9 per centum of such sum, the insurance liability under this subsection for that portion of such excess which represents loans insured after the applicable date with respect to such loans, as determined under subparagraph (c), shall be equal to 80 per centum of the amount of such portion.

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“(B)“(B)

Notwithstanding subparagraph (A), the provisions of clauses (i) and (ii) shall not apply to an eligible lender as described in section 435(g) (1) (D) for the fiscal year in which such lender begins to carry on a loan program insured by the Commissioner, or for any of the four succeeding fiscal years.

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“(C)“(C)

The applicable date with respect to a loan made by an eligible lender as described in section 435(g) (1) (D) shall be—

“(i)“(i)

the 90th day after the adjournment of the next regular session of the appropriate State legislature which convenes after the date of enactment of the Education Amendments of 1976, or

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“(ii)“(ii)

if the primary source of lending capital for such lender is derived from the sale of bonds, and the constitution of the appropriate State prohibits a pledge of such State’s credit as security against such bonds, the day which is one year after such 90th day.

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“(2)“(2)

For the purposes of this subsection, the sum of the loans made by a lender which are insured by the Commissioner and which are in repayment shall be the original principal amount of loans made by such lender which are insured by the Commissioner reduced by (A) the amount the Commissioner has been required to pay to discharge his insurance obligations under this part, (B) the original principal amount of loans insured by the Commissioner which have been fully repaid, (C) the original principal amount insured on those loans for which payment of first installment of principal has not become due pursuant to section 427(a) (2) (B) or such first installment need not be paid pursuant to section 427 (a) (2) (C), and (D) the original principal amount of loans repaid by the Commissioner under section 437.

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“(3)“(3)

For the purposes of this subsection, payments by the Commissioner under section 430 to an assignee of the lender with respect to a loan shall be deemed payments made to such lender.

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“(4)“(4)

The full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under the provisions of section 430 or 437 of this part.”

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“Sec. 426. “sources of funds

Loans made by eligible lenders in accordance with this part shall be insurable by the Commissioner whether made from funds fully owned by the lender or from funds held by the lender in a trust or similar capacity and available for such loans.

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“Sec. 427. “eligibility of student borrowers and terms of federally insured student loans

(a)(a)

A loan by an eligible lender shall be insurable by the Commissioner under the provisions of this part only if—

“(1)“(1)

made to a student who (A) has been accepted for enrollment at an eligible institution or, in the case of a student already attending such institution, is in good standing there as determined by the institution, (B) is carrying at least one-half of the normal fulltime workload as determined by the institution, and (C) has agreed to notify promptly the holder of the loan concerning any change of address; and

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“(2)“(2)

evidenced by a note or other written agreement which—

“(A)“(A)

is made without security and without endorsement, except that if the borrower is a minor and such note or other written agreement executed by him would not, under the applicable law, create a binding obligation, endorsement may be required,

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“(B)“(B)

provides for repayment (except as provided in subsection (c)) of the principal amount of the loan in installments over a period of not less than live years (unless sooner repaid or unless the student, during the nine- to twelve-month period preceding the start of the repayment period, specifically requests that repayment be made over a shorter period) nor more than ten years beginning not earlier than nine months nor later than one year after the date on which the student ceases to carry at an eligible institution at least one-half the normal full-time academic workload as determined by the institution, except—

“(i)“(i)

as provided in clause (C) below,

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“(ii)“(ii)

that the period of the loan may not exceed fifteen years from the execution of the note or written agreement evidencing it,

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“(iii)“(iii)

that the note or other written instrument may contain such provisions relating to repayment in the event of default in the payment of interest or in the payment of the cost of insurance premiums, or other default by the borrower, as may be authorized by regulations of the Commissioner in effect at the time the loan is made, and

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“(iv)“(iv)

that the lender and the student, after the student ceases to carry at an eligible institution at least one-half the normal full-time academic workload as determined by the institution, may agree to a repayment schedule which begins earlier, or is of shorter duration, than required by this subparagraph, except that in the event a student has requested and obtained a repayment period of less than five years, he may at any tune prior to the total re-payment of the loan, have the repayment period extended so that the total repayment period is not less than five ye are,

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“(C)“(C)

provides that periodic installments of principal need not be paid, but interest shall accrue and be paid, during any period (i) during which the borrower is pursuing a full-time course of study at an ‘eligible institution’, or is pursuing a course of study pursuant to a graduate fellowship program approved by the Commissioner, (ii) not in excess of three years during which the borrower is a member of the Armed Forces of the United States, (iii) not in excess of three years during which the borrower is in service as a volunteer under the Peace Corps Act, (iv) not in excess of three years during which the borrower is in service as a full-time volunteer under the Domestic Volunteer Service Act of 1973, or (v) during a

42 USC 4951 note.

single period, not in excess of twelve months, at the request of the borrower, during which the borrower is seeking and unable to find full-time employment, and any such period shall not be included in determining the ten-year period or the fifteen-year period provided in clause (B) above,

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“(D)“(D)

provides for interest, on the unpaid principal balance of the loan at a yearly rate, not exceeding the applicable maximum rate prescribed and defined by the Secretary (within the limits set forth in subsection (b)) on a national, regional, or other appropriate basis, which interest shall lie payable in installments over the period of the loan except that, if provided in the note or other written agreement, any interest payable by the student may be deferred until not later than the date upon which repayment of the first installment of principal falls due, in which case interest that has so accrued during that period may be added on that date to the principal,

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“(E)“(E)

provides that the lender will not collect or attempt to collect from the borrower any portion of the interest on the note which is payable by the Commissioner under this part, and that the lender will enter into such agreements with the Commissioner as may be necessary for the purposes of section 437,

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“(F)“(F)

entitles the student borrower to accelerate without penalty repayment of the whole or any part of the loan,

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“(G)“(G)

provides that, in the case of each loan insured by the program, the eligible institution attended by the borrower at the time of the loan will be notified of such insurance and the name of the lender making the loan, and such notification will be made either by (i) the prompt transmittal of such information to the institution by the insurer or the lender, or (ii) a requirement of the insurer, as a condition of its insurance, that the lender shall transmit any checks for the proceeds of such loan directly to the eligible institution for delivery to the borrower;

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“(H)“(H)

the funds borrowed by a student are disbursed by check payable to the order and requiring the endorsement of such student, and

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“(I)“(I)

contains such other terms and conditions, consistent with the provisions of this part and with the regulations issued by the Commissioner pursuant to this part , as may be agreed upon by the parties to such loan, including, if agreed upon, a provision requiring the borrower to pay the lender, in addition to principal and interest, amounts equal to the insurance premiums payable by the lender to the Commissioner with respect to such loan.

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“(b)“(b)

No maximum rate of interest prescribed and defined by the Secretary for the purposes of clause (2) (D) of subsection (a) may exceed 7 per centum per annum on the unpaid principal balance of the loan.

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“(c)“(c)

The total of the payments by a borrower during any year of any repayment period with respect to the aggregate amount of all loans to that borrower which are insured under this part shall not unless the borrower and the lender otherwise, agree, be less than $360 or the balance of all of such loans (together with interest thereon), whichever amount is less, except that in the case of a husband and wife, both of whom have such loans outstanding, the total of the combined payments for such a couple during any year shall not be less than $360 or the balance of all such loans, whichever is less.

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“Sec. 428. “federal payments to reduce student interest costs

(a)(a)

(1)(1)

Each student who has received a loan for study at an eligible institution—

“(A)“(A)

which is insured by the Commissioner under this part;

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“(B)“(B)

which was made under a State student loan program (meeting criteria prescribed by the Commissioner), and which was contracted for, and paid to the student, within the period specified by paragraph (5): or

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“(C)“(C)

which is insured under a program of a State or of a non-profit private institution or organization which was contracted for, and paid to the student, within the period specified in paragraph (5), and which—

“(i)“(i)

in the case of a loan insured prior to July 1, 1967, was made by an eligible lender and is insured under a program which meets the requirements of subparagraph (E) of subsection (b) (1) and provides that repayment of such loan shall be in installments beginning not earlier than sixty days after the student ceases to pursue a course of study (as described in subparagraph (D) of subsection (b) (1)) at an eligible institution, or

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“(ii)“(ii)

in the case of a loan insured after June 30, 1967, is insured under a program covered by an agreement made pursuant to subsection (b),

#

#

shall be entitled to have paid on his behalf and for his account to the holder of the loan a portion of the interest on such loan under circumstances described in paragraph (2).

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“(2)“(2)

(A)(A)

Each student qualifying for a portion of an interest payment under paragraph (1) shall—

“(i)“(i)

have provided to the lender a statement from the eligible institution, at which the student has been accepted for enrollment, or at which he is in attendance in good standing (as determined by such institution), which—

“(I)“(I)

sets forth such student’s estimated costs of attendance and

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“(II)“(II)

sets forth such student’s estimated financial assistance; and

#

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“(ii)“(ii)

meet the requirements of subparagraph (B),

#

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“(B)“(B)

For the purposes of clause (ii) of subparagraph (A), a student shall qualify for a portion of an interest payment under paragraph (1) if such student’s adjusted family income at the time of execution of the note or written agreement evidencing such loan—

“ (i)

is less than $25,000; or

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“(ii)“(ii)

is equal to or greater than $25,000 and the eligible institution has provided the lender with a statement evidencing a determination of need and recommending a loan in the amount of such need.

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“(C)“(C)

For the purposes of paragraph (1) and this paragraph—

Definitions.

“(i)“(i)

a student’s estimated cost of attendance means, for the period for which the loan is sought, the tuition and fees applicable to such student together with the institution’s estimate of other expenses reasonably related to attendance at such institution, including, but not limited to, the cost of room and board, reasonable commuting costs, and costs for books;

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“(ii)“(ii)

a student’s estimated financial assistance means, for the period for which the loan is sought, the amount of assistance such student will receive under parts A, C, and E of this title, plus other scholarship, grant, or loan assistance;

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“(iii)“(iii)

the term ‘eligible institution’ when used with respect to a student is the eligible institution at which the student has been accepted for enrollment or, in the ease of a student who is in attendance at such an institution, at which the student is in good standing (as determined by such institution);

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“(iv)“(iv)

the determination of need and the amount of a loan recommended by an eligible institution under subparagraph (B) (ii) with respect to a student shall be determined by subtracting from the estimated cost of attendance at such institution the total of the expected family contribution with respect to such student (as determined by means other than one formulated by the Commissioner under subpart 1 of part A of this title) plus any other resources or student financial assistance reasonably available to such student

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“(D)“(D)

For the purposes of this paragraph, the adjusted family income of a student shall be determined pursuant to regulations of the Commissioner in effect at the time of the execution of the note, or written agreement evidencing the loan. Such regulations shall provide for taking into account such factors, including family size, as the Commissioner deems appropriate. In the absence of fraud by the lender, such determination of the need of a student under this paragraph shall be final insofar as it concerns the obligation of the Commissioner to pay the holder of a loan a portion of the interest on the loan.

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“(3)“(3)

(A)(A)

Except as provided in paragraph (8), the portion of the interest on a loan which a student is entitled to have paid on his behalf and for his account to the holder of the loan pursuant to paragraph (1) of this subsection shall be equal to the total amount of the interest on the unpaid principal amount of the loan which accrues prior to the beginning of the repayment period of the loan, or which accrues during ^a period in which principal need not be paid (whether or not such principal is in fact paid) by reason of a provision described in subsection (b) (1) (M) of this section or in section 427(a)(2) (C); but, except as provided in paragraph (8) of this subsection, such portion of the interest on a loan shall not exceed, for any period, the amount of the interest on that, loan which is payable by the student after taking into consideration the amount of any interest on that loan which the student is entitled to have paid on his behalf for that period under any State or private loan insurance program. The holder of a loan with respect to which payments are required to be made under this section shall he deemed to have a contractual right, as against the United States, to receive from the Commissioner the portion of interest which has been so determined. The Commissioner shall pay this portion of the interest to the holder of the loan on behalf of and for the account of the borrower at such times as may be specified in regulations in force when the applicable agreement entered into pursuant to subsection (b) was made, or, if the loan was made by a State or is insured under a program which is not covered by such an agreement, at such times as may be specified in regulations in force at the time the loan was paid to the student.

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“(B)“(B)

If (i) a. State student loan insurance program is covered by an agreement under subsection (b), (ii) a statute of such State limits the interest rate on loans insured by such program to a rate which is less than 7 per centum per annum on the unpaid principal balance, and (iii) the Commissioner determines that section 428(d) does not make such statutory limitation inapplicable and that such statutory limitation threatens to impede the carrying out of the purposes of this part, then he may pay an administrative cost allowance to the holder of each loan which is insured under such program and which is made during the period beginning on the sixtieth day after the date of

20 USC 1001 note.

enactment of the Higher Education Amendments of 1968 and ending 120 days after the adjournment of such State’s first regular legislative session which adjourns after January 1, 1969. Such administrative cost allowance, shall be paid over the term of the loan in an amount per annum (determined by the Commissioner) which shall not exceed 1 per centum of the unpaid principal balance of the loan.

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“(4)“(4)

Each bolder of a loan with respect to which payments of interest are required to be made by the Commissioner shall submit to the Commissioner, at such time or times and in such manner as he may prescribe, statements containing such information as may be required by or pursuant to regulation for the purpose of enabling the Commissioner to determine the amount of the payment which he must make with respect to that loan,

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“(5)“(5)

The period referred to in subparagraphs (B) and (C) of paragraph (I) of this subsection shall begin on the date of enactment of this Act and end at the close of September 30, 1981, except that, in the case of a loan made or insured under a student loan or loan insurance program to enable a student who has obtained a prior loan made or insured under such program to continue his educational program, such period shall end at the close of September 30, 1985.

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“(6)“(6)

No payment may be made under this section with respect to the interest on a loan made from a student loan fund established under title II of the National Defense Education Act of 1958 or part E of

20 USC 401 note, 20 USC 1088.

this title.

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“(7)“(7)

Nothing in this or any other Act shall be construed to prohibit or require, unless otherwise specifically provided by law, a lender to evaluate the total financial situation of a student making application for a loan under this part, or to counsel a student with respect to any such loan, or to make a decision based on such evaluation and counseling with respect to the dollar amount of any such Joan, ,

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“(8)“(8)

(A)(A)

In the case of any eligible lender (other than an eligible institution or an agency or’instrumentality of a State), which is approved by the Commissioner pursuant to subparagraph (B) of this paragraph for the purpose of authorizing multiple disbursements and which enters into a binding agreement with a student to make a loan—

“(i)“(i)

for which the student is entitled to have a portion of the interest paid on his behalf under this section, and

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“(ii)“(ii)

the proceeds of which loan are to be paid to the student in multiple disbursements over the period of enrollment for which the loan is made, but not to exceed twelve months, the amount of the interest payment and the amount of any special allowance payment to be paid under section 438 shall be determined as if the entire amount to be made available for that period of enrollment had been disbursed on the date on which the first installment thereof was disbursed, and any increase in the rate of interest on the loan attributable to such multiple disbursements shall not be deemed to violate any provision of this part relating to the maximum rate of interest on such loan. The provisions of this paragraph shall apply only in the case of loans paid in multiple disbursements, in accordance with regulations of the Commissioner, based on the need of the student for the proceeds of such loan over the course of the academic year.

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“(B)“(B)

The Commissioner may approve an eligible lender for the

Eligible lender.

purposes of this paragraph if he determines—

“(i)“(i)

that such lender is making or will be mailing a substantial volume of loans on which an interest subsidy is payable under this section, and

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“(ii)“(ii)

that such lender has sufficient experience and administrative capability in processing such loans to enable the lender to make such multiple disbursements in accordance with regulations issued by the Commissioner under this subparagraph.

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“(9)“(9)

With respect to any loan for which a portion of the interest is payable under this section, in the case of a student attending an eligible institution which is located in other than a State, the determinations to be made (except determinations of good standing) and the statement to be provided by such institution under paragraph (2) (A) (i) and (2) (B) (ii) of this subsection shall be made and provided by (A) the Commissioner in the case of a loan described by paragraph (1) (A), (B) the State in the case of a loan described by paragraph (1) (B), or (C) the State or a nonprofit private institution or organization as the case may be, in the case of a loan described by paragraph (i)(C).

