 
      CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE
 
                    SUBCHAPTER IV--STUDENT ASSISTANCE
 
              Part B--Federal Family Education Loan Program
 
Sec. 1072. Advances for reserve funds of State and nonprofit 
        private loan insurance programs
        

(a) Purpose of and authority for advances to reserve funds

                  (1) Purpose; eligible recipients

        From sums appropriated pursuant to paragraphs (3) and (4)(A) of 
    section 1071(b) of this title, the Secretary is authorized to make 
    advances to any State with which the Secretary has made an agreement 
    pursuant to section 1078(b) of this title 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 does not have a student loan insurance program covered by an 
    agreement made pursuant to section 1078(b) of this title, and the 
    Secretary 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 Secretary may make advances for such year for the same 
    purpose to one or more nonprofit private institutions or 
    organizations with which the Secretary has made an agreement 
    pursuant to section 1078(b) of this title in order to enable 
    students in the State to participate in a program of student loan 
    insurance covered by such an agreement. The Secretary 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 
    requirements of section 1078(b)(1) of this title.

                      (2) Matching requirement

        No advance shall be made after June 30, 1968, unless matched by 
    an equal amount from non-Federal sources. Such equal amount may 
    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 be maintained in such 
        fund pursuant to State law or regulation, or by agreement with 
        lenders, as a reserve against the insurance of outstanding 
        loans.

    Except as provided in section 1078(c)(9)(E) or (F) of this title, 
    such unencumbered non-Federal portion shall not be subject to 
    recall, repayment, or recovery by the Secretary.

                 (3) Terms and conditions; repayment

        Advances pursuant to this subsection shall be upon such terms 
    and conditions (including conditions relating to the time or times 
    of payment) consistent with the requirements of section 1078(b) of 
    this title as the Secretary determines will best carry out the 
    purpose of this section. Advances made by the Secretary under this 
    subsection shall be repaid within such period as the Secretary 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.

(b) Limitations on total advances

                           (1) In general

        The total of the advances from the sums appropriated pursuant to 
    paragraph (4)(A) of section 1071(b) of this title to nonprofit 
    private institutions and organizations for the benefit of students 
    in any State and to such State may not exceed an amount which bears 
    the same ratio to such sums as the population of such State aged 18 
    to 22, inclusive, bears to the population of all the States aged 18 
    to 22 inclusive, but such advances may otherwise be in such amounts 
    as the Secretary determines will best achieve the purposes for which 
    they are made. The amount available 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.

                    (2) Calculation of population

        For the purpose of this subsection, the population aged 18 to 
    22, inclusive, of each State and of all the States shall be 
    determined by the Secretary on the basis of the most recent 
    satisfactory data available to him.

(c) Advances for insurance obligations

            (1) Use for payment of insurance obligations

        From sums appropriated pursuant to section 1071(b)(4)(B) of this 
    title, the Secretary shall advance to each State which has an 
    agreement with the Secretary under section 1078(c) of this title 
    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.

                       (2) Amount of advances

        (A) Except as provided in subparagraph (B), the amount to be 
    advanced to each such State shall be equal to 10 percent of the 
    principal amount of loans made by lenders and 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.
        (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 of the unspent balance of the advances made 
        to a State pursuant to subsection (a) of this section.

    Notwithstanding subparagraph (A) and the preceding sentence of this 
    subparagraph, but subject to subparagraph (D) of this paragraph, the 
    amount of any advance to a State described in paragraph (5)(A) for 
    the first year of its eligibility under such paragraph, and the 
    amount of any advance to any State described in paragraph (5)(B) for 
    each year of its eligibility under such paragraph, shall not be less 
    than $50,000.
        (C) For the purpose of subparagraph (B), the unspent balance of 
    the advances made to a State pursuant to subsection (a) of this 
    section 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) of this section, bears to the 
    total of all past contributions to such reserve funds 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 1078(b) of this title.
        (D) If the sums appropriated for any fiscal year for paying the 
    amounts determined under subparagraphs (A) and (B) are not 
    sufficient to pay such amounts in full, then such amounts shall be 
    reduced--
            (i) by ratably reducing that portion of the amount allocated 
        to each State which exceeds $50,000; and
            (ii) if further reduction is required, by equally reducing 
        the $50,000 minimum allocation of each State.

    If additional sums become available for paying such amounts 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.

            (3) Use of earnings for insurance obligations

        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.

