Title 20 — Education

Part D · Chapter 28 — Higher Education Resources and Student Assistance

§ 1066b. Federal insurance for bonds

Statutory text

General rule

Subject to the limitations in section 1066c of this title, the Secretary is authorized to enter into insurance agreements to provide financial insurance to guarantee the full payment of principal and interest on qualified bonds upon the conditions set forth in subsections (b), (c) and (d).

Responsibilities of designated bonding authority

The Secretary may not enter into an insurance agreement described in subsection (a) unless the Secretary designates a qualified bonding authority in accordance with sections 1066d(1) and 1066e 1 of this title and the designated bonding authority agrees in such agreement to—

use the proceeds of the qualified bonds, less costs of issuance not to exceed 2 percent of the principal amount thereof, to make loans to eligible institutions or for deposit into an escrow account for repayment of the bonds;

provide in each loan agreement with respect to a loan that not less than 95 percent of the proceeds of the loan will be used—

to finance the repair, renovation, and, in exceptional cases, construction or acquisition, of a capital project; or

to refinance an obligation the proceeds of which were used to finance the repair, renovation, and, in exceptional cases, construction or acquisition, of a capital project;

charge such interest on loans, and provide for such a schedule of repayments of loans, as will, upon the timely repayment of the loans, provide adequate and timely funds for the payment of principal and interest on the bonds; and

require that any payment on a loan expected to be necessary to make a payment of principal and interest on the bonds be due not less than 60 days prior to the date of the payment on the bonds for which such loan payment is expected to be needed;

prior to the making of any loan, provide for a credit review of the institution receiving the loan and assure the Secretary that, on the basis of such credit review, it is reasonable to anticipate that the institution receiving the loan will be able to repay the loan in a timely manner pursuant to the terms thereof;

provide in each loan agreement with respect to a loan that, if a delinquency on such loan results in a funding under the insurance agreement, the institution obligated on such loan shall repay the Secretary, upon terms to be determined by the Secretary, for such funding;

assign any loans to the Secretary, upon the demand of the Secretary, if a delinquency on such loan has required a funding under the insurance agreement;

in the event of a delinquency on a loan, engage in such collection efforts as the Secretary shall require for a period of not less than 45 days prior to requesting a funding under the insurance agreement;

establish an escrow account—

into which each eligible institution shall deposit 5 percent of the proceeds of any loan made under this part, with each eligible institution required to maintain in the escrow account an amount equal to 5 percent of the outstanding principal of all loans made to such institution under this part; and

the balance of which—

shall be available to the Secretary to pay principal and interest on the bonds in the event of delinquency in loan repayment; and

shall be used to return to an eligible institution an amount equal to any remaining portion of such institution’s 5 percent deposit of loan proceeds within 120 days following scheduled repayment of such institution’s loan;

provide in each loan agreement with respect to a loan that, if a delinquency on such loan results in amounts being withdrawn from the escrow account to pay principal and interest on bonds, subsequent payments on such loan shall be available to replenish such escrow account;

comply with the limitations set forth in section 1066c of this title;

make loans only to eligible institutions under this part in accordance with conditions prescribed by the Secretary to ensure that loans are fairly allocated among as many eligible institutions as possible, consistent with making loans of amounts that will permit capital projects of sufficient size and scope to significantly contribute to the educational program of the eligible institutions; and

limit loan collateralization, with respect to any loan made under this part, to 100 percent of the loan amount, except as otherwise required by the Secretary.

Additional agreement provisions

Any insurance agreement described in subsection (a) of this section shall provide as follows:

The payment of principal and interest on bonds shall be insured by the Secretary until such time as such bonds have been retired or canceled.

The Federal liability for delinquencies and default for bonds guaranteed under this part shall only become effective upon the exhaustion of all the funds held in the escrow account described in subsection (b)(8).

The Secretary shall create a letter of credit authorizing the Department of the Treasury to disburse funds to the designated bonding authority or its assignee.

The letter of credit shall be drawn upon in the amount determined by paragraph (5) of this subsection upon the certification of the designated bonding authority to the Secretary or the Secretary’s designee that there is a delinquency on 1 or more loans and there are insufficient funds available from loan repayments and the escrow account to make a scheduled payment of principal and interest on the bonds.

Upon receipt by the Secretary or the Secretary’s designee of the certification described in paragraph (4) of this subsection, the designated bonding authority may draw a funding under the letter of credit in an amount equal to—

the amount required to make the next scheduled payment of principal and interest on the bonds, less

the amount available to the designated bonding authority from loan repayments and the escrow account.

All funds provided under the letter of credit shall be paid to the designated bonding authority within 2 business days following receipt of the certification described in paragraph (4).