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“(b)“(b)

(1)(1)

Any State or any nonprofit private institution or organization

Agreement with Commissioner.

may enter into an agreement with the Commissioner for the purpose of entitling students who receive loans which are insured under a student loan insurance program of that State, institution, or organization to have made on their behalf the payments provided for in subsection (a) if the Commissioner determines that the student loan insurance program—

“(A)“(A)

authorizes the insurance of not less than $1,000 nor more than $2,500 in the ease of a student who has not successfully completed a program of undergraduate education, or $5,000 in the case of a graduate or professional student (as defined in regulations of the Commissioner), except—

“(i)“(i)

that the program may not authorize the insurance of a loan which is made by an eligible lender as described in section 435(g)(1)(D) or which is made or originated (as defined in section 433(b)) by an eligible institution to a student who has not successfully completed a program of undergraduate education in an amount in excess of $2,500 or 50 per centum of the estimated cost of attendance (calculated in accordance with section 428(a) (2)(C)(i)),

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“(ii)“(ii)

that the program may not authorize the insurance of a loan in excess of $1,500 for an academic year which is made or originated (as defined in section 433(b)) by an eligible institution, and is made to a student for his first academic year of post secondary education, unless the loan is to be disbursed in two or more installments, none of which exceeds one-half of the loan, with the interval between the first and second of such installments being not less than one-third of the period of enrollment for which the student received the loan, and

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“(iii)“(iii)

in cases where the Commissioner determines, pursuant to regulations prescribed by him, that a higher amount is warranted in order to carry out the purposes of this part with respect to students engaged in specialized training requiring exceptionally high costs of education, but the annual insurable limit per student shall not be deemed to be exceeded by a line of credit under which actual payments by the lender to the borrower will not be made in any years in excess of the annual limit:

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“(B)“(B)

provides that the aggregate insured unpaid principal amount for all such insured loans made to any student shall not at any time exceed $7,500, in the case of any student who has not successfully completed a program of undergraduate education, and $15,000 in the ease of any graduate or professional student (as defined by regulations of the Commissioner and including any loans which are insured by the Commissioner under this part, or by a State or nonprofit institution or organization with which the Commissioner has an agreement under section 428(b), made to such person before he became a graduate or professional student);

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“(C)“(C)

authorizes the insurance of loans to any individual student for at least six academic years of study or their equivalent (as determined under regulations of the Commissioner);

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“(D)“(D)

provides that (i) the student borrower shall be entitled to accelerate without penalty the whole or any part, of an insured loan, (ii) except as provided in subparagraph (M) of this paragraph, the period of any insured loan may not exceed fifteen years from the date of execution of the note or other written evidence of the loan, and (iii) the note or other written evidence of any loan, may contain such provisions relating to repayment in the event of default by the borrower as may be authorized by regulations of the Commissioner in effect at the time such note or written evidence was executed;

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“(E)“(E)

subject to subparagraphs (D) and (L) of this paragraph and except as provided by subparagraph (M) of this paragraph, provides that repayment of loans shall be in installments over a period of not less than five years (unless the student, during the nine- to twelve-month period preceding the start of the repayment period, specifically requests that repayment be made over a shorter period) nor more than ten years beginning not earlier than nine months nor later than one year after the student ceases to pursue a full-time course of study at an eligible institution, except—

“(i)“(i)

that, if the program provides for the insurance of loans for part-time study at eligible institutions, the program shall provide that such repayment period shall begin not earlier than nine months nor later than one year after the student ceases to carry at an eligible institution at least one-half the normal full-time academic workload as determined by the institution;

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“(ii)“(ii)

that the lender and the student, after the student ceases to carry at an eligible institution at least one-half the normal full-time academic workload, as determined by the institution, may agree to a repayment schedule which begins earlier, or is of shorter duration, than required by this sub-paragraph, except that in the event a student has requested and obtained a repayment period of less than five years, he may at any time prior to the total repayment of the loan have the repayment period extended so that the total repayment period is not less than five years;

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“(F)“(F)

authorizes interest on the unpaid balance of the loan at a yearly rate not in excess of 7 per centum per annum on the unpaid principal balance of the loan (exclusive of any premium for insurance which may be passed on to the borrower);

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“(G)“(G)

insures not less than 80 per centum of the unpaid principal of loans insured under the program;

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“(H)“(H)

does not provide for collection of an excessive insurance premium;

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“(I)“(I)

provides that the benefits of the loan insurance program will not be denied any student who is eligible for interest benefits under section 428(a) (1) and (2) except in the case of loans made by an instrumentality of a State or eligible institution;

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“(J)“(J)

provides that a student may obtain insurance under the program for a loan for any year of study at an eligible institution;

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“(K)“(K)

in the case of a State program, provides that such State program is administered by a single State agency, or by one or more nonprofit private institutions or organizations under supervision of a single State agency;

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“(L)“(L)

provides that the total of the payments by a borrower during any year of any repayment period with respect to the aggregate amount of all loans to that borrower which are insured under this part shall not be less than $360 or the balance of all such loans (together with interest thereon), whichever amount is less, unless the borrower and the lender otherwise agree, except that, in the case of a husband and wife, both of whom have such loans outstanding, the total of the combined payments for such a couple during any year shall not be less than $360 or the balance of all such loans, whichever is less;

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“(M)“(M)

provides that, periodic installments of principal need not be paid, but interest shall accrue and be paid during any period (i) during which the borrower is pursuing a full-time course of study at an eligible institution, or is pursuing a course of study pursuant to a graduate fellowship program approved by the Commissioner, (ii) not in excess of three years during which the borrower is a member of the Armed Forces of the United States, (iii) not in excess of thi’ee years during which the borrower is in service as a volunteer under the Peace Corps Act, (iv) not in excess of three years during which the borrower

22 USC 2501 note.

42 USC 49S1 note.

is in service as a full-time volunteer under the Domestic Volunteer Service Act of 1973, or (v) during a single period, not in excess of twelve months, at the request of the borrower, during which the borrower is seeking and unable to find full-time employment;

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“(N)“(N)

provides that in the case of each loan insured by the program that the eligible institution attended by the borrower at the time of the loan will be notified of such insurance and the name of the lender making the loan, and such notification will be made either by (i) the prompt transmittal of such information to the institution by the insurer or the lender, or (ii) a requirement of the insurer, as a condition of its insurance, that the lender shall transmit any checks for the proceeds of such loan directly to the eligible institution for delivery to the borrower;

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“(O)“(O)

provides that funds borrowed by a student are disbursed by check payable to the order and requiring the endorsement of such student;

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“(P)“(P)

provides that the borrower shall, within four months after ceasing to carry at an eligible institution at least one-half the normal full-time academic workload as determined by the institution, contact the holder of his loan to negotiate the terms of his repayment obligations, and

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“(Q)“(Q)

requires the borrower to promptly notify the holder of the loan concerning any change of address.

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“(2)“(2)

Such an agreement shall—

“(A)“(A)

provide that the holder of any such loan will be required to submit to the Commissioner, at such time or times and in such manner as he. may prescribe, statements containing such information as may be required by or pursuant to regulation for the purpose of enabling the Commissioner to determine the amount of the payment which he must make with respect to that loan;

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“(B)“(B)

include such other provisions as may lie necessary to protect the financial interests of the United States and promote the purposes of this part, including such provisions as may be necessary for the purpose of section 437, and as are agreed to by the Commissioner and the State or nonprofit private organization or institution, as the case may be; and

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“(C)“(C)

provide for making such reports, in such form and containing such information, as the Commissioner may reasonably require to carry out his function under this part, and for keeping such records and for affording such access thereto as the Commissioner may find necessary to assure the correctness and verification of such reports.

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“(c)“(c)

(1)(1)

(A)(A)

The Commissioner may enter into a guaranty agreement with any State or any nonprofit private institution or organization with which he has an agreement pursuant to subsection (b), whereby the Commissioner shall undertake to reimburse it, under such terms and conditions as he may establish, with respect, to losses (resulting from the default of the student borrower) on the unpaid balance of the principal and accrued interest of any insured loan with respect to which a portion of the interest is payable by the Commissioner under subsection (a), or would be payable under such subsection but for the borrower’s lack of need. Except as provided in subparagraph (B) of this paragraph and in paragraph (7), the amount to be paid a State, or nonprofit private institution or organization as reimbursement under this subsection shall be equal to 80 per centum of the amount expended by it in discharge of its insurance obligation incurred under its loan insurance program.

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“(B)“(B)

Any State or any nonprofit private institution or organization which has entered into a supplementary agreement under section 428A of this Act whereby the Commissioner agrees to reimburse the State or nonprofit private institution or organization, under such terms and conditions as he may establish, with respect to losses (resulting from the default of the student borrower) on the unpaid balance of the principal and accrued interest of any such insured loan in an amount equal to 100 per centum of the amount expended by it in the discharge of its insurance obligation incurred under its loan insurance program, except that—

“(i)“(i)

if, for any fiscal year, the amount of such reimbursement payments by the Commissioner under this subsection exceeds 5 per centum of the loans which are insured by such institution or organization under such program and which were in repayment at the end of the preceding fiscal year, the amount to be paid as reimbursement under this subsection for such excess shall be equal to 90 per centum of the amount of such excess; and

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“(ii)“(ii)

if, for any fiscal year, the amount of such reimbursement payments, exceed 9 per centum of such loans, the amount to be paid as reimbursement under this subsection for such excess shall be equal to 80 per centum of the amount of such excess.

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“(C)“(C)

For purposes of this subsection, the amount of loans of a State or nonprofit private institution or organization which are in repayment shall be the original principal amount of loans insured by it reduced by (i) the amount the insurer has been required to pay to discharge its insurance obligations under this part, (ii) the original principal amount of loans insured by it which have been fully repaid, (iii) the original principal amount insured on those loans for which payment of the first installment of principal has not become due pursuant to section 428(b) (1) (E) or such first installment need not be paid pursuant to section 428(b) (1) (M), and (iv) the original principal amount of loans repaid by the Commissioner under section 437.

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“(2)“(2)

The guaranty agreement—

“(A)“(A)

shall set forth such administrative and fiscal procedures as may be necessary to protect the United States from the risk of unreasonable loss thereunder, to insure proper and efficient administration of the loan insurance program, and to assure that due diligence will be exercised in the collection of loans insured under the program;

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“(B)“(B)

shall provide for making such reports, in such form and

Reports.

containing such information, as the Commissioner may reasonably require to carry out his functions under this subsection, and for keeping such records and for affording such access thereto as the Commissioner may find necessary to assure the correctness and verification of such reports;

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“(C)“(C)

shall set forth adequate assurance that, with respect to so much of any loan insured under the loan insurance program as may be guaranteed by the Commissioner pursuant to this subsection, the undertaking of the Commissioner under the guaranty agreement is acceptable in full satisfaction of State law or regulation requiring the maintenance of a reserve;

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“(D)“(D)

shall provide that if, after the Commissioner has made payment under the guaranty agreement pursuant to paragraph (1) of this subsection with respect to any loan, any payments are made in discharge of the obligation incurred by the borrower with respect to such loan (including any payments of interest accruing on such loan after such payment by the Commissioner), there shall be paid over to the Commissioner ( for deposit in the fund established by section 431) such proportion of the amounts of such payments as is determined (in accordance with paragraph (6)) to represent his equitable share thereof, but shall not otherwise provide for subrogation of the United States to rights of any insurance beneficiary: Provided, That, except as the Commissioner may otherwise by or pursuant to regulation provide, amounts so paid by a borrower on such a loan shall be first applied in reduction of principal owing on such loan;

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“(E)“(E)

shall set forth adequate assurance that an amount equal to each payment made under paragraph (1) will be promptly deposited in or credited to the accounts maintained for purposes of section 422(c); and

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“(F)“(F)

may include such other provisions as may be necessary to promote the purposes of this part.

#

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“(3)“(3)

To the extent provided in regulations of the Commissioner, a guaranty agreement under this subsection may contain provisions which permit such forebearance for the benefit of the student borrower as may be agreed upon by the parties to an insured loan and approved by the insurer.

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“(4)“(4)

For purposes of this subsection, the terms ‘insurance beneficiary’ and ‘default’ shall have the meanings assigned to them by section 430(e).

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“(5)“(5)

In the ease of any guaranty agreement entered into prior to September 1, 1969, with a State or nonprofit private institution or organization with which the Commissioner has in effect on that date an agreement pursuant to subsection (b) of this section, or section

20 USC 981 note.

9(b) of the National Vocational Student Loan Insurance Act of 1965, made prior to the date of enactment of this subsection, the Commissioner may, in accordance with the terms of this subsection, undertake to guarantee loans described in paragraph (1) which are insured by such State, institution, or organization and are outstanding on the date of execution of the guaranty agreement, but only with respect to defaults occurring after the execution of such guaranty agreement or, if later, after its effective dale.

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“(6)“(6)

(A)(A)

For the purpose of paragraph (2) (D) the Commissioner’s equitable share of payments made by the borrower pursuant to such paragraph shall be that portion of the payments remaining after the State or the nonprofit private institution or organization with which t he Commissioner has an agreement under this subsection has deducted from such payments (i) a percentage amount equal to the complement of the reinsurance percentage in effect when payment under the guaranty agreement was made with respect to the loan and (ii) an amount equal to the administrative costs of collection of the loan and Hie administrative costs of preclaims assistance for default prevention (us such terms are defined in subparagraph (B) of this subsection) reimbursed pursuant to subsection (f), to the extent such costs do not exceed 30 per centum of such payments.

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“(B)“(B)

For the purpose of this paragraph, the term—

“(i)“(i)

‘administrative costs of collection of the loan’ means any administrative costs incurred by a guaranty agency which are directly related to the collection of the loan on which a default claim has been paid to the participating lender, including the attributable compensation of collection personnel (and in the case of personnel who perform several functions for such an agency only the portion of compensation attributable to the collection activity), attorney’s fees, fees paid to collection agencies, postage, equipment, supplies, telephone and similar charges, but does not include the overhead costs of such agency whether or not attributable and

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“(ii)“(ii)

‘administrative costs of proclaim assistance for default prevention’ means any administrative costs incurred by a guaranty agency which 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 the attributable compensation of appropriate personnel (and in the case of personnel who perform several functions for such an agency only the portion of compensation attributable to the collection activity), fees paid to locate a missing borrower, postage, equipment, supplies, telephone and similar charges, but does not include the overhead costs of such agency whether or not attributable,

#

Regulation.

subject to such additional criteria as the Commissioner may by regulation prescribe.

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“(7)“(7)

(A)(A)

Notwithstanding paragraph (1)(B), the amount to be paid a State or a nonprofit private institution or organization for any fiscal year—

“(i)“(i)

which begins on or after the effective date of this paragraph; and

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“(ii)“(ii)

which is either the fiscal year in which such State, institution, or organization begins to actively carry on a student loan insurance program which is subject to a guarantee agreement under this subsection, or is one of the four succeeding fiscal years, shall be 100 per centum of the amount expended by such State, organization, or institution in discharge of its insurance obligation insured under such program.

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“(B)“(B)

The Commissioner shall continuously monitor the operations of those States and nonprofit private institutions or organizations to which the provisions of subparagraph (A) are applicable and revoke the, application of such subparagraph to any such State or nonprofit private institution or organization which he determines has not exercised reasonable prudence in the administration of such program.

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#

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“(d)“(d)

No provision of any law of the United States (other than sections 427 (a) (2) (D) and 427 (b) of this Act) or of any State (other than a statute applicable principally to such State’s student loan insurance program) which limits the rate or amount of interest payable on loans shall apply to a loan—

“(1)“(1)

which bears interest (exclusive of any premium for insurance) on the unpaid principal balance at a rate not in excess of 7 per centum per annum, and

#

“(2)“(2)

which is insured (A) by the United States under this part, or ( B ) by a State or nonprofit private institution or organization under a program covered by an agreement made pursuant to subsection (b) of this section.

#

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“(e)“(e)

(1)(1)

Each eligible institution shall be eligible to receive from the Commissioner the payment of $10 per academic year for each student enrolled in that institution who is in receipt of a loan described in paragraph (1) of subsection (a) of this section, for that year. Payments received by an institution under this subsection shall be used first by the institution to carry out the provisions of section 493A of this Act and then for such additional administrative costs as that institution determines necessary.

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“(2)“(2)

There are authorized to be appropriated such sums as may be necessary to carry out the provisions of this subsection. If the sums appropriated for any fiscal year for making payments under this subsection are not sufficient to pay in full the amounts provided for in paragraph (1), then such amount will be ratably’ reduced. In case additional funds become available for making payments for any fiscal year during which the preceding sentence has been applied, such reduced amounts shall be increased on the same basis as they were reduced.

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“(f)“(f)

(1)(1)

(A)(A)

The Commissioner is authorized to make payments in accordance with the provisions of this paragraph to any State or any nonprofit private institution or organization with which he has an agreement under subsection (b) of this section, for the purposes of—

“(i)“(i)

the administrative costs of promotion of commercial lender participation;

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“(ii)“(ii)

the administrative costs of collection of loans;

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“(iii)“(iii)

the administrative costs of preclaims assistance for default prevention; or

#

“(iv)“(iv)

other such costs related to the student loan insurance program subject to such agreement.

#

The total amount of payments for any fiscal year made under this paragraph shall not exceed one-half of 1 per centum of the total principal amount, of the loans upon which insurance was issued under this part during such fiscal year by such State, or institution or organization. If the sums appropriated for any fiscal year for making payments under this paragraph are not sufficient to pay in full the amounts provided for which such States, institutions, and organizations are, eligible, then such amount will be ratably reduced. In case additional funds become available for making payments for any fiscal year during which the preceding sentence has been applied, such reduced amounts shall be increased on the same basis as they were reduced.