                      (4) Repayment of advances

        Advances made by the Secretary under this subsection shall, 
    subject to subsection (d) of this section, be repaid within such 
    period as the Secretary may deem to be appropriate and shall be 
    deposited in the fund established by section 1081 of this title.

                (5) Limitation on number of advances

        Except as provided in paragraph (7), advances pursuant to this 
    subsection shall be made to a State--
            (A) in the case of a State which is actively carrying on a 
        program under an agreement pursuant to section 1078(b) of this 
        title which was entered into before October 12, 1976, upon such 
        date as such State may request, but not before October 1, 1977, 
        and on the same day of each of the 2 succeeding calendar years 
        after the date so requested; and
            (B) in the case of a State which enters into an agreement 
        pursuant to section 1078(b) of this title on or after October 
        12, 1976, or which is not actively carrying on a program under 
        an agreement pursuant to such section on such date, upon such 
        date as such State may request, but not before October 1, 1977, 
        and on the same day of each of the 4 succeeding calendar years 
        after the date so requested of the advance.

           (6) Payment of advances where no State program

        (A) If for any fiscal year a State does not have a student loan 
    insurance program covered by an agreement made pursuant to section 
    1078(b) of this title, and the Secretary 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 Secretary 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 he has made an agreement pursuant to 
    subsection (c), as well as subsection (b), of section 1078 of this 
    title 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.
        (B) The Secretary may enter into an agreement with a private 
    nonprofit institution or organization for the purpose of this 
    paragraph under which such institution or organization--
            (i) agrees to establish within such State at least one 
        office with sufficient staff to handle written, electronic, 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;
            (ii) agrees that its insurance will not be denied any 
        student because of his or her choice of eligible institutions; 
        and
            (iii) certifies that it is neither an eligible institution, 
        nor has any substantial affiliation with an eligible 
        institution.

                       (7) Emergency advances

        The Secretary is authorized to make advances, on terms and 
    conditions satisfactory to the Secretary, to a guaranty agency--
            (A) in accordance with section 1078(j) of this title, in 
        order to ensure that the guaranty agency shall make loans as the 
        lender-of-last-resort; or
            (B) if the Secretary is seeking to terminate the guaranty 
        agency's agreement, or assuming the guaranty agency's functions, 
        in accordance with section 1078(c)(9)(F)(v) of this title, in 
        order to assist the agency in meeting its immediate cash needs, 
        ensure the uninterrupted payment of claims, or ensure that the 
        guaranty agency shall make loans as described in subparagraph 
        (A).

(d) Recovery of advances during fiscal years 1988 and 1989

                (1) Amount and use of recovered funds

        Notwithstanding any other provision of this section, advances 
    made by the Secretary under this section shall be repaid in 
    accordance with this subsection and shall be deposited in the fund 
    established by section 1081 of this title. The Secretary shall, in 
    accordance with the requirements of paragraph (2), recover (and so 
    deposit) an amount equal to $75,000,000 during fiscal year 1988 and 
    an amount equal to $35,000,000 for fiscal year 1989.

          (2) Determination of guaranty agency obligations

        In determining the amount of advances which shall be repaid by a 
    guaranty agency under paragraph (1), the Secretary--
            (A) shall consider the solvency and maturity of the reserve 
        and insurance funds of the guaranty agency assisted by such 
        advances, as determined by the Comptroller General taking into 
        account the requirements of State law as in effect on October 
        17, 1986;
            (B) shall not seek repayment of such advances from any State 
        described in subsection (c)(5)(B) of this section during any 
        year of its eligibility under such subsection; and
            (C) shall not seek repayment of such advances from any State 
        if such repayment encumbers the reserve fund requirement of 
        State law as in effect on October 17, 1986.

(e) Correction for errors under reduction of excess cash reserves

                           (1) In general

        The Secretary shall pay any guaranty agency the amount of 
    reimbursement of claims under section 1078(c)(1) of this title, 
    filed between September 1, 1988, and December 31, 1989, which were 
    previously withheld or canceled in order to be applied to satisfy 
    such agency's obligation to eliminate excess cash reserves held by 
    such agency, based on the maximum cash reserve (as described in 
    subsection (e) of this section as in effect on September 1, 1988) 
    permitted at the end of 1986, if such maximum cash reserve was 
    miscalculated because of erroneous financial information provided by 
    such agency to the Secretary and if (A) such erroneous information 
    is verified by an audited financial statement of the reserve fund, 
    signed by a certified public accountant, and (B) such audited 
    financial statement is provided to the Secretary prior to January 1, 
    1993.

