[Code of Federal Regulations]

[Title 42, Volume 1]

[Revised as of October 1, 2006]

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

[CITE: 42CFR60.32]



[Page 330-331]

 

                         TITLE 42--PUBLIC HEALTH

 

    CHAPTER I--PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH AND HUMAN 

                                SERVICES

 

PART 60_HEALTH EDUCATION ASSISTANCE LOAN PROGRAM--Table of Contents

 

                     Subpart D_The Lender and Holder

 

Sec.  60.32  The HEAL lender or holder insurance contract.



    (a)(1) If the Secretary approves an application to be a HEAL lender 

or holder, the Secretary and the lender or holder must sign an insurance 

contract. Under this contract, the lender or holder agrees to comply 

with all the laws, regulations, and other requirements applicable to its 

participation in the HEAL program and the Secretary agrees to insure 

each eligible HEAL loan held by the lender or holder against the 

borrower's default, death, total and permanent disability, bankruptcy 

under chapter 11 or 13 of the Bankruptcy Act, or bankruptcy under 

chapter 7 of the Bankruptcy Act when



[[Page 331]]



the borrower files a complaint to determine the dischargeability of the 

HEAL loan. The Secretary's insurance covers 100 percent of the lender's 

or holder's losses on both unpaid principal and interest, except to the 

extent that a borrower may have a defense on the loan other than 

infancy.

    (2) HEAL insurance, however, is not unconditional. The Secretary 

issues HEAL insurance on the implied representations of the lender that 

all the requirements for the initial insurability of the loan have been 

met. HEAL insurance is further conditioned upon compliance by the holder 

of the loan with the HEAL statute and regulations, the lender's or 

holder's insurance contract, and its own loan management procedures set 

forth in writing pursuant to Sec.  60.31(c). The contract may contain a 

limit on the duration of the contract and the number or amount of HEAL 

loans a lender may make or hold. Each HEAL lender has either a standard 

insurance contract or a comprehensive insurance contract with the 

Secretary, as described below.

    (b) Standard insurance contract. A lender with a standard insurance 

contract must submit to the Secretary a borrower's loan application for 

HEAL insurance on each loan that the lender determines to be eligible. 

The Secretary notifies the lender whether the loan is or is not 

insurable, the amount of the insurance, and the expiration date of the 

insurance commitment. A loan which has been disbursed under a standard 

contract of insurance prior to the Secretary's approval of the 

application is considered not to have been insured.

    (c)(1) Comprehensive insurance contract. A lender with a 

comprehensive insurance contract may disburse a loan without submitting 

an individual borrower's loan application to the Secretary for approval. 

All eligible loans made by a lender with this type of contract are 

insured immediately upon disbursement.

    (2) The Secretary will revoke the comprehensive contract of any 

lender who utilizes procedures which are inconsistent with the HEAL 

statute and regulations, the lender's insurance contract, or its own 

loan management procedures set forth in writing pursuant to Sec.  

60.31(c), and require that such lenders disburse HEAL loans only under a 

standard contract. When the Secretary determines that the lender is in 

compliance with the HEAL statute and regulations and its own loan 

management procedures set forth in writing pursuant to Sec.  60.31(c), 

the lender may reapply for a comprehensive contract.

    (3) In providing comprehensive contracts, the Secretary shall give 

priority to eligible lenders that:

    (i) Make loans to students at interest rates below the rates 

prevailing during the period involved; or

    (ii) Make loans under terms that are otherwise favorable to the 

student relative to the terms under which eligible lenders are generally 

making loans during the period involved.



(Approved by the Office of Management and Budget under control number 

0915-0108)



[48 FR 38988, Aug. 26, 1983, as amended at 52 FR 747, Jan. 8, 1987; 56 

FR 42701, Aug. 29, 1991; 57 FR 28796, June 29, 1992]