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“(B)“(B)

Each State or nonprofit, private institution or organization to which subparagraph (A) of this paragraph applies shall spend not less than % of the payments received pursuant to this paragraph on the purposes described in clause (i) or subparagraph (A), not less than % of such payments on the purposes described in clauses (ii) and (iii) of subparagraph (A), and the remaining amount, of such payments on the purpose described in clause (iv) of such subparagraph.

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“(2)“(2)

(A)(A)

The Commissioner is authorized to make payments in accordance with the provisions of this paragraph to any State or any nonprofit private institution or organization with which he has a supplemental guaranty agreement under section 428A(a) (2) of this Act for the purposes of—

“(i)“(i)

the administrative costs of promotion of commercial lender participation;

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“(ii)“(ii)

the administrative costs of collection of loans;

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“(iii)“(iii)

the administrative costs of preclaims assistance for default prevention; or

#

“(iv)“(iv)

other such costs related to the student loan insurance program subject to such agreement.

#

The total amount of payments for any fiscal year made under this paragraph shall not exceed an additional one-half of 1 per centum of the total principal amount of the loans upon which insurance was issued under this part during such fiscal year by such State, or institution or organization. If the sums appropriated for any fiscal year for making payments under this paragraph are not sufficient to pay in full the amounts provided for which such States, institutions, and organizations are eligible, then such amount, will be ratably reduced. In case additional funds become available for making payments for any fiscal year during which the preceding sentence has been applied, such reduced amounts shall be increased on the same basis as they were reduced.

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“(B)“(B)

The provisions of subparagraph (B) of paragraph (1) shall apply to any payments made under subparagraph (A) of this paragraph.

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“(3)“(3)

For the purpose of this subsection, the term—

“(A)“(A)

‘administrative costs of promotion of commercial lender participation’ means any administrative costs incurred by an insurer which are directly related to supervising, training, or informing eligible lenders or prospective eligible lenders or inducing such lenders to improve or expand their program participation, and such costs may include (i) the, costs of planning and executing instructional seminars and the costs of attending other meetings with lenders, (ii) the costs of obtaining or producing instructional or promotional materials or equipment for distribution to, or use with, lenders, (iii) postage costs associated with the distribution of instructional or promotional materials to lenders, (iv) an appropriate share of the costs of establishing branch offices to serve the needs of lenders which are geographically distant from such insurer’s primary business location, and (v) an appropriate share of the compensation of personnel whose primary responsibility is the training, supervising, or recruiting of lenders, but not including personnel whose primary responsibilities are the performing or supervising such duties as relate to the routine processing of borrower applications for loans or the maintenance of supporting records but in no case shall any such costs include any overhead expenses of such insurer associated with the insurer’s primary business location.

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“(B)“(B)

‘administrative, costs of collection or loans’ means any administrative costs incurred by a guaranty agency which are directly related to the collection of loans on which default claims have been paid to participating lenders, including the compensation of collection personnel (and in the case of personnel who perform several functions for such an agency only the portion of compensation attributable to collection activities), attorney’s fees, fees paid to collection agencies, postage, equipment, supplies, telephone and similar charges, but does not include the overhead costs of such agency, and

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“(C)“(C)

‘administrative costs of preclaim assistance for default prevention’ means any administrative costs incurred by a guaranty agency which are directly related to providing collection assistance to lenders on delinquent loans, prior to the loans being legally in a default status, including the compensation of appropriate personnel (and in the case of personnel who perform several functions for such an agency only the portion of compensation attributable to collection activities) fees paid to locate missing borrowers, postage, equipment, supplies, telephone and similar charges, but does not include the overhead costs of such agency,

#

subject to such additional criteria as the Commissioner may by regulation

Regulation.

prescribe.

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“(4)“(4)

(A)(A)

No payment may be made under paragraph (1) of this

Application.

subsection unless the State or the nonprofit private institution or organization submits to the Commissioner an application at Such time, at least annually, in such manner, and containing or accompanied by such information, as the Commissioner may reasonably require. Each such application shall—

“(i)“(i)

contain provisions designed to demonstrate the capability of carrying out a necessary and successful program of collection of and preclaim assistance for the loan program subject to that agreement;

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“(ii)“(ii)

set forth an estimate of the costs which are eligible, for payment under the provisions of this subsection;

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“(iii)“(iii)

provide for such administrative and fiscal procedures, including an audit, as are necessary to carry out the provisions of this subsection; and

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“(iv)“(iv)

set forth assurances that the State, or the nonprofit private institution or organization will furnish such data and information, including where necessary estimates, as the Commissioner may reasonably require to carry out the provisions of this subsection.

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“(B)“(B)

No payment may be made under paragraph (2) of this subsection

Application.

unless the State or the nonprofit private institution or organization submits to the Commissioner an application, at such time, at least annually, in such manner, and containing or accompanied by such information as the Commissioner may reasonably require. Each such application shall—

“(i)“(i)

set forth assurances that the student loan insurance program subject to the supplemental guaranty agreement complies with clauses (A) through (F) of paragraph (2) of section 428A

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“(ii)“(ii)

contain provisions designed to demonstrate the capability of carrying out a necessary and successful program of collection of and preclaim assistance for the loan program subject to that agreement;

#

“(iii)“(iii)

set forth an estimate of the costs which are eligible for payment under the provisions of this subsection;

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“(iv)“(iv)

provide for such administrative and fiscal procedures, including an audit, as are necessary to carry out the provisions of this subsection; and

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“(v)“(v)

set forth assurances that the State or the nonprofit private institution or organization will furnish such data and information, including where necessary estimates, as the Commissioner may reasonably require to carry out the provisions of this subsection.

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“(g)“(g)

If a nonprofit private institution or organization (1) applies to enter into an agreement with the Commissioner under subsections (b) and (c) with respect to a student loan insurance program to be carried on in a State with which the Commissioner does not have an

Notification to congressional committees.

agreement under subsection (b), and (2) as provided in the application, undertakes to meet the requirements of section 422(c) (6) (B) (i), (ii), and (iii), the Commissioner shall consider and act upon such application within 180 days, and shall forthwith notify the Committee on Labor and Public Welfare of the Senate and the Committee on Education and Labor of the House of Representatives of bis actions.

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“Sec. 428A. “loan insurance supplemental guaranty agreement

(a)(a)

(1)(1)

The Commissioner may enter into a supplemental guaranty agreement, annually, with any State or any non-profit private institution or organization having a guaranty agreement under section 428(c) (I) whereby the Commissioner shall undertake to reimburse the State or nonprofit private institution or organization, under such terms and conditions as he may establish, in an amount determined in accordance with section 428(c) (1) (B), if the Commissioner determines that the student, loan insurance program—

“(A)“(A)

authorizes the insurance of loans in any amount up to a maximum of $2,500 (in the case of a student who has not successfully completed a program of undergraduate education) or $5,000 (in the ease of a graduate or professional student) to any individual student in any academic year or its equivalent (as determined under regulations of the Commissioner), which limit shall not be deemed exceeded by a line of credit under which actual payments by the lender to the borrower will not be made in any such year in excess of such annual limit; and provides that the aggregate insured unpaid principal amount of all such insured loans made to any student snail be any amount up to a maximum of $7,500 in the case of any student who has successfully completed a program of undergraduate education, and $15,000 in the case of any graduate or professional student (as defined by regulations of the Commissioner and including any loans which are insured by the Commissioner under this part, or by a State or nonprofit institution or organization with which the Commissioner has an agreement under this part, made to such person before he became a graduate or professional student);

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“(B)“(B)

insures not less than 100 per centum of the unpaid principal of the loans insured under the program, whether or not such loans are eligible for interest subsidies under this part;

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“(C)“(C)

provides for the insurance of loans for part-time study at an eligible institution in the same manner as is provided under the Federal student loan insurance program;

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“(D)“(D)

provides no restrictions with respect to the insurance of loans for students who are otherwise eligible for loans under such program if such a student is a legal resident of the State mid if such a student is accepted for enrollment in or is attending an eligible institution outside that State;

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“(E)“(E)

provides no restrictions with respect to eligible institutions that are residential institutions which are more onerous than eligibility requirements for institutions under the Federal student, loan insurance program, unless (i) that institution is ineligible under regulations for the limitation, suspension, or termination of eligible institutions under the Federal student loan insurance program or is ineligible pursuant to criteria issued under the student loan insurance program which are substantially the same as regulations with respect to such eligibility issued under the Federal student loan insurance program, or (ii) there is a State constitutional prohibition affecting the eligibility of such an institution; and

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“(F)“(F)

provides (i) for the eligibility of the eligible institutions as lenders under reasonable criteria, unless (I) that eligible institution is eliminated as the lender under regulations for the limitation, suspension, or termination of eligible institutions under the Federal student loan insurance program or is eliminated as a lender pursuant to criteria issued under the student loan insurance program which are substantially the same as regulations with respect to such eligibility as a lender issued under the Federal student loan insurance program, or (II) there is a State constitutional prohibition affecting the eligibility of such an institution as a lender, and (ii) assurances that the State

Report to Commissioner.

or nonprofit private institution or organization will report to the Commissioner not later than July 1, 1977, and annually thereafter, concerning such criteria, including any special requirements for the eligibility of such lenders, procedures in effect under such program to limit, suspend, or terminate such lenders, a list of applications of such lenders, a summary of actions taken on such applications, and a list of the names of all such lenders within the State.

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“(2)“(2)

The Commissioner may enter into a supplemental guaranty agreement, annually, with any State or any nonprofit private institution or organization having a guaranty agreement under section 428(c) (1) for the purpose of qualifying such State or nonprofit private. institution or organization for payment of administrative cost allowances under section 428(f)(2) if the Commissioner determines that the student loan insurance program—

“(A)“(A)

authorizes the insurance of loans in any amount up to a maximum of $2,500 (in the case of a student who has not successfully completed a program of undergraduate education) or $5,000 (in the case of a graduate or professional student) to any individual student in any academic year or its equivalent (as determined under regulations of the Commissioner), which limit shall not be deemed exceeded by a line of credit, under which actual payments by the lender to the borrower will not be made in any such year in excess of such annual limit; and provides that the aggregate insured unpaid principal amount of all such insured loans made to any student shall be any amount up to a maximum of $7,500 in the ease of any student who has successfully completed a program of undergraduate education, and $15,000 in the case of any graduate or professional student (as defined by regulations of the Commissioner and including any loans which are insured by the Commissioner under this part, or by a State or nonprofit institution or organization with which the Commissioner has an agreement under this part, made to such person before he became a graduate or professional student);

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“(B)“(B)

insures not less than 100 per centum of the unpaid principal of the loans insured under the program, whether or not such loans are eligible for interest subsidies under this part;

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“(C)“(C)

provides for the insurance of loans for part-time study at an eligible institution in the same manner as is provided tinder the Federal student loan insurance program;

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“(D)“(D)

provides no restrictions with respect to the insurance of loans for students who are otherwise eligible for loans under such program if such a student is a legal resident of the State, or if such a student is accepted for enrollment in or is attending an eligible institution within that State;

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“(E)“(E)

provides no restrictions with respect to eligible institutions that are residential institutions which are more onerous than eligibility requirements for eligible institutions under the Federal student loan insurance program, unless (i) that eligible institution is ineligible under regulations for the limitation, suspension, or termination of eligible institutions under the Federal student loan insurance program or is ineligible pursuant to criteria issued under the, student loan insurance program which are substantially the same as regulations with respect to such eligibility issued under (he Federal student loan insurance program, or (ii) there is a State constitutional prohibition affecting the eligibility of such an institution;

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“(F)“(F)

provides (i) for the eligibility of the eligible institutions as lenders under reasonable criteria, unless (1) that eligible institution is eliminated as a lender under regulations for the limitation, suspension, or termination of eligible institutions under the Federal student loan insurance program or is eliminated as a lender pursuant to criteria issued under the student loan insurance program which are substantially the same as regulations with respect to such eligibility as a lender issued under the Federal student loan insurance program, or (II) there is a State constitutional prohibition affecting the eligibility of

Report to Commissioner.

such an institution as a lender, and (ii) assurances that the State or nonprofit private institution or organization will report to the Commissioner not later than July 1, 1977, and annually thereafter, concerning such criteria, including any special requirements for the eligibility of such lenders, procedures in effect under such program to limit, suspend, or terminate such lenders, a list of applications of such lenders, a summary of actions taken on such applications, and a list of the names of all such lenders within the State.

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“(b)“(b)

Each supplemental guaranty agreement entered into under subsection (a)—

“(1)“(1)

shall set forth such administrative and fiscal procedures as may be necessary to protect the United States from the risk of unreasonable loss thereunder, to insure proper and efficient administration of the loan insurance program, and to insure that due diligence will be exercised in the collection of loans insured under the program;

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“(2)“(2)

shall set forth adequate assurance that the requirements of paragraph (1) or paragraph (2) of subsection (a) of this section, as the case may be, are met;

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“(3)“(3)

shall provide for the making of such reports, in such form, and containing such information as the Commissioner may reasonably require to carry out his functions under this section, and for keeping such records and for affording such access thereto as the Commissioner may find necessary to assure the correctness and verification of such reports;

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“(4)“(4)

shall set forth adequate assurance that, with respect to so much of any loan insured under the loan insurance program as may be guaranteed by the Commissioner pursuant to subsection (a) of this section, the undertaking of the Commissioner under the supplemental guaranty agreement is acceptable in full satisfaction of State law or regulation requiring the maintenance of a reserve;

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“(6)“(6)

shall provide that if, after the Commissioner has made payment under the supplemental guaranty agreement pursuant to this section with respect to any loan, any payments are made in discharge of the obligation incurred by the borrower with respect to such loan (including any payments of interest accruing on such loan after such payment by the Commissioner), there shall be paid over to the Commissioner (for deposit in the fund established by section 431) such portion of the amount of such payments as is determined (in accordance with regulations prescribed by the Commissioner) to represent his equitable share thereof, but shall not otherwise provide for subrogation of the United States to the rights of any insurance beneficiary: Provided, That, except as the Commissioner may otherwise by or pursuant to regulation provide, amounts so paid by a borrower on such a loan shall be first applied in reduction of principal owing on such loan; and

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“(6)“(6)

may include such other provisions as may be necessary to promote the purposes of this part.

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“(c)“(c)

(1)(1)

To the extent provided in regulations of the Commissioner, a supplemental guaranty agreement under this section may contain provisions which permit such forbearance for the benefit of the student borrower as may be agreed upon by the parties to an insured loan and approved by the insurer.

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“(2)“(2)

For purposes of this section, the terms ‘insurance beneficiary’

Definitions.

and ‘default’ shall have the meanings assigned to them by section 430(e).

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“Sec. 429. “certificate of federal wan insurance—effective date of insurance

(a)(a)

(1)(1)

If, upon application by an eligible lender, made

20 USC 1079.

upon such form, containing such information, and supported by such evidence as the Commissioner may require, and otherwise in conformity with this section, the Commissioner finds that the applicant has made a loan to an eligible student which is insurable under the provisions of this part, he may issue to the applicant a certificate of insurance covering the loan and setting forth the amount and terms of the insurance.

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“(2)“(2)

Insurance evidenced by a certificate of insurance pursuant to subsection (a) (1) shall become effective upon the date of issuance of the certificate, except that the Commissioner is authorized, in accord-ance with regulations, to issue commitments with respect to proposed loans, or with respect to lines (or proposed lines) of credit, submitted by eligible lenders, and in that event, upon compliance with subsection (a) (1) by the lender, the certificate of insurance may be issued elf active as of the date when any loan, or any payment by the lender pursuant to a line of credit, to be covered by such insurance was made. Such insurance shall cease to be effective upon sixty days’ default by the lender in the payment of any installment of the premiums payable pursuant to subsection (c).

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“(3)“(3)

An application submitted pursuant to subsection (a) (1) shall contain (A) an agreement by the applicant to pay, in accordance with regulations, the premiums fixed by the Commissioner pursuant to subsection (c), and (B) an agreement by the applicant that if the loan is covered by insurance the applicant, will submit such supplementary reports and statements during the effective period of the loan agreement, upon such forms, at such times, and containing such information as the Commissioner may prescribe by or pursuant to regulation.

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“(b)“(b)

(1)(1)

In lieu of requiring a separate insurance application and issuing a separate certificate of insurance for each student loan made by an eligible lender as provided in subsection (a), the Commissioner may, in accordance with regulations consistent with section 424, issue to any eligible lender applying therefor a certificate of comprehensive insurance coverage winch shall, without further action by the Commissioner, insure all insurable, loans made by that lender, on or after the date of the certificate and before a specified cutoff date, within the limits of an aggregate maximum amount stated in the certificate. Such regulations may provide for conditioning such insurance, with respect to any loan, upon compliance by the lender with such requirements (to be stated or incorporated by reference in the certificate) as in the Commissioner’s judgment will best achieve the purpose of this subsection while protecting the financial interest of the United States and promoting the objectives of this part, including (but not limited to) provisions as to the reporting of such loans and information relevant thereto to the Commissioner and as to the payment of initial and other premiums and the effect of default therein, and including provision for confirmation by the Commissioner from time to time (through endorsement, of the certificate) of the coverage of specific new loans by such certificate, which confirmation shall be incontestable by the Commissioner in the absence of fraud or misrepresentation of fact or patent error.