                             (2) Amount

        The amount of reimbursement for claims shall be equal to the 
    amount of reimbursement for claims withheld or canceled in order to 
    be applied to such agency's obligation to eliminate excess cash 
    reserves which exceeds the amount of that which would have been 
    withheld or canceled if the maximum excess cash reserves had been 
    accurately calculated.

(f) Refund of cash reserve payments

    The Secretary shall, within 30 days after July 23, 1992, pay the 
full amount of payments withheld or canceled under paragraph (3) of this 
subsection to any guaranty agency which--
        (1) was required to eliminate excess cash reserves, based on the 
    maximum cash reserve (as described in subsection (e) of this section 
    as in effect on September 1, 1988) permitted at the end of 1986;
        (2) appealed the Secretary's demand that such agency should 
    eliminate such excess cash reserves and received a waiver of a 
    portion of the amount of such excess cash reserves to be eliminated;
        (3) had payments under section 1078(c)(1) of this title or 
    section 1078(f) of this title previously withheld or canceled in 
    order to be applied to satisfy such agency's obligation to eliminate 
    excess cash reserves held by such agency, based on the maximum cash 
    reserve (as described in subsection (e) of this section as in effect 
    on September 1, 1988) permitted at the end of 1986; and
        (4) according to a Department of Education review that was 
    completed and forwarded to such guaranty agency prior to January 1, 
    1992, is expected to become insolvent during or before 1996 and the 
    payments withheld or canceled under paragraph (3) of this subsection 
    are a factor in such agency's impending insolvency.

(g) Preservation and recovery of guaranty agency reserves

                   (1) Authority to recover funds

        Notwithstanding any other provision of law, the reserve funds of 
    the guaranty agencies, and any assets purchased with such reserve 
    funds, regardless of who holds or controls the reserves or assets, 
    shall be considered to be the property of the United States to be 
    used in the operation of the program authorized by this part. 
    However, the Secretary may not require the return of all reserve 
    funds of a guaranty agency to the Secretary unless the Secretary 
    determines that such return is in the best interest of the operation 
    of the program authorized by this part, or to ensure the proper 
    maintenance of such agency's funds or assets or the orderly 
    termination of the guaranty agency's operations and the liquidation 
    of its assets. The reserves shall be maintained by each guaranty 
    agency to pay program expenses and contingent liabilities, as 
    authorized by the Secretary, except that--
            (A) the Secretary may direct a guaranty agency to return to 
        the Secretary a portion of its reserve fund which the Secretary 
        determines is unnecessary to pay the program expenses and 
        contingent liabilities of the guaranty agency;
            (B) the Secretary may direct the guaranty agency to require 
        the return, to the guaranty agency or to the Secretary, of any 
        reserve funds or assets held by, or under the control of, any 
        other entity, which the Secretary determines are necessary to 
        pay the program expenses and contingent liabilities of the 
        guaranty agency, or which are required for the orderly 
        termination of the guaranty agency's operations and the 
        liquidation of its assets;
            (C) the Secretary may direct a guaranty agency, or such 
        agency's officers or directors, to cease any activities 
        involving expenditure, use or transfer of the guaranty agency's 
        reserve funds or assets which the Secretary determines is a 
        misapplication, misuse, or improper expenditure of such funds or 
        assets; and
            (D) any such determination under subparagraph (A) or (B) 
        shall be based on standards prescribed by regulations that are 
        developed through negotiated rulemaking and that include 
        procedures for administrative due process.

               (2) Termination provisions in contracts

        (A) To ensure that the funds and assets of the guaranty agency 
    are preserved, any contract with respect to the administration of a 
    guaranty agency's reserve funds, or the administration of any assets 
    purchased or acquired with the reserve funds of the guaranty agency, 
    that is entered into or extended by the guaranty agency, or any 
    other party on behalf of or with the concurrence of the guaranty 
    agency, after August 10, 1993, shall provide that the contract is 
    terminable by the Secretary upon 30 days notice to the contracting 
    parties if the Secretary determines that such contract includes an 
    impermissible transfer of the reserve funds or assets, or is 
    otherwise inconsistent with the terms or purposes of this section.
        (B) The Secretary may direct a guaranty agency to suspend or 
    cease activities under any contract entered into by or on behalf of 
    such agency after January 1, 1993, if the Secretary determines that 
    the misuse or improper expenditure of such guaranty agency's funds 
    or assets or such contract provides unnecessary or improper benefits 
    to such agency's officers or directors.