Full faith and credit provisions

Subject to subsection (c)(1) the full faith and credit of the United States is pledged to the payment of all funds which may be required to be paid under the provisions of this section.

Sale of qualified bonds

Notwithstanding any other provision of law, a qualified bond guaranteed under this part may be sold to any party that offers terms that the Secretary determines are in the best interest of the eligible institution.

Footnotes

1 See References in Text note below.

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1992
Higher Education Act of 1965
Pub. L. 89–329 title III § 343 · 79 Stat. 1219
Enacted · 20 U.S.C. § 1066b
Pub. L. 89–329, title III, § 343, formerly title VII, § 723, as added Pub. L. 102–325, title VII, § 704, July 23, 1992, 106 Stat. 743
Source evidence
Code source credit
Pub. L. 89–329, title III, § 343, formerly title VII, § 723, as added Pub. L. 102–325, title VII, § 704, July 23, 1992, 106 Stat. 743
1994
Improving America’s Schools Act of 1994
Pub. L. 103–382 § 360C(1)(A) · 108 Stat. 3518
Inserted · 20 U.S.C. § 1066b(b)(8)(A)
Pub. L. 103–382, § 360C(1)(A), inserted before semicolon “, with each eligible institution required to maintain in the escrow account an amount equal to 10 percent of the outstanding principal of all loans made to such institution under this part”
Source evidence
Code amendment note
Subsec. (b)(8)(A). Pub. L. 103–382, § 360C(1)(A), inserted before semicolon “, with each eligible institution required to maintain in the escrow account an amount equal to 10 percent of the outstanding principal of all loans made to such institution under this part”.
Enacted provision · exact public law section
(A) in subparagraph (A), by inserting “, with each eligible institution required to maintain in the escrow account an amount equal to 10 percent of the outstanding principal of all loans made to such institution under this part” before the semicolon; and
1994
Improving America’s Schools Act of 1994
Pub. L. 103–382 § 360C(1)(B) · 108 Stat. 3518
Amended · 20 U.S.C. § 1066b(b)(8)(B)(ii)
Pub. L. 103–382, § 360C(1)(B), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “when all bonds under this part are retired or canceled, shall be divided among the eligible institutions making deposits into such account on the basis of the amount of each such institution’s deposit;”
Source evidence
Code amendment note
Subsec. (b)(8)(B)(ii). Pub. L. 103–382, § 360C(1)(B), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “when all bonds under this part are retired or canceled, shall be divided among the eligible institutions making deposits into such account on the basis of the amount of each such institution’s deposit;”.
Enacted provision · exact public law section
(B) by amending clause (ii) of subparagraph (B) to read as follows: “(ii) shall be used to return to an eligible institution an amount equal to any remaining portion of such institution’s 10 percent deposit of loan proceeds following scheduled repayment of such institution’s loan;”; and
1994
Improving America’s Schools Act of 1994
Pub. L. 103–382 § 360C(2) · 108 Stat. 3518
Substituted · 20 U.S.C. § 1066b(b)(11)
Pub. L. 103–382, § 360C(2), substituted “conditions” for “regulations”
Source evidence
Code amendment note
Subsec. (b)(11). Pub. L. 103–382, § 360C(2), substituted “conditions” for “regulations”.
Enacted provision · exact public law section
(2) in paragraph (11), by striking “regulations” and inserting “conditions”.
1998
Higher Education Amendments of 1998
Pub. L. 105–244 § 301(c)(5)(A) · 112 Stat. 1581
Substituted · 20 U.S.C. § 1066b(a)
Pub. L. 105–244, § 301(c)(5)(A), substituted “section 1066c” for “section 1132c–3”
Source evidence
Code amendment note
Subsec. (a). Pub. L. 105–244, § 301(c)(5)(A), substituted “section 1066c” for “section 1132c–3”.
Enacted provision · exact public law section
(A) in subsection (a), by striking “724” and inserting “344”; and
Effective date note
Amendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as a note under section 1001 of this title.
1998
Higher Education Amendments of 1998
Pub. L. 105–244 § 301(c)(5)(B)(i) · 112 Stat. 1581
Substituted · 20 U.S.C. § 1066b(b)
Pub. L. 105–244, § 301(c)(5)(B)(i), substituted “sections 1066d(1) and 1066e” for “sections 1132c–4(1) and 1132c–5” in introductory provisions
Source evidence
Code amendment note
Subsec. (b). Pub. L. 105–244, § 301(c)(5)(B)(i), substituted “sections 1066d(1) and 1066e” for “sections 1132c–4(1) and 1132c–5” in introductory provisions.
Enacted provision · exact public law section
(i) in the matter preceding paragraph (1), by striking “725(1) and 726” and inserting “345(1) and 346”;
Effective date note
Amendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as a note under section 1001 of this title.
1998
Higher Education Amendments of 1998
Pub. L. 105–244 § 306(b)(1) · 112 Stat. 1581
Substituted · 20 U.S.C. § 1066b(b)(8)
Pub. L. 105–244, § 306(b)(1), substituted “5 percent” for “10 percent” wherever appearing
Source evidence
Code amendment note
Subsec. (b)(8). Pub. L. 105–244, § 306(b)(1), substituted “5 percent” for “10 percent” wherever appearing.
Enacted provision · exact public law section
(1) in subsection (b)(8) (as redesignated by section 301(a)(4))(20 U.S.C. 1132c–2(b)(8)), by striking “10 percent” each place the term appears and inserting “5 percent”; and
Effective date note
Amendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as a note under section 1001 of this title.
1998
Higher Education Amendments of 1998
Pub. L. 105–244 § 301(c)(5)(B)(ii) · 112 Stat. 1581
Substituted · 20 U.S.C. § 1066b(b)(10)
Pub. L. 105–244, § 301(c)(5)(B)(ii), substituted “section 1066c” for “section 1132c–3”
Source evidence
Code amendment note
Subsec. (b)(10). Pub. L. 105–244, § 301(c)(5)(B)(ii), substituted “section 1066c” for “section 1132c–3”.
Enacted provision · exact public law section
(ii) in paragraph (10), by striking “724” and inserting “344”; and
Effective date note
Amendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as a note under section 1001 of this title.
1998
Higher Education Amendments of 1998
Pub. L. 105–244 § 301(c)(5)(B)(iii) · 112 Stat. 1581
Changed · 20 U.S.C. § 1066b(d)
Pub. L. 105–244, § 301(c)(5)(B)(iii), made technical amendment to reference in original act which appears in text as reference to subsection (c)(1) of this section
Source evidence
Code amendment note
Subsec. (d). Pub. L. 105–244, § 301(c)(5)(B)(iii), made technical amendment to reference in original act which appears in text as reference to subsection (c)(1) of this section.
Enacted provision · exact public law section
(iii) in subsection (d), by striking “723(c)(1)” and inserting “343(c)(1)”;
Effective date note
Amendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as a note under section 1001 of this title.
1998
Higher Education Amendments of 1998
Pub. L. 105–244 § 306(b)(2) · 112 Stat. 1581
Added · 20 U.S.C. § 1066b(e)
Pub. L. 105–244, § 306(b)(2), added subsec. (e)
Source evidence
Code amendment note
Subsec. (e). Pub. L. 105–244, § 306(b)(2), added subsec. (e).
Enacted provision · exact public law section
(2) by adding at the end the following: “(e) Notwithstanding any other provision of law, a qualified bond guaranteed under this part may be sold to any party that offers terms that the Secretary determines are in the best interest of the eligible institution.”.
Effective date note
Amendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as a note under section 1001 of this title.
2008
Higher Education Opportunity Act
Pub. L. 110–315 § 314(b)(1)(B) · 122 Stat. 3078
Inserted · 20 U.S.C. § 1066b(b)(8)(B)(ii)
Pub. L. 110–315, § 314(b)(1)(B), inserted “within 120 days” after “loan proceeds”
Source evidence
Code amendment note
Subsec. (b)(8)(B)(ii). Pub. L. 110–315, § 314(b)(1)(B), inserted “within 120 days” after “loan proceeds”.
Enacted provision · exact public law section
(B) by inserting “within 120 days” after “loan proceeds”;
2008
Higher Education Opportunity Act
Pub. L. 110–315 § 314(b)(1)(A) · 122 Stat. 3078
Substituted · 20 U.S.C. § 1066b(b)(8)(B)(ii)
Pub. L. 110–315, § 314(b)(1)(A), which directed the substitution of “5” for “10”, could not be executed because “10” did not appear subsequent to amendment by Pub. L. 105–244, § 306(b)(1). See 1998 Amendment note below
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 110–315, § 314(b)(1)(A), which directed the substitution of “5” for “10”, could not be executed because “10” did not appear subsequent to amendment by Pub. L. 105–244, § 306(b)(1). See 1998 Amendment note below.
Enacted provision · exact public law section
(A) by striking “10” and inserting “5”; and
2008
Higher Education Opportunity Act
Pub. L. 110–315 § 314(b)(2) · 122 Stat. 3078
Added · 20 U.S.C. § 1066b(b)(12)
Pub. L. 110–315, § 314(b)(2)–(4), added par. (12)
Source evidence
Code amendment note
Subsec. (b)(12). Pub. L. 110–315, § 314(b)(2)–(4), added par. (12).
Enacted provision · exact public law section
(2) in paragraph (10), by striking “and” after the semicolon;
2008
Higher Education Opportunity Act
Pub. L. 110–315 § 320(2) · 122 Stat. 3078
Inserted · 20 U.S.C. § 1066b(e)
Pub. L. 110–315, § 320(2), inserted heading
Source evidence
Code amendment note
Subsec. (e). Pub. L. 110–315, § 320(2), inserted heading.
Enacted provision · exact public law section
(2) in section 343(e) (20 U.S.C. 1066b(e)), by inserting “Sale of Qualified Bonds.—” before “Notwithstanding”;