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“(2)“(2)

If the holder of a certificate of comprehensive insurance coverage issued under this subsection grants to a student a line of credit extending beyond the cutoff date specified in that certificate, loans or payments thereon made by the holder after that date pursuant to the line of credit shall not be deemed to lie included in the coverage of that certificate except as may be specifically provided therein; but, subject to the limitations of section 424, the Commissioner may, in accordance with regulations, make commitments to insure such future loans or payments, and such commitments may be honored either as provided in subsection (a) or by inclusion of such insurance on comprehensive coverage under this subsection for the period or periods in which such future loans or payments are made,

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“(c)“(c)

The Commissioner shall, pursuant to regulations, charge for insurance on each loan under this part a premium in an amount not to exceed one-fourth of 1 per centum per year of the unpaid principal amount of such loan (excluding interest added to principal), payable in advance, at such times and in such manner as may be prescribed by the Commissioner. Such regulations may provide that such premium shall not be payable, or if paid shall be refundable, with respect to any period after default in the payment of principal or interest or after the borrower has died or becomes totally and permanently disabled, if (1) notice of such default or other event has been duly given, and (2) requests for payment of the loss insured against has been made or the Commissioner has made such payment on his own motion pursuant to section 430(a).

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“(d)“(d)

The rights of an eligible lender arising under insurance evidenced by a certificate of insurance issued to it under this section may be assigned as security by such lender only to another eligible lender, and subject to regulation by the Commissioner.

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“(e)“(e)

The consolidation of the obligations of two or more federally insured loans obtained by a student borrower in any fiscal year into a single obligation evidenced by a single instrument of indebtedness shall not affect the insurance by the United States. If the loans thus consolidated are covered by separate certificates of insurance issued under subsection (a), the Commissioner may upon surrender of the original certificates issue a new certificate of insurance in accordance with that, subsection upon the consolidated obligation; if they are, covered by a single comprehensive certificate issued under subsection (b), the Commissioner may amend that certificate accordingly.

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“Sec. 430. “default of student under federal loan insurance program

(a)(a)

Upon default by the student borrower on any loan

Notification to Commissioner.

20 USC 1080.

covered by Federal loan insurance pursuant to this part, and prior to the commencement, of suit or other enforcement proceedings upon security for that loan, the insurance beneficiary shall promptly notify the Commissioner, and the Commissioner shall if requested (at that time or after further collection efforts) by the beneficiary, or may on his own motion, if the insurance is still in effect, pay to the beneficiary the amount of the loss sustained by the insured upon that, loan as soon as that amount has been determined. The ‘amount of the loss’ on any

“Amount of the loss.”

loan shall, for the purposes of this subsection and subsection (b), be deemed to be an amount equal to the unpaid balance of the principal amount and interest accrued from the dale of submission of a valid default claim (as determined by the Commissioner) to the date on which payment is authorized by the Commissioner, reduced to the extent required by section 425(b). Such beneficiary shall be required to meet the standards of due diligence in the collection of the loan.

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“(b)“(b)

Upon payment of the amount of the loss pursuant to subsection (a), the United States shall be subrogated for all of the rights of the holder of the obligation upon the insured loan and shall lie entitled to an assignment of the note or other evidence of the insured loan by the insurance beneficiary. If the net recovery made by the Commissioner 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 Commissioner may, in attempting to make recovery on such loans, contract with private business concerns. State student loan insurance agencies, or State guaranty agencies, for payment for services rendered by such concerns or agencies in assisting the Commissioner in making such recovery. Any contract under this subsection entered into by the Commissioner shall provide that attempts to make recovery on such loans shall be fair and reasonable, and do not involve harassment, intimidation, false or misleading representations, or unnecessary communications concerning the existence of any such loan to persons other than the student borrower.

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“(c)“(c)

Nothing in this section or in this part shall be construed to preclude any forebearance for the benefit of the student borrower which may be agreed upon by the parties to the insured loan and approved by the Commissioner, or to preclude forebearance by the Commissioner in the enforcement of the insured obligation after payment on that insurance,

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“(d)“(d)

Nothing in this section or in this part shall be construed to excuse the holder of a federally insured loan from exercising reasonable care and diligence in the making and collection of loans under the provisions of this part. If the Commissioner, after reasonable notice and opportunity for hearing to an eligible lender, finds that it has substantially failed to exercise such care and diligence or to make the reports and statements required under section 428(a) (4) and section 429(a)(3), or to pay the required Federal loan insurance premiums, he shall disqualify that lender for further Federal insurance on loans granted pursuant, to this part 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 or comply with such requirements, us the case may be.

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(e)(e)

As used in this section—

“(1)“(1)

the term ‘insurance beneficiary’ means the insured or its authorized assignee in accordance with section 429(d); and

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“(2)“(2)

the term ‘default’ includes only such defaults as have existed for (A) one hundred and twenty days in the case of a loan which is repayable hi monthly installments, or (B) one hundred and eighty days in the case of a loan which is repayable in less frequent installments.

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“Sec. 431. “insurance fund

(a)(a)

There is hereby established a student loan insurance fund (hereinafter in tins section called the ‘fund’) which shall be available without fiscal year limitation to the Commissioner for making payments in connection with the default of loans insured by him under this part, or in connection with payments under a guaranty agreement under section 428 (c). Al I amounts received by the Commissioner as premium charges for insurance and as receipts, earnings, or proceeds derived from any claim or other assets acquired by the Commissioner in connection with his operations under this part, any excess advances under section 422(c) (4) (C), and any other moneys, property, or assets derived by the Commissioner from his operations in connection with this section, shall be deposited in the fund. All payments in connection with the default of loans insured by the Commissioner under this part, or hi connection with such guaranty agreements

Investments.

shall be paid from the fund. Moneys in the fund not needed for current operations under this section may be invested in bonds or other obligations guaranteed as to principal and interest by the United States.

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“(b)“(b)

If at any time the moneys in the fund are. insufficient to make payments in connection with the default of any loan insured by the Commissioner under this part, or hi connection with any guaranty agreement made under section 428(c) or 428A (a)(1), the Commissioner is authorized, to the extent provided in advance by appropriations Acts, to issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions as may fie prescribed by the Commissioner with the approval of the Secretary of the Treasury. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into considera-tion the current average market yield on outstanding marketable obligations of the United States of comparable maturities during the month preceding the issuance of the notes or other obligations. The Secretary of the Treasury is authorized and directed to purchase any notes and other obligations issued hereunder and for that purpose he is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which securities may be issued

31 USC 774.

under that Act, as amended, are extended to include any purchase of such notes and obligations. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired by him under this subsection. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States. Sums borrowed under this subsection shall be deposited in the fund and redemption of such notes and obligations shall be made by the Commissioner from such fund.

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“Sec. 432. “legal towers and responsibilities

(a)(a)

In the performance of, and with respect, to, the functions,

20 USC 1082.

powers, and duties vested in him by this part, the Commissioner may—

“(1)“(1)

prescribe such regulations as may be necessary to carry

Regulations.

out the purposes of this part.;

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“(2)“(2)

sue and be sued in any court of record of a State having general jurisdiction or in any district court of the United States, and such district courts shall have jurisdiction of civil actions arising under this part without regard to the amount in controversy, and action instituted under this subsection by or against the Commissioner shall survive notwithstanding any change in the person occupying the office of Commissioner or any vacancy in that office; but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Commissioner or property under his control, and nothing herein shall be construed to except litigation arising out. of activities under this part from the application of sections 509,517, 547, and 2679 of title 28 of the United States Code;

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“(3)“(3)

include in any contract for Federal loan insurance such terms, conditions, and covenants relating to repayment of principal and payment of interest, relating to his obligations and rights and to those of eligible lenders, arid borrowers in case of default, and relating to such other matters as the Commissioner determines to be necessary to assure that the purposes of this part will be achieved; and any term, condition, and covenant made pursuant to this clause or any other provisions of this part may be modified by the Commissioner if he determines that modification is necessary to protect the financial interest of the United States;

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“(4)“(4)

subject to the specific limitations in this part, consent to the modification, with respect to rate of interest, time of payment of any installment of principal and interest or any portion thereof,, or any other provision of any note or other instrument evidencing a loan which has been insured by him under this part;

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“(5)“(5)

enforce, pay, or compromise, any claim on, or arising because of, any such insurance or any guarantee agreement under section 428(c); and

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“(6)“(6)

enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.

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“(b)“(b)

The Commissioner shall, with respect to the financial operations arising by reason of this part—

“(1)“(1)

prepare annually and submit a budget program as provided for wholly owned Government corporations by the Government Corporation Control Act; and

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“(2)“(2)

maintain with respect to insurance wider this part an integral set of accounts, which shall be audited annually by the General Accounting Office in accordance with principles and procedures applicable to commercial corporate transactions, as provided

31 USC 850.

by section 105 of the Government Corporation Control Act, except that the transactions of the Commissioner, including the settlement of insurance claims and of claims for payments pursuant to section 428, and transactions related thereto and vouchers approved by the Commissioner in connection with such transactions, shall be final and conclusive upon all accounting and other officers of the Government.

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“(c)“(c)

(1)(1)

(A)(A)

For loans insured after December 31, 1976, or in the case of each insurer after such earlier date where the data required by this subsection are available, the Commissioner and all other insurers under this part shall collect and accumulate all data relating to (i) loan volume insured and (ii) defaults reimbursed or default rates according to the categories of loans listed in subparagraph (B) of this paragraph.

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“(B)“(B)

The data indicated in subparagraph (A) of this paragraph shall be accumulated according to the category of lender making the loan and shall be accumulated separately for lenders who are (i) eligible institutions, (ii) State or private, nonprofit direct lenders, (iii) commercial financial institutions who are banks, savings and loan associations, or credit unions, and (iv) all other types of institutions or agencies.

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“(C)“(C)

The Commissioner may designate such additional subcategories within the categories specified in subparagraph (B) as he deems appropriate.

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“(D)“(D)

The category or designation of a loan shall not be changed for any reason, including its purchase or acquisition by a lender of another category.

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“(2)“(2)

(A)(A)

The Commissioner shall collect data under this subsection from all insurers under this part and shall publish not less often than once every fiscal year a report showing loan volume guaranteed and default data for each category specified in subparagraph (B) of paragraph (1) of this subsection and for the total of all lenders.

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“(B)“(B)

The reports specified in subparagraph (A) of this paragraph shall include a separate report for each insurer under this part including the Commissioner, and where an insurer insures loans for lenders in more than one State, such insurer’s import shall list all data separately for each State,

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“(3)“(3)

For purposes of clarity in communications, the Commissioner shall separately identify loans made by the lenders referred to in clause (i) and loans made by the lenders referred to in clause (ii) of paragraph (1) (B) of this subsection.

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“(d)“(d)

(1)(1)

The functions of the Commissioner under this part listed in paragraph (2) of this subsection may be delegated to employees in the regional offices of the Office of Education established pursuant to section 403(c)(2) of the General Education Provisions Act.

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“(2)“(2)

The functions which may be delegated pursuant, to this subsection are—

“(A)“(A)

reviewing applications for loan insurance under section 429 and issuing contracts for Federal loan insurance, certificates of insurance, and certificates of comprehensive insurance coverage to eligible lenders which are financial or credit institutions subject to examination and supervision by an agency of the United States or of any State;

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“(B)“(B)

receiving claims for payments under section 430(a), examining those claims, and pursuant to regulations of the Commissioner, approving claims for payment, or requiring lenders to take additional collection action as a condition for payment of claims; and

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“(C)“(C)

certifying to the central office when collection of defaulted loans has been completed, compromising or agreeing to the modification of any Federal claim against a borrower (pursuant to regulations of the Commissioner issued under section 432(a)), and recommending litigation with respect to any such claim.

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“Sec. 433. “institutional lenders

(a)(a)

(1)(1)

An eligible institution may not act as an eligible

20 USC 1083.

lender or originate loans under this part, unless it has in effect an agreement with the Commissioner under which it agrees (A) to make such loans to no more than 50 per centum of the students in attendance at the institution who are not graduate or professional students (as defined in regulations of the Commissioner), and (B) that it will not make such a loan under this part to a student, other than a graduate or professional student (as defined in regulations of the Commissioner), who has not previously received a loan from such institution until such student has provided the institution with either (i) a statement from an eligible lender (other than an eligible institution or a State or an agency of a State or a private nonprofit agency designated by a State) that the borrower sought a loan from it and was denied such loan, or (ii) a sworn statement by the borrower that the lender from which he sought, such a loan declined to provide the statement described in clause (i).

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“(2)“(2)

Whenever the Commissioner determines that the termination of the eligible institution’s status as a lender under paragraph (1) would be a hardship to the present or prospective students of the eligible institution after considering the management of that institution, the opportunities that institution provides to economically disadvantaged students, and related factors, the Commissioner shall waive the provisions of such paragraph with respect to that institution.

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“(b)“(b)

(1)(1)

An eligible institution shall be deemed to have originated a loan for purposes of this section if it has had delegated to it by an eligible lender a substantial portion of the functions and responsibilities normally performed by a lender prior to the making of a loan, such as interviewing the applicant for the loan, explaining the applicant’s responsibilities under the loan, obtaining completion of necessary forms, obtaining necessary documentation, or verifying that the student is eligible for the loan.

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“(2)“(2)

For purposes of this section, a loan is made or originated on the date of the first disbursement of any proceeds of the loan.

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“Sec. 434. “participation by federal credit unions in federal, state, and private student loan insurance programs

Notwithstanding any other provision of law, Federal

20 USC 1084.

credit unions shall, pursuant to regulations of the Director of the Bureau of Federal Credit Unions, have power to make insured loans to student members in accordance with the provisions of this partrelating to federally insured loans, or in accordance with the provisions of any State or nonprofit private student loan insurance program which meets the requirements of section 428 (a) (1) (C).

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“Sec. 435. “definitions for student loan insurance program

As used in this part:

“(a)“(a)

The term ‘eligible institution’ means (1) an institution of higher education, (2) a vocational school, or (3) with respect to students who are nationals of the United States, an institution outside the United States which is comparable to an institution of higher education or to a vocational school and which has been approved by the Commissioner for purposes of this part, except that such term does not include any such institution or school which employs or uses commissioned salesmen to promote the availability of any loan program described in section 428(a) (1) at that institution or school.

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“(b)“(b)

The term ‘institution of higher education’ means an educational institution in any State which (1) admits as regular students only persons having a certificate of graduation from a school providing secondary education, or the recognized equivalent of such certificate, or who are beyond the age of compulsory school attendance. (2) is legally authorized within such State to provide a program of education beyond secondary education, (3) provides an educational program for which it awards a bachelor’s degree or provides not less than a two-year program which is acceptable for full credit toward such a degree, (4) is a public or other nonprofit institution, and (5) is accredited by a nationally recognized accrediting agency or association approved by the Commissioner for this purpose or, if not so accredited, (A) is an institution with respect to which the Commissioner has determined that there is satisfactory assurance, considering the resources available to the institution, the period of time, if any, chiring which it has operated, the effort, it is making to meet accreditation standards, and the purpose for which this determination is being made, that the institution will meet the accreditation standards of such an agency or association within a reasonable time or, (B) is an institution whose credits are accepted on transfer by not less than three institutions which are so accredited, for credit on the same basis as if transferred from an institution so accredited. Such term includes any public or other nonprofit collegiate or associate degree school of nursing and any school which provides not less than a one-year program of training to prepare students for gainful employment in a recognized occupation and which meets the provisions of clauses (1), (2), (4), and (5). If the Commissioner determines that a particular category of such schools does not meet the requirements of clause (5) because there is no nationally recognized accrediting agency or association qualified to accredit schools in such category, he shall, pending the establishment of such an accrediting agency or association, appoint an advisory committee, composed of persons specially qualified to evaluate training provided by schools in such category, which shall (i) prescribe the standards of content, scope, and quality which must be met in order to qualify schools in such category to participate in the program pursuant to this part, and (ii) determine whether particular schools not meeting the requirements of clause (5) meet those

List of accrediting agencies or associations.

standards. For purposes of this subsection the Commissioner shall publish a list of nationally recognized accrediting agencies or associations which he determines to he reliable authority as to the quality of training offered.

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“(c)“(c)

The term ‘vocational school’ means a business or trade school, or technical institution or other technical or vocational school, in any State, which (1) admits as regular students only persons who have completed or left elementary or secondary school and who have the ability to benefit from the training offered by such institution; (2) is legally authorized to provide, and provides within that State, a program of post-secondary vocational or technical education designed to fit individuals for useful employment in recognized occupations; (3) has been in existence for two years or has been specially accredited by the Commissioner as an institution meeting the other requirements of this subsection; and (4) is accredited (A) by a nationally recognized accrediting agency or association listed by the Commissioner pursuant to this clause, (B) if the Commissioner determines that there is no nationally recognized accrediting agency or association qualified to accredit schools of a particular category, by a State agency listed by the Commissioner pursuant to this clause, and (C) if the Commissioner determines there is no nationally recognized or State agency or association qualified to accredit schools of a particular category, by an advisory committee appointed by him and composed of persons specially qualified to evaluate training provided by schools of that category, which committee shall prescribe the standards of content, scope, and quality which must be met by those schools in order for loans to students attending them to be insurable under this part and shall also determine whether particular schools meet those standards. For the purpose of this subsection, the Commissioner shall publish a

List of accrediting agencies or associations.

list of nationally recognized accrediting agencies or associations and State agencies which he determines to be reliable authority as to the quality of education or training afforded.