                            (3) Penalties

        Violation of any direction issued by the Secretary under this 
    subsection may be subject to the penalties described in section 1097 
    of this title.

                      (4) Availability of funds

        Any funds that are returned or otherwise recovered by the 
    Secretary pursuant to this subsection shall be available for 
    expenditure for expenses pursuant to section 1087h of this title.

(h) Recall of reserves; limitations on use of reserve funds and assets

                           (1) In general

        Notwithstanding any other provision of law, the Secretary shall, 
    except as otherwise provided in this subsection, recall 
    $1,000,000,000 from the reserve funds held by guaranty agencies on 
    September 1, 2002.

                             (2) Deposit

        Funds recalled by the Secretary under this subsection shall be 
    deposited in the Treasury.

                         (3) Required share

        The Secretary shall require each guaranty agency to return 
    reserve funds under paragraph (1) based on the agency's required 
    share of recalled reserve funds held by guaranty agencies as of 
    September 30, 1996. For purposes of this paragraph, a guaranty 
    agency's required share of recalled reserve funds shall be 
    determined as follows:
            (A) The Secretary shall compute each guaranty agency's 
        reserve ratio by dividing (i) the amount held in the agency's 
        reserve funds as of September 30, 1996 (but reflecting later 
        accounting or auditing adjustments approved by the Secretary), 
        by (ii) the original principal amount of all loans for which the 
        agency has an outstanding insurance obligation as of such date, 
        including amounts of outstanding loans transferred to the agency 
        from another guaranty agency.
            (B) If the reserve ratio of any guaranty agency as computed 
        under subparagraph (A) exceeds 2.0 percent, the agency's 
        required share shall include so much of the amounts held in the 
        agency's reserve funds as exceed a reserve ratio of 2.0 percent.
            (C) If any additional amount is required to be recalled 
        under paragraph (1) (after deducting the total of the required 
        shares calculated under subparagraph (B)), such additional 
        amount shall be obtained by imposing on each guaranty agency an 
        equal percentage reduction in the amount of the agency's reserve 
        funds remaining after deduction of the amount recalled under 
        subparagraph (B), except that such percentage reduction under 
        this subparagraph shall not result in the agency's reserve ratio 
        being reduced below 0.58 percent. The equal percentage reduction 
        shall be the percentage obtained by dividing--
                (i) the additional amount required to be recalled (after 
            deducting the total of the required shares calculated under 
            subparagraph (B)), by
                (ii) the total amount of all such agencies' reserve 
            funds remaining (after deduction of the required shares 
            calculated under such subparagraph).

            (D) If any additional amount is required to be recalled 
        under paragraph (1) (after deducting the total of the required 
        shares calculated under subparagraphs (B) and (C)), such 
        additional amount shall be obtained by imposing on each guaranty 
        agency with a reserve ratio (after deducting the required shares 
        calculated under such subparagraphs) in excess of 0.58 percent 
        an equal percentage reduction in the amount of the agency's 
        reserve funds remaining (after such deduction) that exceed a 
        reserve ratio of 0.58 percent. The equal percentage reduction 
        shall be the percentage obtained by dividing--
                (i) the additional amount to be recalled under paragraph 
            (1) (after deducting the amount recalled under subparagraphs 
            (B) and (C)), by
                (ii) the total amount of all such agencies' reserve 
            funds remaining (after deduction of the required shares 
            calculated under such subparagraphs) that exceed a reserve 
            ratio of 0.58 percent.

                  (4) Restricted accounts required

        (A) In general

            Within 90 days after the beginning of each of the fiscal 
        years 1998 through 2002, each guaranty agency shall transfer a 
        portion of the agency's required share determined under 
        paragraph (3) to a restricted account established by the agency 
        that is of a type selected by the agency with the approval of 
        the Secretary. Funds transferred to such restricted accounts 
        shall be invested in obligations issued or guaranteed by the 
        United States or in other similarly low-risk securities.

        (B) Requirement

            A guaranty agency shall not use the funds in such a 
        restricted account for any purpose without the express written 
        permission of the Secretary, except that a guaranty agency may 
        use the earnings from such restricted account for default 
        reduction activities.