13 of 14 references resolved to an enrolled provision · 1 partial

Editorial Notes

References in Text

Section 1066e of this title, referred to in subsec. (b), was repealed by Pub. L. 105–244, title III, § 306(d), Oct. 7, 1998, 112 Stat. 1647.

Codification

Section was formerly classified to section 1132c–2 of this title prior to renumbering by Pub. L. 105–244.

Prior Provisions

A prior section 343 of Pub. L. 89–329 was classified to section 1068 of this title prior to the general amendment of this subchapter by Pub. L. 99–498.

Amendments1994–2008 · 3 rounds

2008

Subsec. (b)(8)(B)(ii). Pub. L. 110–315, § 314(b)(1)(B), inserted “within 120 days” after “loan proceeds”.

Pub. L. 110–315, § 314(b)(1)(A), which directed the substitution of “5” for “10”, could not be executed because “10” did not appear subsequent to amendment by Pub. L. 105–244, § 306(b)(1). See 1998 Amendment note below.

Subsec. (b)(12). Pub. L. 110–315, § 314(b)(2)–(4), added par. (12).

Subsec. (e). Pub. L. 110–315, § 320(2), inserted heading.

1998

Subsec. (a). Pub. L. 105–244, § 301(c)(5)(A), substituted “section 1066c” for “section 1132c–3”.

Subsec. (b). Pub. L. 105–244, § 301(c)(5)(B)(i), substituted “sections 1066d(1) and 1066e” for “sections 1132c–4(1) and 1132c–5” in introductory provisions.

Subsec. (b)(8). Pub. L. 105–244, § 306(b)(1), substituted “5 percent” for “10 percent” wherever appearing.

Subsec. (b)(10). Pub. L. 105–244, § 301(c)(5)(B)(ii), substituted “section 1066c” for “section 1132c–3”.

Subsec. (d). Pub. L. 105–244, § 301(c)(5)(B)(iii), made technical amendment to reference in original act which appears in text as reference to subsection (c)(1) of this section.

Subsec. (e). Pub. L. 105–244, § 306(b)(2), added subsec. (e).

1994

Subsec. (b)(8)(A). Pub. L. 103–382, § 360C(1)(A), inserted before semicolon “, with each eligible institution required to maintain in the escrow account an amount equal to 10 percent of the outstanding principal of all loans made to such institution under this part”.

Subsec. (b)(8)(B)(ii). Pub. L. 103–382, § 360C(1)(B), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “when all bonds under this part are retired or canceled, shall be divided among the eligible institutions making deposits into such account on the basis of the amount of each such institution’s deposit;”.

Subsec. (b)(11). Pub. L. 103–382, § 360C(2), substituted “conditions” for “regulations”.

Statutory Notes and Related Subsidiaries

Effective Date of 1998 Amendment

Amendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see section 3 of Pub. L. 105–244, set out as a note under section 1001 of this title.

Credits

1992–2008 · 4 acts

1992Pub. L. 89–329, title III, § 343, formerly title VII, § 723, as added Pub. L. 102–325, title VII, § 704, July 23, 1992, 106 Stat. 743
1994amended Pub. L. 103–382, title III, § 360C, Oct. 20, 1994, 108 Stat. 3972
1998renumbered title III, § 343, and amended Pub. L. 105–244, title III, §§ 301(a)(3), (4), (c)(5), 306(b), Oct. 7, 1998, 112 Stat. 1636, 1637, 1646
2008Pub. L. 110–315, title III, §§ 314(b), 320(2), Aug. 14, 2008, 122 Stat. 3181, 3187.

Show as published

(Pub. L. 89–329, title III, § 343, formerly title VII, § 723, as added Pub. L. 102–325, title VII, § 704, July 23, 1992, 106 Stat. 743; amended Pub. L. 103–382, title III, § 360C, Oct. 20, 1994, 108 Stat. 3972; renumbered title III, § 343, and amended Pub. L. 105–244, title III, §§ 301(a)(3), (4), (c)(5), 306(b), Oct. 7, 1998, 112 Stat. 1636, 1637, 1646; Pub. L. 110–315, title III, §§ 314(b), 320(2), Aug. 14, 2008, 122 Stat. 3181, 3187.)