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“(d)“(d)

The term ‘collegiate school of nursing’ means a department, division, or other administrative unit in a college or university which provides primarily or exclusively an accredited program of education in professional nursing and allied subjects leading to the degree of bachelor of arts, bachelor of science, bachelor of nursing, or to an equivalent degree, or to a graduate degree in nursing.

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“(e)“(e)

The term ‘associate degree school of nursing’ means a department, division, or other administrative unit in a junior college, community college, college, or university which provides primarily or exclusively an accredited two-year program of education in professional nursing and allied subjects leading to an associate degree in nursing or to an equivalent degree.

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“(f)“(f)

The term ‘accredited’ when applied to any program of nurse education means a program accredited by a recognized body or bodies approved for such purpose by the Commissioner of Education.

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“(g)“(g)

(1)(1)

Except as provided in paragraphs (2), (3), and (4), the term ‘eligible lender’ means—

“(A)“(A)

a National or State chartered bank, a mutual savings bank, a savings and loan association, or a credit union which—

“(i)“(i)

is subject to examination and supervision by an agency of the United States or of the State in which its principal place of operation is established, and

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“(ii)“(ii)

does not have as its primary consumer credit function the making or holding of loans made to students under this part unless it is a bank which is wholly owned by a State;

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“(B)“(B)

a pension fund as defined in the Employees Retirement Income Security Act;

29 USC 1001 note.

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“(C)“(C)

an insurance company which is subject to examination and supervision by an agency of the United States or a State;

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“(D)“(D)

in any State, a single agency of the State or a single nonprofit private agency designated by the State;

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“(E)“(E)

an eligible institution which meets the requirements of paragraphs (2), (3), and (4) of this subsection and which has signed an agreement pursuant to section 433;and

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“(F)“(F)

for purposes only of purchasing and holding loans made by other lenders under this part, the Student Loan Marketing Association or an agency of any State functioning as a secondary market.

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“(2)“(2)

To be an eligible lender under this part, an eligible institution—

“(A)“(A)

shall employ at least one person whose full-time responsibilities are limited to the administration of programs of financial aid for students attending such institution; and

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“(B)“(B)

shall not be a home study school.

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“(3)“(3)

The term eligible lender does not include any eligible institution in any fiscal year immediately after the fiscal year in which the Commissioner determines, after notice and opportunity for a hearing, that for each of two consecutive years 15 per centum or more of the amount of the loan described in section 428(a)(1) made with respect to students at that institution and repayable in each such year is in default, as defined in section 430(e) (2).

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“(4)“(4)

Whenever the Commissioner determines that—

“(A)“(A)

there is reasonable possibility that an eligible institution may, within one year after a determination is made under paragraph (3), improve the collection of loans described in section 428 (a)(1), so that the application of paragraph (3) would be a hardship to that institution, or

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“(B)“(B)

the termination of the lender’s status under paragraph (3) would be a hardship to the present or for prospective students of the eligible institution, after considering the management of that institution, the ability of that institution to improve the collection of loans, the opportunities that institution offers to economically disadvantaged students, and other related factors,

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Waiver.

the Commissioner shall waive the provisions of paragraph (3) with respect to that institution. Any determination required under this paragraph shall he made by the Commissioner prior to the termination of an eligible institution as a lender under the exception of paragraph (3). Whenever the Commissioner grants a waiver pursuant to this paragraph he shall provide technical assistance to the institution concerned in order to improve the collection rate of such loans.

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“(h)“(h)

The term dine of credit’ means an arrangement or agreement between the lender and the borrower whereby a loan is paid out by the lender to the borrower in annual installments, or whereby the lender agrees to make, in addition to the initial loan, additional loans in subsequent years.

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“(i)“(i)

The term ‘due diligence’ requires the utilization by a lender, in the servicing and collection of loans insured under this part, of collection practices at least as extensive and forceful as those generally practiced by financial institutions for the collection of consumer loans.

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“Sec. 436. “district of columbia student loan insurance program

(a)(a)

The government of the District of Columbia is authorized (1) to establish a student loan insurance program which meets the requirements of this part for a State loan insurance program in order to enter into agreements with the Commissioner for the purposes of this title, (2) to enter into such agreements with the Commis-sioner, (3) to use amounts appropriated for the purposes of this section to establish a fund for such purposes and for expenses in connection therewith, and (4) to accept and use donations for the purposes of this section.

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“(b)“(b)

Notwithstanding the provisions of any applicable law, if the borrower, on any loan insured under the program established pursuant to this section, is a minor, any otherwise valid note or other written agreement executed by him for the purposes of such loan shall create a binding obligation.

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“(c)“(c)

There are authorized to be appropriated such amounts as may

Appropriation authorization.

be necessary for the purposes of this section.

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“Sec. 437. “repayment by the commissioner of loans of bankrupt, deceased, or disabled borrowers

(a)(a)

If a student borrower who has received a loan

20 USC 1087.

described in clause (A), (B), or (C) of section 428(a)(1) dies or becomes permanently and totally disabled (as determined in accordance with regulations of the Commissioner), then the Commissioner shall discharge the borrower’s liability on the loan by repaying the amount owed on the loan.

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“(b)“(b)

If a student borrower who has received a loan described in clause (A), (B), or (C) of section 428(a) (1) is relieved of his obligation to repay such loan, in whole or in part, through a discharge in bankruptcy, the Commissioner shall repay the amount of the loan so discharged.

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“Sec. 438. “special allowances

(a)(a)

In order to assure (1) that the limitation on interest

20 USC 1087–1.

payments or other conditions (or both) on loans made or insured under this part, do not impede or threaten to impede the carrying out of the purposes of this part or do not cause the return to holders of loans to be less than equitable, (2) that incentive payments on such loans are paid promptly to eligible lenders, (3) that appropriate consideration of relative administrative costs and money market conditions is made in setting the quarterly rate of such payments, and (4) that participating lenders will have a better and more accurate way of assessing the rate of such payments for current and prospective quarters, the Congress finds it necessary to establish an improved method for the determination of the quarterly rate of the special allowance on such loans, and to provide for a thorough, expeditious and objective examination of alternative methods for the determination of the quarterly rate of such allowance.

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“(b)“(b)

(1)(1)

A special allowance shall be paid for each of the three-month periods ending March 31, June 30, September 30, and December 31 of every year and the amount of such allowance paid to any holder with respect to any three-month period shall be a percentage of the unpaid balance of disbursed principal (not including unearned interest added to principal) of ail eligible loans held by such holder during such period.

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“(2)“(2)

(A)(A)

Subject, to subparagraphs (B) and (C) and paragraph (4), the special allowance paid pursuant to this subsection shall be computed (i) by determining the average of the bond equivalent rates of the ninety-one-day Treasury bills auctioned for such three-month period, (ii) by subtracting 3.5 per centum from such average, and (iii) by rounding the resultant per centum upward to the nearest one-eighth of 1 per centum.

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“(B)“(B)

Except as provided in paragraph (4), if the special allowance computed according to subparagraph (A) would (i) cause the special allowance for any twelve-month period during the period ending September 30, 1977, to exceed 3 per centum, the special allowance rate to be paid for such period shall be reduced to the highest one-eighth of 1 per centum rate interval which would not cause such excess,

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“(C)“(C)

Except as provided in subparagraph (4), if the special allowance computed according to subparagraph (A) would (i) cause the special allowance for any twelve-month period after October 1, 1977, to exceed 5 per centum, the special allowance rate to be paid for such period shall be reduced to the highest one-eighth of 1 per centum rate which would not cause such excess.

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“(3)“(3)

Subject to paragraph (4) the special allowance determined for any such three-month period shall be payable at such time, after the close of such period, as may be specified by or pursuant to regulations promulgated under (his section. The holder of a loan with respect to which any such allowance is to be paid shall be deemed to have a contractual right, as against the United States, to receive such allowance from the Commissioner.

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“(4)“(4)

(A)(A)

If payment of the special allowance payable under this section or of interest payments under section 428(a) with respect to a loan have not been made within thirty days after the Commissioner has received an accurate, timely, and complete request for payment thereof, the special allowance payable to such holder shall be increased by an amount equal to the daily interest accruing on the special allowance and interest benefits payments due the holder.

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“(B)“(B)

Such daily interest shall be computed at the daily equivalent rate of the special allowance rate computed pursuant to paragraph (3) plus 7 per centum and shall be paid for the later of (i) the thirty-first day after the receipt of such request for payment from the holder, or (ii) the thirty-first day after the, final day of the period or periods covered by such request, and shall be paid for each succeeding day until, and including, the date on which the Commissioner authorizes payment.

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“(C)“(C)

For purposes of reporting to the Congress the amounts of special allowances paid under this section, amounts of special allowances paid pursuant to this subparagraph shall be segregated and reported separately.

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“(5)“(5)

As used in this section, the term ‘eligible loan’ means a loan which is insured under this part, or made under a program covered by an agreement under section 428(b) of this Act.

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“(b)“(b)

The Commissioner shall pay the holder of an eligible loan, at such time or times as are specified in regulations, a special allowance prescribed pursuant to subsection (a), subject to the condition that such holder shall submit to the Commissioner, at such time or times and in such manner as he may deem proper, such information as may be required by regulation for the purpose of enabling the Secretary and the Commissioner to carry out their functions under this section and to carry out the purposes of this section.

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“(c)“(c)

The, Commissioner shall adopt or amend appropriate, regulations pertaining to programs carried on under this part to prevent, where practicable, any practices which he finds have denied loans to a substantial number of students. Regulations issued under section 2(a) (6) (B) (ii) of the Emergency Insured Student Loan Act of

20 USC 1078a.

1969 shall remain in effect until superseded or amended under this subsection, but no payments shall be made under such Act after the effective date of this section.

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“(d)“(d)

There are authorized to be appropriated such sums as may

Appropriation authorization.

be necessary for special allowances authorized by this section.

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“(e)“(e)

In order to assure (i) that the limitation on interest payments

Committee on the Process of Determining Student Loan Special Allowances. Establishment.

or other conditions (or both) on loans made or insured under this part, do not impede or threaten to impede the carrying out of the purposes of this part or do not cause the return to holders of loans to be less than equitable, (ii) that incentive payments on such loans are paid promptly to eligible lenders, (iii) that appropriate consideration of relative administrative costs and money market conditions is made in setting the quarterly rate of such payments, and (iv) that participating lenders will have a better and more accurate way of assessing the rate of such payments for current and prospective quarters, there is established a Committee on the Process of Determining Student Loan Special Allowances (hereinafter in this section referred to as the ‘Committee’). The Committee shall be composed of—

“(1)“(1)

the Commissioner of Education;

#

“(2)“(2)

the Secretary of Health, Education, and Welfare;

#

“(3)“(3)

the Secretary of Treasury;

#

“(4)“(4)

a representative of State and nonprofit private institutions and organizations participating under an agreement under section 428(b);

#

“(5)“(5)

a student financial aid administrator of an eligible institution (as defined in section 435(g) (2));

#

“(6)“(6)

a business officer of an eligible institution (as defined in section 435(g) (2));

#

“(7)“(7)

a representative of participating eligible lenders other than one defined in section 435(g)(1) (E);

#

“(8)“(8)

a student at an eligible institution (as defined in section 435 g)(2)); and

#

“(9)“(9)

a representative of the Student Loan Marketing Association, designated by the Board of Directors of the Association.

#

#

“(f)“(f)

The Commissioner shall appoint the members of the Committee described in paragraphs (4), (5), (6), (7), and (8) of subsection (e) of this section, after consultation in the case of those members appointed under each such paragraph, with nationally-recognized organizations of such persons or agencies.

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“(g)“(g)

(1)(1)

No later than October 1, 1977, the Committee shall prepare

Report to Congress.

and submit to the President of the Senate and the Speaker of the House of Representatives a report of their findings and recommendations for an improved method or methods for the determination of the quarterly rate of the special allowance paid under this Act which they believe will carry out the objectives set forth in subsection (a) of this section.

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“(2)“(2)

The Committee shall make every effort to reach a unanimous decision with respect to the method for the determination of the quarterly rate of the special allowance established under this section.

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“(3)“(3)

In developing the method for the determination of the quarterly rate of the special allowance under this section, the Committee shall consider—

“(A)“(A)

the experiences of students, and eligible lenders under the method prescribed in this section, and under the method in operation prior to the enactment of this section,

#

“(B)“(B)

the administrative costs of various types of eligible lenders under this part,

#

“(C)“(C)

relevant and widely available financial indicators which accurately reflect the costs of capital invested in programs under this part, or substitute financial indicators which equitably represent the cost of such capital,

#

“(D)“(D)

an administrative mechanism necessary to produce a prompt and rapidly disseminated determination of the quarterly rate of the special allowance, in order to avoid delays in the determination and dissemination of that rate and in the actual payment of the special allowance to eligible lenders, and

#

“(E)“(E)

such other factors as the Committee considers necessary to carry out the purposes of this section.

#

#

“(4)“(4)

In carrying out its responsibilities under this section, the Committee shall be given the full cooperation and assistance of the official in the Office of Education directly responsible for the administration

20 USC 1071.

of this part B of title IV of the Higher Education Act of 1965 and such other appropriate officials of the Office of Education as the Committee deems appropriate.

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“(5)“(5)

In order to assist the Committee to carry out its functions under this section, the Commissioner of Education is authorized to hire consultants, and to enter into contracts, and pay the costs of such contracts from funds regularly appropriated for the purpose of administering programs authorized by this part.

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“(6)“(6)

The Commissioner of Education shall convene the first session of the Committee within sixty days after the date of enactment of the

Ante, p. 2081.

Education Amendments of 1976. The Chairman of the Committee shall be selected by those members who are not officials of the Federal Government from among themselves.

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“(7)“(7)

The Committee is not authorized to employ permanent employees or to lease or obtain the use of permanent offices or to take, other steps to extend its period of service beyond the time necessary to complete its responsibilities under this section.

#

“(8)“(8)

The Committee shall cease to exist, ten days after the submission of the report prescribed in paragraph (1) of this subsection.

#

#

#

“Sec. 439. “student loan marketing association

(a)(a)

The Congress hereby declared that it is the purpose of this section (1) to establish a Government-sponsored private corporation which will be financed by private capital and which will serve as a secondary market and warehousing facility for insured student loans, insured’ by the Commissioner under this part or by a State or nonprofit private institution or organization with which the Commissioner has an agreement under section 428(b), and which will provide liquidity for student loan investments; and (2) in order to facilitate secured transactions involving insured student loans, to provide for perfection of security interests in insured student loans either through the taking of possession or by notice filing.

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“(b)“(b)

(1)(1)

There is hereby created a body corporate to be known as the Student Loan Marketing Association (hereinafter referred to as the ‘Association’). The Association shall have succession until dissolved. It shall maintain its principal office in the District of Columbia and shall be deemed, for purposes of venue and jurisdiction in civil actions, to be a resident thereof. Offices may be established by the Association in such other place or places as it may deem necessary or appropriate for the conduct of its business.

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“(2)“(2)

The Association, including its franchise, capital, reserves, surplus, mortgages, or other security holdings, and income shall lie exempt from all taxation now or hereafter imposed by any State, territory, possession, Commonwealth, or dependency of the United States, or by the District of Columbia, or by any county, municipality, or local taxing authority, except that any real property of the Associa-tion shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed.

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“(3)“(3)

There is hereby authorized to be appropriated to the Secretary

Appropriation authorization.

of Health, Education, and Welfare $5,000,000 for making advances for the purpose of helping to establish the Association. Such advances shall be repaid within such period as the Secretary may deem to be appropriate in light of the maturity and solvency of the Association. Such advances shall bear interest at a rate not less than (A) a rate determined by the Secretary of the Treasury taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining period to maturity comparable to the maturity of such advances, adjusted to the nearest one-eighth of 1 per centum, plus (B) an allowance adequate in the judgment of the Secretary to cover administrative costs and probable losses. Repayments of such advances shall be deposited into miscellaneous receipts of the Treasury.

#

#

“(c)“(c)

(1)(1)

The Association shall have a Board of Directors which

Chairman.

shall consist of twenty-one persons, one of whom shall be designated Chairman by the President.

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“(2)“(2)

An interim Board of Directors shall be appointed by the President,

Appointment.

one of whom he shall designate as interim Chairman. The interim Board shall consist of twenty-one members, seven of whom shall be representative of banks or other financial institutions which are insured lenders pursuant to this section, seven of whom shall be representative of educational institutions, and seven of whom shall be representative of the general public. The interim Board shall arrange for an initial offering of common and preferred stocks and take what-ever other actions are necessary to proceed with the operations of the Association.