        (C) Installments

            In each of fiscal years 1998 through 2002, each guaranty 
        agency shall transfer the agency's required share to such 
        restricted account in 5 equal annual installments, except that--
                (i) a guaranty agency that has a reserve ratio (as 
            computed under subparagraph (3)(A)) equal to or less than 
            1.10 percent may transfer the agency's required share to 
            such account in 4 equal installments beginning in fiscal 
            year 1999; and
                (ii) a guaranty agency may transfer such required share 
            to such account in accordance with such other payment 
            schedules as are approved by the Secretary.

                            (5) Shortage

        If, on September 1, 2002, the total amount in the restricted 
    accounts described in paragraph (4) is less than the amount the 
    Secretary is required to recall under paragraph (1), the Secretary 
    shall require the return of the amount of the shortage from other 
    reserve funds held by guaranty agencies under procedures established 
    by the Secretary. The Secretary shall first attempt to obtain the 
    amount of such shortage from each guaranty agency that failed to 
    transfer the agency's required share to the agency's restricted 
    account in accordance with paragraph (4).

                           (6) Enforcement

        (A) In general

            The Secretary may take such reasonable measures, and require 
        such information, as may be necessary to ensure that guaranty 
        agencies comply with the requirements of this subsection.

        (B) Prohibition

            If the Secretary determines that a guaranty agency has 
        failed to transfer to a restricted account any portion of the 
        agency's required share under this subsection, the agency may 
        not receive any other funds under this part until the Secretary 
        determines that the agency has so transferred the agency's 
        required share.

        (C) Waiver

            The Secretary may waive the requirements of subparagraph (B) 
        for a guaranty agency described in such subparagraph if the 
        Secretary determines that there are extenuating circumstances 
        beyond the control of the agency that justify such waiver.

                           (7) Limitation

        (A) Restriction on other authority

            The Secretary shall not have any authority to direct a 
        guaranty agency to return reserve funds under subsection 
        (g)(1)(A) of this section during the period from August 5, 1997, 
        through September 30, 2002.

        (B) Use of termination collections

            Any reserve funds directed by the Secretary to be returned 
        to the Secretary under subsection (g)(1)(B) of this section 
        during such period that do not exceed a guaranty agency's 
        required share of recalled reserve funds under paragraph (3)--
                (i) shall be used to satisfy the agency's required share 
            of recalled reserve funds; and
                (ii) shall be deposited in the restricted account 
            established by the agency under paragraph (4), without 
            regard to whether such funds exceed the next installment 
            required under such paragraph.

        (C) Use of sanctions collections

            Any reserve funds directed by the Secretary to be returned 
        to the Secretary under subsection (g)(1)(C) of this section 
        during such period that do not exceed a guaranty agency's next 
        installment under paragraph (4)--
                (i) shall be used to satisfy the agency's next 
            installment; and
                (ii) shall be deposited in the restricted account 
            established by the agency under paragraph (4).

        (D) Balance available to Secretary

            Any reserve funds directed by the Secretary to be returned 
        to the Secretary under subparagraph (B) or (C) of subsection 
        (g)(1) of this section that remain after satisfaction of the 
        requirements of subparagraphs (B) and (C) of this paragraph 
        shall be deposited in the Treasury.

                           (8) Definitions

        For the purposes of this subsection:

        (A) Default reduction activities

            The term ``default reduction activities'' means activities 
        to reduce student loan defaults that improve, strengthen, and 
        expand default prevention activities, such as--
                (i) establishing a program of partial loan cancellation 
            to reward disadvantaged borrowers for good repayment 
            histories with their lenders;
                (ii) establishing a financial and debt management 
            counseling program for high-risk borrowers that provides 
            long-term training (beginning prior to the first 
            disbursement of the borrower's first student loan and 
            continuing through the completion of the borrower's program 
            of education or training) in budgeting and other aspects of 
            financial management, including debt management;
                (iii) establishing a program of placement counseling to 
            assist high-risk borrowers in identifying employment or 
            additional training opportunities; and
                (iv) developing public service announcements that would 
            detail consequences of student loan default and provide 
            information regarding a toll-free telephone number 
            established by the guaranty agency for use by borrowers 
            seeking assistance in avoiding default.

        (B) Reserve funds

            The term ``reserve funds'' when used with respect to a 
        guaranty agency--
                (i) includes any reserve funds in cash or liquid assets 
            held by the guaranty agency, or held by, or under the 
            control of, any other entity; and
                (ii) does not include buildings, equipment, or other 
            nonliquid assets.

