[Code of Federal Regulations]

[Title 34, Volume 3]

[Revised as of July 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 34CFR682.419]



[Page 766-767]

 

                           TITLE 34--EDUCATION

 

 CHAPTER VI--OFFICE OF POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION

 

PART 682_FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM--Table of Contents

 

 Subpart D_Administration of the Federal Family Education Loan Programs 

                          by a Guaranty Agency

 

Sec. 682.419  Guaranty agency Federal Fund.



    (a) Establishment and control. A guaranty agency must establish and 

maintain a Federal Student Loan Reserve Fund (referred to as the 

``Federal Fund'') to be used only as permitted under paragraph (c) of 

this section. The assets of the Federal Fund and the earnings on those 

assets are, at all times, the property of the United States. The 

guaranty agency must exercise the level of care required of a fiduciary 

charged with the duty of protecting, investing, and administering the 

money of others.

    (b) Deposits. The agency must deposit into the Federal Fund--

    (1) All funds, securities, and other liquid assets of the reserve 

fund that existed under Sec. 682.410;

    (2) The total amount of insurance premiums collected;

    (3) Federal payments for default, bankruptcy, death, disability, 

closed school, false certification, and other claims;

    (4) Federal payments for supplemental preclaims assistance 

activities performed before October 1, 1998;

    (5) 70 percent of administrative cost allowances received on or 

after October 1, 1998 for loans upon which insurance was issued before 

October 1, 1998;

    (6) All funds received by the guaranty agency from any source on 

FFEL Program loans on which a claim has been paid, within 48 hours of 

receipt of those funds, minus the portion the agency is authorized to 

deposit in its Operating Fund;

    (7) Investment earnings on the Federal Fund;

    (8) Revenue derived from the Federal portion of a nonliquid asset, 

in accordance with Sec. 682.420; and

    (9) Other funds received by the guaranty agency from any source that 

are specifically designated for deposit in the Federal Fund.

    (c) Uses. A guaranty agency may use the assets of the Federal Fund 

only--

    (1) To pay insurance claims;

    (2) To transfer default aversion fees to the agency's Operating 

Fund;

    (3) To transfer account maintenance fees to the agency's Operating 

Fund, if directed by the Secretary;

    (4) To refund payments made by or on behalf of a borrower on a loan 

that has been discharged in accordance with Sec. 682.402;

    (5) To pay the Secretary's share of borrower payments, in accordance 

with Sec. 682.404(g);

    (6) For transfers to the agency's Operating Fund, pursuant to Sec. 

682.421;

    (7) To refund insurance premiums related to loans cancelled or 

refunded, in whole or in part;

    (8) To return to the Secretary portions of the Federal Fund required 

to be returned by the Act; and

    (9) For any other purpose authorized by the Secretary.

    (d) Prohibition against prepayment. A guaranty agency may not prepay 

obligations of the Federal Fund unless it demonstrates, to the 

satisfaction of the Secretary, that the prepayment is in the best 

interests of the United States.

    (e) Minimum Federal Fund level. The guaranty agency must maintain a 

minimum Federal Fund level equal to at least 0.25 percent of its insured 

original principal amount of loans outstanding.

    (f) Definitions. For purposes of this section--

    (1) Federal Fund level means the total of Federal Fund assets 

identified in paragraph (b) of this section plus the amount of funds 

transferred from the Federal Fund that are in the Operating Fund, using 

an accrual basis of accounting.

    (2) Original principal amount of loans outstanding means--

    (i) The sum of--

    (A) The original principal amount of all loans guaranteed by the 

agency; and

    (B) The original principal amount of any loans on which the 

guarantee was transferred to the agency from another guarantor, 

excluding loan guarantees transferred to another agency pursuant



[[Page 767]]



to a plan of the Secretary in response to the insolvency of the agency;

    (ii) Minus the original principal amount of all loans on which--

    (A) The loan guarantee was cancelled;

    (B) The loan guarantee was transferred to another agency;

    (C) Payment in full has been made by the borrower;

    (D) Reinsurance coverage has been lost and cannot be regained; and

    (E) The agency paid claims.



(Authority: 20 U.S.C. 1072-1)



[64 FR 58634, Oct. 29, 1999]