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“(3)“(3)

When, in the judgment of the President, sufficient common

Common stock.

stock of the Association has been purchased by educational institutions and banks or other financial institutions, the holders of common stock which are educational institutions shall elect seven members of the Board of Directors and the holders of common stock which are banks or other financial institutions shall elect seven members of the Board of Directors. The President shall appoint the remaining seven directors, who shall be representative of the general public.

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“(4)“(4)

At the time the events described in paragraph (3) have occurred, the interim Board shall turn over the affairs of the Association to the regular Board so chosen or appointed.

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“(5)“(5)

The directors appointed by the President shall serve at the pleasure of the President and until their successors have been appointed and have qualified. The remaining directors shall each be elected for a term ending on the date of the next, annual meeting of the common stockholders of the Association, and shall serve until their successors have been elected and have qualified. Any appointive seat on the Board which becomes vacant shall be filled by appointment of the President, Any elective seat on the Board which becomes vacant after the annual election of the directors shall be filled by the Board, but only for the unexpired portion of the term.

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“(6)“(6)

The Board of Directors shall meet at the call of its Chairman, but at least semiannually. The Board shall determine the general policies which shall govern the operations of the Association. The Chairman of the Board shall, with the approval of the Board, select, appoint, and compensate qualified persona to fill the offices as may be provided for in the bylaws, with such executive functions, powers, and duties as may be prescribed by the bylaws or by the Board of Directors, and such persons shall be the executive officers of the Association and shall discharge all such executive functions, powers, and duties.

#

#

“(d)“(d)

(1)(1)

The Association is authorized, subject to the provisions of this section, pursuant to commitments or otherwise, to make advances on the security of, purchase, service, sell, or otherwise deal in, at prices and on terms and conditions determined by the Association, student loans which are insured by the Commission under this part or by a State or nonprofit private institution or organization with which the Commissioner has an agreement under section 428(b).

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“(2)“(2)

Any warehousing advance made under paragraph (1) of this subsection shall not exceed 80 per centum of the face amount on an insured loan. The proceeds from any such advance shall be invested in additional insured student loans.

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“(3)“(3)

Notwithstanding the provisions of any State law to the contrary, including the Uniform Commercial Code as in effect in any State, a security interest in insured student loans created on behalf of the Association or any eligible lender as defined in section 435(a) may be perfected either through the taking of possession of such loans or by the filing of notice of such security interest in such loans in the manner provided by said State law for perfection of security interests in accounts.

#

#

“(e)“(e)

The Association, pursuant to such criteria as the Board of Directors may prescribe, shall make advances on security or purchase student loans pursuant to subsection (d) only after the Association is assured that the lender (A) does not discriminate by pattern or practice against any particular class or category of students by requiring that, as a condition to the receipt of a loan, the student or his family maintain a business relationship with the lender, except that this clause shall not apply in the ease of a loan made by a credit union, savings and loan association, mutual savings bank, institution of higher education, or any other lender with less than $50,006,000 in deposits, and (B) does not discriminate on the basis of race, sex, color, creed, or national origin.

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“(f)“(f)

(1)(1)

The Association shall have common stock having a par value of $100 per share which may be issued only to lenders under this part, pertaining to guaranteed student loans, who are qualified as insured lenders under this part or who are eligible institutions as defined in section 435(a) (other than an institution outside the United States),

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“(2)“(2)

Each share of common stock shall be entitled to one vote with rights of cumulative voting at all elections of directors. Voting shall be by classes as described in subsection (c) (3).

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“(3)“(3)

The common stock of the Association shall be transferable only as may be prescribed by regulations of the Secretary of Health, Education, and Welfare, and, as to the Association, only on the books of the Association. The Secretary of Health, Education, and Welfare shall prescribe the maximum number of shares of common stock the Association may issue and have outstanding at any one time.

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“(4)“(4)

To the extent that net income is earned and realized, subject to subsection (g) (2), dividends may be declared on common stock by the Board of Directors. Such dividends as may be declared by the Board shall be paid to the holders of outstanding shares of common stock, except that no such dividends shall be payable with respect to any share which has been called for redemption past the effective date of such call.

#

#

“(g)“(g)

(1)(1)

The Association is authorized, with the approval of the

Preferred stock.

Secretary of Health, Education, and Welfare, to issue nonvoting preferred stock with a par value of $100 per share. Any preferred share issued shall he freely transferable, except that, as to the Association, it shall be transferred only on the books of the Association.

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“(2)“(2)

The holders of the preferred shares shall he entitled to such rate of cumulative dividends and such shares shall be subject to such redemption or other conversion provisions as may be provided for at the time of issuance. No dividends shall be payable on any share of common stock at any time when any dividend is due on any share of preferred stock and has not been paid.

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“(3)“(3)

Tn the event of any liquidation, dissolution, or winding up of the Association’s business, the holders of the preferred shares shall be paid in full at par value thereof, plus all accrued dividends, before the holders of the common shares receive any payment.

#

#

“(h)“(h)

(1)(1)

The Association is authorized with the approval of the Secretary of Health, Education, and Welfare and the Secretary of the Treasury to issue and have outstanding obligations having such maturities and bearing such rate or rates of interest as may be determined by the Association. Such obligations may be redeemable at the option of the Association before maturity in such manner as may be stipulated therein.

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“(2)“(2)

The Secretary of Health, Education, and Welfare is authorized, prior to July 1, 1982, to guarantee payment when due of principal and interest on obligations issued by the Association in an aggregate amount determined by the Secretary in consultation with the Secretary of the Treasury.

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“(3)“(3)

To enable the Secretary of Health, Education, and Welfare to discharge his responsibilities under guarantees issued by him, he is authorized to issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions, as may be prescribed by the Secretary of Health, Education, and Welfare with the approval of the Secretary of the Treasury. Such notes or other obligations shall bear interest, at a rate determined by the Secretary of the Treasury, taking into consideration tile current average market yield on outstanding marketable obligations of the United States of comparable maturities during the months preceding the issuance of the notes or other obligations. The Secretary of the Treasury is authorized and directed to purchase any notes and other obligations issued hereunder and for that purpose he is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which

31 USC 774.

securities may be issued under that Act, as amended, are extended to include any purchase of such notes and obligations. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired by him under this subsection. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States. There is authorized to be appropriated to the Secretary of Health, Education, and Welfare such sums as may be necessary to pay the principal and interest on the notes or obligations issued by him to the Secretary of the Treasury.

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#

“(i)“(i)

The Association shall have power—

Powers.

“(1)“(1)

to sue and be sued, complain and defend, in its corporate name and through its own counsel;

#

“(2)“(2)

to adopt, alter, and use the corporate seal, which shall be judicially noticed;

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“(3)“(3)

to adopt, amend, and repeal by its Board of Directors, bylaws, rules, and regulations as may be necessary for the conduct of its business;

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“(4)“(4)

to conduct its business, carry on its operations, and have officers and exercise the power granted by this section in any State without regard to any qualification or similar statute in any State;

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“(5)“(5)

to lease, purchase, or otherwise acquire, own, hold, improve, use, or otherwise deal bi and with any property, real, personal, or mixed, or any interest therein, wherever situated;

#

“(6)“(6)

to accept gifts or donations of services, or of property, real, personal, or mixed, tangible or intangible, in aid of any of the purposes of the Association;

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“(7)“(7)

to sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of its property and assets;

#

“(8)“(8)

to appoint such officers, attorneys, employees, and agents as may be required, to determine their qualifications, to define their duties, to fix their salaries, require bonds for them and fix tile penalty thereof; and

#

“(9)“(9)

to enter into contracts, to execute instruments, to incur liabilities, and to do all things as are necessary or incidental to the proper management of its affairs and the proper conduct of its business.

#

#

“(j)“(j)

The accounts of the Association shall be audited annually. Such audits shall be conducted in accordance with generally accepted auditing standards by independent certified public accountants or by independent licensed public accountants, licensed on or before December 31, 1970, who are certified or licensed by a regulatory authority of a State or other political subdivision of the United States, except that independent public accountants licensed to practice by such regulatory authority after December 31, 1970, and persons who, although not so certified or licensed, meet, in the opinion of the Secretary, standards of education and experience representative of the highest standards prescribed by the licensing authorities of the several States which provide for the continuing licensing of public accountants and which are prescribed by the Secretary in appropriate regulations may perform

Report to Treasury Secretary.

such audits until December 31, 1975. A report of each such audit shall be furnished to the Secretary of the Treasury. The audit shall be conducted at the place or places where the accounts are normally kept. The representatives of the Secretary shall have access to all books, accounts, financial records, reports, files, and all other papers, things, or property belonging to or in use by the Association and necessary to facilitate the audit, and they shall be afforded full facilities for verifying transactions with the balances or securities held by depositaries, fiscal agents, and custodians.

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“(k)“(k)

A report of each such audit for a fiscal year shall be made by the Secretary of the Treasury to the President and to the Congress not later than six months following the close of such fiscal year. The report shall set forth the scope of the audit, and shall include a statement (showing intercorporate relations) of assets and liabilities, capital and surplus or deficit; a statement of surplus or deficit analysis; a statement of income and expense; a statement of sources and application of funds; and such comments and information as may be deemed necessary to keep the President and the Congress informed of the operations and financial condition of the Association, together with such recommendations with respect thereto as the Secretary may deem advisable, including a report of any impairment of capital or lack of sufficient capital noted in the audit. A copy of each report shall be furnished to the Secretary of Health, Education, and Welfare and to the Association.

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“(l)“(l)

All obligations issued by the Association shall be lawful investments, and may be accepted as security for all fiduciary, trust, and public funds, the investment or deposit of which shall be under authority or control of the United States or of any officer or officers thereof. All stock and obligations issued by the Association pursuant to this section shall be deemed to be exempt securities within the meaning of laws administered by the Securities and Exchange Commission, to the same extent as securities which are direct obligations of, or obligations guaranteed as to principal or interest by, the United States. The Association shall, for the purposes of section 14(b) (2) of the Federal Reserve Act, be deemed to be an agency of the United States.

12 USC 355.

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“(m)“(m)

In order to furnish obligations for delivery by the Association, the Secretary of the Treasury is authorized to prepare such obligations in such form as the Board of Directors may approve, such obligations when prepared to lie held in the Treasury subject to delivery upon order by the Association. The engraved plates, dies, bed pieces, and so forth, executed in connection therewith shall remain in the custody of the Secretary of the Treasury. The Association shall reimburse the Secretary of the Treasury for any expenditures made in the preparation, custody, and delivery of such obligations.

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“(n)“(n)

The Association shall, as soon as practicable after the end of

Report to President and Congress.

each fiscal year, transmit to the President and the Congress a report of its operations and activities during each year,

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“Sec. 439A. “five-year nondischargeability of certain loan debts

(a)(a)

A debt which is a loan insured or guaranteed under

20 USC 1087–3.

the, authority of this part, may be released by a discharge in bankruptcy under the Bankruptcy Act only if such discharge is granted after the five-year period (exclusive of any applicable suspension of the repayment period) beginning on the date of commencement of the repayment period of such loan, except that prior to the expiration of that five-year period, such loan may be released only if the court in which the proceeding is pending determines that payment from future income or other wealth will impose an undue hardship on the debtor or his dependents.

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“(b)“(b)

Subsection (a) of this section shall be effective with respect to

Effective date.

11 USC 1 note.

any proceedings begun under the Bankruptcy Act on or after September 30, 1977.

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“Sec. 440. “criminal penalties

(a)(a)

Any person who knowingly and willfully embezzles,

20 USC 1087–4.

misapplies, steals, or obtains by fraud, false statement, or forgery any funds, assets or property provided or insured under this part shall be fined not more than $10,000 or imprisoned for not more than five years, or both; but if the amount so embezzled, misapplied, stolen or obtained by fraud, false statement, or forgery does not exceed $200, the fine shall be not more than $1,000 and imprisonment shall not exceed one year, or both.

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“(h)“(h)

Any person who knowingly and willfully makes any false statement, furnishes any false information, or conceals any material information in connection with an application for a finding by the Commissioner under section 435(b) (4) (A) or (B), for the purpose of qualifying an educational institution as an eligible institution under this part shall, upon conviction thereof, be fined not more than $1,000 or imprisoned not more than one year, or both.

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“(c)“(c)

Any person who knowingly and willfully makes any false statement to, furnishes any false information to, or conceals any material information in connection with the assignment of a loan, which is insured under this part, to another eligible lender, shall, upon conviction thereof, be fined not more than $1,000 or imprisoned not more than one year, or both.

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“(d)“(d)

Any person who knowingly and willfully makes an unlawful payment to an eligible lender as an inducement to make, or to acquire by assignment, a loan insured under this part shall, upon conviction thereof, be fined not more than $1,000 or imprisoned not more than one year, or both.

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“(e)“(e)

Any person who knowingly and willfully destroys any application for a loan which is insured under this part, any application for insurance of a loan under this part, or destroys or conceals any other record relating to the making or insuring of loans under this part with intent to defraud the United States or to prevent the United States from enforcing any right obtained by subrogation under this part, shall upon conviction thereof, be fined not more than $10,00(1 or imprisoned not more than five years, or both.”.

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#

The amendment made by subsection (a) of this section of this Act shall become effective October 1, 1976, except as otherwise provided therein, and to the extent such amendment makes changes in such part B which affect student loans, such changes shall apply to outstanding loans as well as to loans made after the amendment becomes effective, except that—

Section 441(b) of the Act is amended—

42 USC 2751.

Section 443(b) of the Act is amended by striking “461” and

42 USC 2753.

inserting in lieu thereof “491”, and by inserting before the period at the end thereof the following: “, and includes a combination of such institutions which have entered into a cooperative arrangement, or have designated or created a public or private nonprofit agency, institution, or organization to act on their behalf.”.

Section 447 of the Act is amended to read as follows:

42 USC 2756a.

“Sec. 447. “job location and development programs

(a)(a)

The Commissioner is authorized to enter into agreements

Agreements.

with eligible institutions under which such institution may use not more than 10 per centum or $15,000 of its allotment tinder section 446, whichever is less, to establish or expand a program under which such institution, separately, in combination with other eligible institutions, or through a contract with a nonprofit organization, locates and develops jobs for currently enrolled students which are suitable to the scheduling and other needs of such students.

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“(b)“(b)

Agreements under subsection (a) shall—

“(1)“(1)

provide that the Federal share of the cost of any program under this section will not exceed 80 per centum of such cost;

#

“(2)“(2)

provide satisfactory assurance that funds available under this section will not be used to locate or develop jobs at an eligible institution;

#

“(3)“(3)

provide satisfactory assurance that the institution will continue to spend in its own job location and development programs, from sources other than funds received under this section, not less than the average expenditures per year made during the most recent three fiscal years preceding the effective date of the agreement;

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“(4)“(4)

provide-satisfactory assurance that funds available under this section will not be used for the location or development of jobs for students to obtain upon graduation, but rather for the location and development of jobs available to students during and between periods of attendance at such institution;

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“(5)“(5)

provide satisfactory assurance that the location or development of jobs pursuant to programs assisted under this section will not result in the displacement of employed workers or impair existing contracts for services;

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“(6)“(6)

provide satisfactory assurance that Federal funds used for the purposes of this section can realistically be expected to help generate student wages exceeding in the aggregate the amount of such funds and that if such funds are used to contract with another organization, appropriate performance standards are part of such contract; and

#

“(7)“(7)

provide that the institution will submit to the Commissioner an annual report on the uses made of funds provided under this section and an evaluation of the effectiveness of such program in benefiting the students of such institution.”.

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#

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Title IV of the Act is further amended by striking out part D and any references thereto.

Title VIII of the Act is amended to read as follows:

“TITLE VIII— COOPERATIVE EDUCATION

“Sec. 801. “appropriations authorized

(a)(a)

There are authorized to be appropriated—

“(1)“(1)

for the fiscal year ending June 30, 1976, and the period beginning July 1, 1976, and ending September 30, 1976, $13,000,000;

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“(2)“(2)

for the fiscal year 1977, $15,000,000;

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“(3)“(3)

for the fiscal year 1978, $20,000,000;

#

“(4)“(4)

for the fiscal year 1979, $25,000,000; and

#

“(5)“(5)

for each of the fiscal years 1980, 1981, and 1982, $25,000,000,

#

to enable the Commissioner to make grants pursuant to section 802 to institutions of higher education, or to combinations of such institutions, for the planning, establishment, expansion, or carrying out by such institutions or combinations of programs of cooperative education. Such programs shall provide alternating periods of academic study and of public or private employment, the latter affording students not only the opportunity to earn the funds necessary for continuing and completing their education but, so far as practicable, giving them work experience related to their academic or occupational objectives.

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“(b)“(b)

There ate further authorized to be appropriated—

(1)(1)

$1,000,000 for the fiscal year ending June 30, 1976, and the period beginning July 1, 1976, and ending September 30, 1976;

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“(2)“(2)

$1,500,000 for the fiscal year 1977;

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“(3)“(3)

$2,500,000 for the fiscal year 1978; and

#

“(4)“(4)

$3,000,000 for each of the fiscal years 1978, 1979, 1980, 1981, and 1982,

#

to enable the Commissioner to make training, demonstration, or research grants or contracts pursuant to section 803.

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“(c)“(c)

Appropriations under this title shall not be available for the payment of compensation of students for employment by employers under arrangements pursuant to this part.

#

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“Sec. 802. “grants for programs of cooperative education

(a)(a)

From the sums appropriated pursuant to subsection

20 USC 1133a.

(a) of section 801, and for the purposes set forth therein, the Commissioner is authorized to make grants to institutions of higher education that have applied therefor in accordance with subsection (b) of this section, in amounts not in excess of $175,000 to any one such institution for any fiscal year, and to combinations of such institutions (that have so applied) in amounts not to exceed an amount equal to the product of $125,000 times the number of institutions participating in such combination, for any fiscal year.

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“(b)“(b)

Each application for a grant authorized by subsection (a) of

Application.

this section shall be filed with the Commissioner at such time or times as he may prescribe and shall—

“(1)“(1)

set. forth programs or activities for which a grant is authorized under this section;

#

“(2)“(2)

specify the portion or portions of such programs or activities which will be performed by a nonprofit organization or institution other than the applicant and the compensation to be paid for such performance;

#

“(3)“(3)

provide that the applicant will expend during such fiscal year for the purpose of such program or activity not less than was expended for such purpose during the previous fiscal year:

#

“(4)“(4)

provide that the applicant shall make such reports and keep such records as are essential to insure that the applicant’s programs or activities are conducted in accordance with the provisions of this part;

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“(5)“(5)

provide for such fiscal control and fund accounting procedures as may be necessary to assure proper disbursement of, and accounting for, Federal funds paid to the applicant under this part; and

#

“(6)“(6)

include such other information as is essential to carry out the provisions of this part.

#

#

“(c)“(c)

No institution of higher education may receive, individually or as a participant in a combination of such institutions, grants under this section for more than five fiscal years, No such institution or combination thereof may receive—

“(1)“(1)

a grant in excess of 100 per centum of the total administrative cost for the first of such fiscal years;

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“(2)“(2)

a grant in excess of 90 per centum of such cost for the second of such years;

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“(3)“(3)

a grant in excess of 80 per centum of such cost for the third of such years;

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“(4)“(4)

a grant in excess of 60 per centum of such cost for the fourth of such years; or

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“(5)“(5)

a grant in excess of 30 per centum of such cost for the fifth of such years.

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Any provision of law to the contrary notwithstanding, the Commissioner shall not waive the provisions of this subsection.

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“(d)“(d)

In approving applications under this section, the Commissioner shall give special consideration to applications from institut ions of higher education for programs which show the greatest promise of success because of—

“(1)“(1)

the extent to which programs in the academic discipline with respect to which the application is made have had a favorable reception by employers,

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“(2)“(2)

the commitment of the institution of higher education to cooperative education as demonstrated by the plans which such institution has made to continue the program after the termination of Federal financial assistance, and

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“(3)“(3)

such other factors as are consistent with the purposes of this section.

#

#

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“Sec. 803. “grants and contracts for training and research

From the sums appropriated pursuant to subsection (b) of section 801, the Commissioner is authorized, for the training of persons in the planning, establishment, administration, or coordination of programs of cooperative education, for projects demonstrating or exploring the feasibility or value of innovative methods of cooperative education, or for research into methods of improving, developing, or promoting the use of cooperative education programs in institutions of higher education, to—

“(1)“(1)

make grants to or contracts with institutions of higher education, or combinations of such institutions, and

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“(2)“(2)

make grants to or contracts with other public or private nonprofit agencies or organizations, when such grants or contracts will make an especially significant contribution to attaining the objectives of this section.”.

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Section 461(b) of the Act is amended by striking out “July 1, 1975” and inserting in lieu thereof “October 1, 1979”.

Section 461(b)(2) of the Act is amended by striking out “June 30, 1976” and inserting in lieu thereof “September 30, 1979”, and by striking out “July 1, 1975” and inserting in lieu thereof “October 1, 1979”.

Section 163(a) of the Act is amended by redesignating clauses (4) and (5) as clauses (5) and (6), respectively, and inserting immediately after paragraph (3) the following new clause:

“(4)“(4)

provide that where a note or written agreement evidencing a note has been in default for (A) one hundred and twenty days, in the case of a loan which is repayable in monthly installments, or (B) one hundred and eighty days, in the case of a loan which is repayable in less frequent installments, notice of such default shall be given to the Commissioner in a report, describing the total number of loans from such fund which are in such default, and made to the Commissioner at least semiannually;”.

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Section 464(b) of the Act is amended by striking “, upon notice

20 USC 1087dd.

to the Commissioner,”.

Section 464(c)(1)(A) of the Act is amended by inserting immediately before the semicolon at the end thereof the following: “, except that such period may begin earlier than nine months after such date upon the request of the borrower”.

Section 464(c) (1) (C) of the Act is amended to read as follows:

“(C)“(C)

may provide, at the option of the institution in accordance with regulations of the Commissioner, that during the repayment period of the loan, payments of principal and interest by the borrower with respect to all outstanding loans made to him from a student loan fund assisted under this part shall be at a rate equal to not less than $30 per month, except that the institution may, subject to such regulations, permit a borrower to pay less than $30 per month for a period of not more than one year where necessary to avoid hardship to the borrower, but without extending the ten-year maximum repayment period provided for in clause (A) of this paragraph;”

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Section 493 of the Act is amended—

20 USC 1088b.

Subpart 1 of part F of title IV of the Act is further amended by inserting immediately after section 493 the following new sections:

“Sec. 493A. “institutional and financial assistance information for students

(a)(a)

(1)(1)

Effective July 1, 1977, each institution of higher education and each eligible institution which receives payments tinder sections 411(d), 428(e) or 493 of this title, as the case may be, shall carry out information dissemination activities to prospective students and to enrolled students who request information regarding financial assistance under this title. The information required by this section shall be produced and be made readily available, through appropriate publications and mailings, to all current students and to any prospective student upon request. The information required by this section shall accurately describe—

“(A)“(A)

the student financial assistance programs available to students who enroll at such institution,

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“(B)“(B)

the method by which such assistance is distributed among student recipients who enroll at such institution,

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“(C)“(C)

any means, including forms, by which application for student financial assistance is made and requirements for accurately preparing such applications and the review standards employed to make awards for student financial assistance,

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“(D)“(D)

the rights and responsibilities of students receiving financial assistance under this title,

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“(E)“(E)

the cost of attending the institution, including (i) tuition and fees, (ii) books and supplies, (iii) estimates of typical student room and board costs or typical community costs, and (iv) any additional cost of the program in which the student, is enrolled or expresses a specific interest,

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“(F)“(F)

the refund policy of the institution for the return of unearned tuition and fees or other refundable portion of cost, as described in clause (E) of this subsection,

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“(G)“(G)

the academic program of the institution, including (i) the current degree programs and other educational and teaming programs, (ii) the instructional, laboratory, and other physical plant facilities which relate to the academic program, (iii) the faculty and other instructional personnel, and (iv) data regarding student retention at the institution and, when available, the number and percentage of students completing the programs in which the student is enrolled or expresses interest, and

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“(H)“(H)

each person designated under subsection (b) of this section, and the methods by which and locations in which any person so designated may be contacted by students and prospective students who are seeking information required by this subsection.

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“(2)“(2)

For purposes of this section, the term ‘prospective student’ means any individual who has contacted an institution of higher education or an eligible institution requesting information for the purpose of enrolling in that institution.

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“(b)“(b)

Effective July 1, 1977, each institution of higher education or eligible institution, as the case may be which receives payments authorized, under section 411(d), 428(e), or section 493 of this title shall designate an employee or group of employees who shall be available on a full-time basis to assist, students or potential students in obtaining information as specified in the preceding subsection. The Commissioner may, by regulation, waive the requirement that an employee or employees be available on a full-time basis for carrying out. responsibilities required under this section whenever an institution of higher education or eligible institution, as the case may be, in which the total enrollment, or the portion of the enrollment participating in programs under this title at that institution, is too small to necessitate such employee or employees being available on a full-time basis. No such waiver may include permission to exempt any such institution from designating a specific individual or a group of individuals to carry out the provisions of this section.

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“(c)“(c)

Within 120 days after the date of enactment of the Education Amendments of 1976, the Commissioner shall begin to make available

Ante, p. 2081.

to institutions of higher education and eligible institutions descriptions of Federal student assistance programs including the rights and responsibilities of student and institutional participants, in order to (1) assist students in gaining information through institutional sources, and (2) assist institutions in carrying out the provisions of this section, so that individual and institutional participants will be fully aware of their rights and responsibilities under such programs.

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“Sec. 493B. “student aid information services

In order to assist in the expansion and improvement of

20 USC 1088b–2.

campus student aid information services, the Commissioner shall—

“(1)“(1)

survey institutional practices of providing students with complete and accurate information about student financial aid, including the employment of part-time financial aid counselors under work-study programs, hiring other part-time persons from the community, using campus or community volunteers, and communicating through use of publications or technology; collect institutional evaluations of such practices; and disseminate the information described in this clause;

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“(2)“(2)

convene meetings of financial aid administrators, students, and other appropriate representatives to explore means of expanding campus financial aid information services and improving the training of part-time individuals involved in such services;

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“(3)“(3)

whenever possible, include student peer counselors and other part-time financial aid personnel in training programs sponsored by the Office of Education; and

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“(4)“(4)

make recommendations to Congress not later than October

Recommendations to Congress.

1, 1977, concerning his findings and legislative proposals for improving the use and quality of services of part-time campus financial aid personnel.

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“Sec. 493C. “student financial assistance training program

(a)(a)

It is the purpose of this section to make incentive

Grants.

20 USC 10888–3.

grants, available, to the States to be administered, in consultation with statewide financial aid administrator organizations, for the purpose of designing and developing programs to increase the proficiency of institutional and State financial aid administrators in all aspects of student financial aid.

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“(b)“(b)

There are hereby authorized to be appropriated $280,000 for

Appropriation authorization.

each year ending prior to October 1, 1978, for equal division among the States.

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“(c)“(c)

To receive a grant under this section a State must provide appropriate assurance to the Commissioner that the grant will be matched from State funds by an amount at least equal to the amount of the grant.

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“(d)“(d)

From the funds otherwise allotted to the States for subpart 2 of part A, and for part C and part E of this title for States which have obtained a grant under this section, the Commissioner shall transfer to such State an amount equal to .06 per centum of such funds or $10,000, whichever is less, and shall reduce such State allotment by that amount.

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“(e)“(e)

A State which desires to obtain a grant under this section for any fiscal year shall submit an application therefor through or by the State agency administering its program of student grants, or if such agency does not exist, through or by any agency or organization designated for such purpose by the State, at such time or times, and containing such information as may be required by such regulations as the Commissioner may prescribe for the purpose of enabling the Commissioner to disburse the funds.”.

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Title TV of the Act is further amended by adding after sect ion 497 the following new sections:

“Sec. 497A. “fiscal eligibility of institutions

(a)(a)

Notwithstanding any other provisions of this title, or of section 434(c) of the General Education Provisions Act, the Commissioner is authorized to prescribe such regulations as may be necessary to provide for—

“(1)“(1)

a fiscal audit of an eligible institution with regard to any funds obtained by it under this title or obtained from a student who has a loan insured or guaranteed by the Commissioner under this title;

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“(2)“(2)

the establishment of reasonable standards of financial responsibility and appropriate institutional capability for the administration by an eligible institution of a program of student financial aid under this title;

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“(3)“(3)

the establishment by each eligible institution under part B responsible for furnishing to the lender the statement required by

Ante, p. 2108.

section 428(a) (2) (A) (i), of policies and procedures by which the latest known address and enrollment status of any student who has had a loan insured under this part and who has either formally terminated his enrollment, or failed to re-enroll on at least a half-time basis, at such institution, shall be furnished either to the holder (or if unknown, the insurer) of the note, not later than sixty days after such termination or failure to re-enroll; and

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“(4)“(4)

the limitation, suspension or termination of the eligibility for any program under this title of any otherwise eligible institution, whenever the Commissioner has determined, after reasonable notice and opportunity for hearing on the record, that such institution has violated or failed to carry out any provision of this title or any regulation prescribed under this title, except that no period of suspension under this section shall exceed sixty days unless the institution and the Commissioner agree to an extension or unless limitation or termination proceedings are initiated by the Commissioner within that period of time.

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“(b)“(b)

The Commissioner shall, for the purpose of carrying out the provisions of this section with respect to subpart 1 of part A of this title, enter into special arrangements with institutions of higher education at which students receiving basic, grants under that subpart are enrolled. The Commissioner shall include special provisions designed to carry out the provisions of this section in agreements with institutions of higher education under section 413C, in agreements with eligible institutions under section 443, and in agreements with institutions of higher education under section 463.

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“(c)“(c)

Upon determination that an eligible institution has engaged in substantial misrepresentation of the nature of its educational program, its financial charges, or the employability of its graduates, the Commissioner may suspend or terminate the eligibility status for any or all programs under this title of any otherwise eligible institution, in accordance with procedures specified in paragraph (a)(3), until he finds that such practices have been corrected.

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“(d)“(d)

The Commissioner shall publish a list of State agencies which he determines to be reliable, authority as to the quality of public post-secondary vocational education in their respective States for the purpose of determining eligibility for all Federal student assistance programs.

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“(e)“(e)

For the purpose of this section the term ‘eligible institution’ means any such institution described in section 435(a) of this Act.”.

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The amendments made by subsection (a) (except the amendment made by paragraph 4(C) thereof) shall take effect on September 30, 1976.

Section 513(a) of the Act is amended—

Section 513(b) of the Act is amended by striking out “for

20 USC 1103.

teacher-interns while teaching” and inserting in lieu thereof “for Teacher Corps members while serving”.

Section 513 of the Act is further amended by adding at the end thereof the following new subsections:

“(e)“(e)

(1)(1)

No arrangement may be entered into under the provisions of paragraph (1), (2), (3), (5), or (6) of subsection (a) of this section unless that arrangement is prepared with the participation of an elected council which shall be representative of the community in which the project subject to that arrangement is located and of the parents of the students of the elementary or secondary schools, or both, to be served by any such project,

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“(2)“(2)

Each council selected pursuant to this subsection shall participate with the local educational agency or institution of higher education, or both, in the planning, carrying out, and evaluation of projects subject to arrangements under paragraphs (1), (2), (3), (5), and (6) of subsection (a) of this section.

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“(3)“(3)

The Commissioner is authorized in each fiscal year to arrange for the payment of necessary secretarial and administration expenses of each council elected pursuant, to the provisions of this subsection for the purposes of carrying out its functions under this subsection.

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“(f)“(f)

The Commissioner shall establish procedures seeking, with respect to the Teacher Corps members enrolled after the date of enactment of the Education Amendments of 1976, goal of having approximately

Ante, p. 2081.

five individuals who are at the time of enrollment, or who previously have been, employed as teachers by local educational agencies to one individual who has not been so employed. The Commissioner may waive, the procedure established under this subsection if he makes a determination that there are insufficient qualified applicants to maintain the goal sought by this subsection, or that there are insufficient employment opportunities for individuals who are not so employed, and submits a report to the Congress of such a determination.

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“(g)“(g)

Notwithstanding any other provision of law, the Commissioner shall develop and establish specific criteria for entering into arrangements under this part in order to assist applicants for assistance under this part to develop proposals to be submitted. Criteria established under this subsection shall housed by the Commissioner in selecting proposals under this title.”.

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Section 514 of the Act is amended by adding at the end thereof

20 USC 1104.

the following new subsection:

“(f)“(f)

The Commissioner is authorized to compensate local educational agencies for released time for educational personnel of the agency who are being trained in Teacher Corps projects assisted under this title.”.

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Title V of the Act is further amended by inserting immediately before the heading of section 511 the following:

“Part A— Teacher Cokes Program”

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and by adding at the end thereof the following new part:

“Part B— Teacher Training Programs

“Sec. 531. “authorization of appropriations

There are authorized to be appropriated $75,000,000 for the fiscal year 1977 and for each of the fiscal years ending prior to October 1, 1979, to carry out the provisions of this part. Of the sums so appropriated for any fiscal year not less than 10 per centum shall be available for each of the programs authorized by sections 532 and 533.

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“Sec. 532. “teacher centers

(a)(a)

(1)(1)

The Commissioner is authorized to make grants to local educational agencies in accordance with the provisions of this section to assist such agencies in planning, establishing, and operating teacher centers.

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“(2)“(2)

For the purpose of this section, the term ‘teacher center’ means any site operated by a local educational agency (or a combination of such agencies) which serves teachers, from public and non-public schools of a State, or an area or community within a State, in which teachers, with the assistance of such consultants and experts as may be necessary, may—

“(A)“(A)

develop and produce curricula designed to meet the educational needs of the persons in the community, area, or State being served, including the use of educational research findings or new or improved methods, practices, and techniques in the development of such curricula; and

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“(B)“(B)

provide training to improve the skills of teachers to enable such teachers to meet better the special educational needs of persons such teachers serve, and to familiarize such teachers with developments in curriculum development and educational research, including the manner in which the research can be used to improve their teaching skills.

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“(b)“(b)

Each teacher center shall be operated under the supervision of a teacher center policy board, the majority of which is representative of elementary and secondary classroom teachers to be served by such center fairly reflecting the make-up of all schoolteachers, including special education and vocational education teachers. Such board shall also include individuals representative of, or designated by, the school board of the local educational agency served by such center, and at least one representative designated by the institutions of higher education (with departments or schools of education) located in the area.

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“(c)“(c)

(1)(1)

Any local educational agency desiring to receive a grant under this section shall make application therefor at such time, in such manner, and containing or accompanied by such information, as the Commissioner may by regulation require. Each application shall be submitted through the State educational agency of the State in which the applicant is located. Each such State agency shall review the application, make comments thereon, and recommend each application the State agency finds should be approved. Only applications so recommended snail be transmitted to the Commissioner for his approval.

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“(2)“(2)

Any local educational agency which has submitted an application in accordance with paragraph (1) of this subsection which is dissatisfied with the action of the appropriate State educational agency may petition the Commissioner to request further consideration by the State educational agency.

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“(d)“(d)

In approving any application under this section, the Commissioner shall insure that there is adequate provision for the furnishing of technical assistance to, and dissemination of information derived from, the proposed teacher center by the appropriate State educational agency. Such State agency shall be adequately compensated by the Commissioner for such review of applications, recommendations, submissions, technical assistance, and dissemination services.

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“(e)“(e)

Any local educational agency having an application approved under this section may contract with an institution of higher education to carry out activities under, or provide technical assistance in connection with, such application.

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“(f)“(f)

Notwithstanding the provisions of subsection (a) (1) of this section with respect to t he requirement that teacher centers be operated by local educational agencies, 10 per centum of the funds expended under this section may be expended directly by the Commissioner to make grants to institutions of higher education to operate teacher centers, subject to the other provisions of this section.

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“Sec. 533. “training for higher education personnel

(a)(a)

The Commissioner is authorized to make grants to

Grants.

20 USC 1119a–1.

institutions of higher education to assist such institutions in the training of individuals—

“(1)“(1)

preparing to serve as teachers, including guidance and counseling personnel, administrative personnel, or education specialists in institutions of higher education if such individuals are (A) from cultural or educational backgrounds which have hindered such individuals in achieving success in the field of education, or (B) preparing to Serve m educational programs designed to meet the special needs of students from such backgrounds; or

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“(2)“(2)

serving as teachers, including guidance and counseling personnel, administrative personnel, or education specialists in institutions of higher education, if such individuals are to be trained to meet changing personnel needs, such as in areas determined to be national priority areas pursuant to section 532 of this title.

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“(b)“(b)

Grants made under this section may be used only to assist in paying the cost of courses of training or study, including short term or regular institutes, symposia or other in-service training, for teachers, including guidance and counseling personnel, administrative personnel, or educational specialists in institutions of higher education.”.

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Section 601(b) of the Act is amended by striking out

20 USC 1121.

that part of the text thereof which precedes “to enable” and inserting in lieu thereof the following: “There are authorized to be appropriated $60,000,000 for each of the fiscal years ending prior to October 1, 1979,”.

Section 601(c) of the Act is amended by striking out that part of the text thereof which precedes “to enable” and inserting in lieu thereof the following: “There are authorized to be appropriated $10,000,000 for each of the fiscal years ending prior to October 1, 1979,”.

Section 604(b) of the Act is amended by striking out all after the first sentence of such section and inserting in lieu thereof the following: “The Commissioner shall establish basic criteria for making determinations under this subsection.”.

Section 604 of the Act is amended by adding at the end thereof the following new subsection:

“(c)“(c)

An institution of higher education shall be eligible for a grunt for a project pursuant to this part in any fiscal year only if such institution has expended from current funds available for that year for instructional and library purposes, other than personnel costs, during the preceding fiscal year an amount not less than the amount expended, per equivalent full time student or in the aggregate, whichever is less, by such institution from current funds for such purposes during the second preceding fiscal year. A combination of institutions of higher education shall be eligible for such a grant in accordance with regulations of the Commissioner prescribing requirements for maintenance of effort. The Commissioner shall establish basic criteria for making determinations under this subsection, and may waive so much of the requirement of this subsection as he determines is equitable in accordance with objective criteria of general applicability.”.

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Section 701(b) is amended by striking out “.Tune 30, 1974, and June 30, 1975” and inserting in lieu thereof “prior to October 1, 1979”.

Section 721(b) is amended by striking out “for the fiscal year ending June 30, 1975” and inserting in lieu thereof “for each of the fiscal years ending prior to October 1, 1979”.

Section 741 (b) is amended by striking out “for the fiscal year ending Juno 30, 1975” and inserting in lieu thereof “for each of the fiscal years ending prior to October 1, 1979”.

Section 745 (c) (2) is amended by striking out. “July 1 of each of the four succeeding years” and inserting in lieu thereof, “the first day of each fiscal year during the period ending September 30, 1979”.

Section 762(a) is amended by striking out “July 1, 1975” and inserting in lien thereof “October 1, 1979”.

Title VII of the Act is amended—

Section 701(c) of the Act is amended by inserting “an appropriate amount, but in no case less than” immediately before “24 per centum”.

Section 704(b) of the Act is amended to read as follows:

20 USC 1132a–3.

“(b)“(b)

The Commissioner shall not disapprove any State plan submitted under this section unless he determines after reasonable notice mid opportunity for hearing and comment, that the plan is inconsistent with a specific provision of tills section or other relevant sections of this title.”

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Section 705(a) of the Act is amended by striking out “on the

20 USC 1132a–4.

campus of such institution”.

Section 721 (a) of the Act is amended by inserting “(1)” immediately

20 USC 1132b.

after “(a)” and by adding at the end thereof the following new paragraph:

“(2)“(2)

The Commissioner is authorized to make grants to or enter into

Grants and contracts.

contracts with institutions of higher education for the construction of facilities for model intercultural programs designed to integrate the educational requirements of substantive knowledge and language proficiency.”.

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Section 743(b) (5) of the Act is amended by inserting before the

20 USC 1132c–2.

semicolon the following: “including (A) the granting of a temporary moratorium on the repayment of principal or interest or both to any institution of higher education or higher education building agency the Commissioner finds to be tempo rarity unable to make such repayment without undue financial hardship, if such institution or agency presents, and the Commissioner approves, a specific plan to make such repayment including a schedule for such repayment, and (B) the granting to any such institution or agency for which he has authorized a loan under this part prior to January 1, 1976, of the option to pay into the fund established under section 744 an amount equal

20 USC 1132c–3.

to 75 per centum of the total current obligation of the institution or agency under this part, in full accord and satisfaction of such total current obligation, if such institution or agency desiring to exercise such an option makes payment from non-Federal sources prior to October 1, 1979.”.

Section 762(a) of the Act is amended by striking out “Office

20 USC 1132d–1.

of Emergency Planning” and inserting in lien thereof “Office of Emergency Preparedness”.

‘Title VII of the Act is further amended by redesignating Part E and all references thereto as Part F and by inserting immediately

20 USC 1132e.

after Part D the following new part:

“Part E— Reconstruction and Renovation

“Sec. 771.

(a)(a)

The Commissioner is authorized to make grants from funds appropriated under section 701(b), grants from funds appropriated under section 721(b), loans from funds appropriated under section 741(b), or loans, to the extent provided in advance by appropriations Acts, from any unused amounts in the fluid established under section 744, notwithstanding any prior restrictions on the use of such unused amounts, to institutions of higher education and to higher education building agencies for the reconstruction or renovation of academic facilities if the primary purpose of such reconstruction or renovation is—

“(1)“(1)

to enable such institutions to economize on the use of energy resources, or

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“(2)“(2)

to enable such institutions to bring their academic facilities into conformity with the requirements of—

“(A)“(A)

the Act of August 12, 1968, commonly known as the

42 USC 4151.

Architectural Barriers Act of 1968, or

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“(B)“(B)

environmental protection or health and safety programs mandated by Federal, State or local law, if such requirements were not in effect at the time such facilities were constructed.

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“(b)“(b)

(1)(1)

In determining whether the primary purpose of a proposed reconstruction or renovation is to conserve energy, the Commissioner shall consult with other Federal agencies which have specific expertise in energy conservation.

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“(2)“(2)

In determining whether the primary purpose of a proposed reconstruction or renovation is to enable such facility to meet environmental protection standards or health or safety requirements imposed under law, the Commissioner shall consult with the appropriate Federal, State or local agency responsible for the administration of such law.

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“(3)“(3)

In determining whether the primary purpose of a proposed reconstruction or renovation is to enable such facility to comply with the Act of August 12, 1968, the Commissioner shall consult with the Architectural and Transportation Barriers Compliance Board and the Administrator of General Services.

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“(c)“(c)

A loan pursuant to this section shall be repaid within such period not exceeding twenty years as may be determined by the Commissioner.”

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Section 782 of the Act is amended—

Part B of title IX of the Act is amended to read as follows:

“Part B— Fellowships for Graduate and Professional Study

“Sec. 921. “appropriations authorized

There are authorized to be appropriated such sums as may be necessary to carry out the provisions of this part.

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“Sec. 922. “number or fellowships

(a)(a)

During the fiscal year ending June 30, 1973, and each of the succeeding fiscal years ending prior to October 1, 1979, the Commissioner is authorized to award not to exceed seven thousand five hundred fellowships to be used for study in graduate programs at institutions of higher education. Such fellowships may be awarded for such period of study as the Commissioner may determine but not in excess of thirty-six months except that the Commissioner may provide by regulation for the granting of such fellowships for a period of study not to exceed one twelve-month period in addition to the thirty-six month period set forth in this section under special circumstances which the Commissioner determines would most effectively serve the purposes of this part. The Commissioner shall make a determination to provide such twelve-month extension of an award to an individual fellowship recipient upon review of an application for such extension by the recipient.

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“(b)“(b)

In addition to the number of fellowships authorized to be awarded by subsection (a) of this section, the Commissioner is authorized to award fellowships equal to the number previously awarded during any fiscal year under this section but vacated prior to the end of the period for which they were awarded; except that each fellowship awarded under this subsection shall be for such period of study, not in excess of the remainder of the period for which the fellowship which it replaces was awarded, as the Commissioner may determine.

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“(c)“(c)

The Commissioner may allow a fellowship recipient to interrupt his studies for a period not to exceed twelve months for the purpose of work, travel, or independent study away from the campus, if such independent study is supportive of the fellowship recipient’s academic program, except that the Commissioner shall make no payments to the fellowship recipient for such period for stipends, travel expenses, or allowances for dependents or payments to institutions pursuant to the recipient’s fellowship award.

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“Sec. 923. “award of fellowships and approval of graduate programs

(a)(a)

The total number of fellowships authorized by section 922(a) to be awarded during a fiscal year shall be awarded by the Commissioner on such bases as he may determine, except that recipi-ents of such fellowships shall be individuals who have been admitted or who are enrolled in graduate or professional programs approved by the Commissioner and who are pursuing, a course of study leading to a degree of doctor of philosophy, doctor of arts, or an equivalent degree. The Commissioner shall approve a graduate program of an institution of higher education only upon his finding that the application contains satisfactory assurance that the institution will provide special orientations and practical experiences designed to prepare its fellowship recipients (1) for academic careers at some level of education beyond the high school, or (2) for other than academic careers in professional career fields of importance to the national interest, as determined by the Commissioner.

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“(b)“(b)

In determining priorities and procedures for the award of fellowships under this section the Commissioner shall—

“(1)“(1)

take into account present and projected needs for highly trained individuals in all areas of education beyond high school,

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“(2)“(2)

take into account present and projected needs for highly trained individuals in other than academic career fields of high national priority,

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“(3)“(3)

consider the need to prepare a larger number of individuals from minority groups, especially from among such groups who have been traditionally underrepresented in colleges and universities, but nothing contained in this clause shall be interpreted to require any educational institution to grant preference or disparate treatment to the members of one minority group on account of an imbalance which may exist with respect to the total number or percentage of individuals of that group participating in or receiving the benefits of this program, in comparison with the total number or percentage of individuals of that group in any community, State, section, or other area,

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“(4)“(4)

assure that consideration in awarding fellowships under this part, is given (A) to individuals who have demonstrated their competence outside of u higher education setting for at least two years subsequent to the completion of their undergraduate studies, or (B) to individuals with varied backgrounds and experiences who have acquired such backgrounds and experiences in other than academic settings,

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“(5)“(5)

seek to achieve a reasonably equitable geographical distribution of graduate programs approved under this section, based upon such factors as student enrollments in institutions of higher education and population.

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“(c)“(c)

No fellowship shall be awarded under this part for study at a school or department of divinity.

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“Sec. 924. “fellowship stipends

(a)(a)

The Commissioner shall pay to individuals awarded

20 USC 1134g.

fellowships under this part such stipends (including such allowances for subsistence and other expenses for such persons and their dependents) as he may determine to be consistent with prevailing practices under comparable federally supported programs.

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“(b)“(b)

The Commissioner shall (in addition to the stipends paid to individuals under subsection (a)) pay to the institution of higher education at which such person is pursuing his course of study such amounts as the Commissioner may determine to be consistent with prevailing practices under comparable federally supported programs, except that such amount charged to a fellowship recipient and col-lected from such recipient by the institution for tuition and other expenses required by the institution as part of the recipient’s instructional program shall be deducted from the payments to the institution under this subsection.

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“Sec. 925. “fellowship conditions

(a)(a)

An individual awarded a fellowship under the provisions of this part shall continue to receive payments provided in section 924 only during such periods as the Commissioner finds that he is maintaining satisfactory proficiency in, and devoting essentially full time to, study or research in the field in which such fellowship was awarded, in an institution of higher education, and is not engaging in gainful employment other than part-time employment by such institution in teaching, research, or similar activities, approved by the Commissioner.

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“(b)“(b)

The Commissioner is authorized to require reports containing such information in such form and to file at such times as he determines necessary from any person awarded a fellowship under the provisions of this part. Such reports shall be accompanied by a certificate from an appropriate official at the institution of higher education, library, archive, or other research center approved by the Commissioner, stating that such person is making satisfactory progress in, and is devoting essentially full time to the program for which the fellowship was awarded.”.

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Title IX of the Act is amended by inserting after part D the following new part:

“Part E— Annual Fellowship Report

“Sec. 971. “report on graduate fellowships and assistance

(a)(a)

Within one hundred and twenty days after the end of each fiscal year during which grants or fellowships are awarded under the provisions of this title the Commissioner shall prepare and submit to the Congress a report which—

“(1)“(1)

specifies the authority for and amount of each grant or fellowship so awarded;

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“(2)“(2)

identifies the institutions which received such grants; and

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“(3)“(3)

identifies the institutions which students receiving such fellowships attended.

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“(b)“(b)

Each report required by this section shall contain an evaluation which—

“(1)“(1)

examines the extent to which grants or fellowships awarded under this title emphasized studies relating to—

“(A)“(A)

innovation in the field of graduate education;

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“(B)“(B)

emerging fields of knowledge;

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“(C)“(C)

areas of overriding national concern; or

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“(D)“(D)

the education and employment of personnel in areas which the Commissioner finds to be of special need; and

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“(2)“(2)

examines the extent to which grants and fellowships awarded under this title made substantial progress toward achieving the purposes of the various parts of this title under which they were awarded.”.

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Part B of title X of the Act as in effect prior to the amendments

Repeal.

20 USC 1135b–1135b–9.

Effective date.

20 USC 1135 note.

made by subsection (b) of this section is repealed.

The amendments made by paragraphs (1), (2), (3) of subsection (a), paragraphs (1), 2(A), (3) of subsection (b), and subsection (c) shall take effect on September 30, 1977.

Section 1203 of the Act is amended by redesignating subsection (c) as subsection (d) and by inserting immediately after subsection (b) the following new subsection:

“(c)“(c)

The Commissioner is authorized to make grants to State commissions established pursuant to section 1202(a), and to interstate compact postsecondary educational agencies approved by the Commissioner for the purpose of this subsection, applying jointly for the purpose of this subsection, to enable the participating commissions to plan, develop, and carry out interstate cooperative postsecondary education projects designed to increase the accessibility of postsecondary educational opportunities for the residents of the participating States and to assist such States to carry out postsecondary education programs in a more effective and economical manner.”.

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Section 1203(d) of the. Act (as redesignated by this section) is amended to read as follows:

“(d)“(d)

(1)(1)

There are authorized to be appropriated such sums as may be necessary for each fiscal year ending prior to October 1, 1979, to early out the provisions of this section other than subsection (c) of this section.

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“(2)“(2)

There are authorized to be appropriated $2,000,000 for each fiscal year ending prior to October 1, 1979, to carry out the provisions of subsection (c) of this section.”.

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