(i) Additional recall of reserves

                           (1) In general

        Notwithstanding any other provision of law and subject to 
    paragraph (4), the Secretary shall recall, from reserve funds held 
    in the Federal Student Loan Reserve Funds established under section 
    1072a of this title by guaranty agencies--
            (A) $85,000,000 in fiscal year 2002;
            (B) $82,500,000 in fiscal year 2006; and
            (C) $82,500,000 in fiscal year 2007.

                             (2) Deposit

        Funds recalled by the Secretary under this subsection shall be 
    deposited in the Treasury.

                         (3) Required share

        The Secretary shall require each guaranty agency to return 
    reserve funds under paragraph (1) on the basis of the agency's 
    required share. For purposes of this paragraph, a guaranty agency's 
    required share shall be determined as follows:

        (A) Equal percentage

            The Secretary shall require each guaranty agency to return 
        an amount representing an equal percentage reduction in the 
        amount of reserve funds held by the agency on September 30, 
        1996.

        (B) Calculation

            The equal percentage reduction shall be the percentage 
        obtained by dividing--
                (i) $250,000,000, by
                (ii) the total amount of all guaranty agencies' reserve 
            funds held on September 30, 1996, less any amounts subject 
            to recall under subsection (h) of this section.

        (C) Special rule

            Notwithstanding subparagraphs (A) and (B), the percentage 
        reduction under subparagraph (B) shall not result in the 
        depletion of the reserve funds of any agency which charges the 
        1.0 percent insurance premium pursuant to section 1078(b)(1)(H) 
        of this title below an amount equal to the amount of lender 
        claim payments paid during the 90 days prior to the date of the 
        return under this subsection. If any additional amount is 
        required to be returned after deducting the total of the 
        required shares under subparagraph (B) and as a result of the 
        preceding sentence, such additional amount shall be obtained by 
        imposing on each guaranty agency to which the preceding sentence 
        does not apply, an equal percentage reduction in the amount of 
        the agency's remaining reserve funds.

                    (4) Offset of required shares

        If any guaranty agency returns to the Secretary any reserve 
    funds in excess of the amount required under this subsection or 
    subsection (h) of this section, the total amount required to be 
    returned under paragraph (1) shall be reduced by the amount of such 
    excess reserve funds returned.

                   (5) Definition of reserve funds

        The term ``reserve funds'' when used with respect to a guaranty 
    agency--
            (A) includes any reserve funds in cash or liquid assets held 
        by the guaranty agency, or held by, or under the control of, any 
        other entity; and
            (B) does not include buildings, equipment, or other 
        nonliquid assets.

(Pub. L. 89-329, title IV, Sec. 422, as added Pub. L. 99-498, title IV, 
Sec. 402(a), Oct. 17, 1986, 100 Stat. 1354; amended Pub. L. 100-203, 
title III, Secs. 3001(a), 3002(a), Dec. 22, 1987, 101 Stat. 1330-36, 
1330-38; Pub. L. 102-325, title IV, Secs. 412, 416(p)(8), July 23, 1992, 
106 Stat. 511, 527; Pub. L. 103-66, title IV, Secs. 4041(a), (2)(A), 
4042, Aug. 10, 1993, 107 Stat. 354, 357; Pub. L. 103-208, Sec. 2(c)(1), 
Dec. 20, 1993, 107 Stat. 2460; Pub. L. 105-33, title VI, Sec. 6101(a), 
Aug. 5, 1997, 111 Stat. 648; Pub. L. 105-244, title IV, Sec. 412, Oct. 
7, 1998, 112 Stat. 1673.)

                          Codification

    Amendment by Pub. L. 103-208 (which was effective as if included in 
Pub. L. 102-325) was executed to this section as amended by Pub. L. 102-
325 and Pub. L. 103-66, to reflect the probable intent of Congress.


                            Prior Provisions

    A prior section 1072, Pub. L. 89-329, title IV, Sec. 422, Nov. 8, 
1965, 79 Stat. 1236; Pub. L. 89-752, Sec. 11, Nov. 3, 1966, 80 Stat. 
1243; Pub. L. 90-575, title I, Sec. 114(b), (c), Oct. 16, 1968, 82 Stat. 
1021, 1022; Pub. L. 94-482, title I, Sec. 127(a), Oct. 12, 1976, 90 
Stat. 2100; Pub. L. 95-43, Sec. 1(a)(11)-(13), June 15, 1977, 91 Stat. 
213, 214; Pub. L. 95-561, title XIII, Sec. 1322(a), Nov. 1, 1978, 92 
Stat. 2363; Pub. L. 96-374, title XIII, Sec. 1391(a)(1), Oct. 3, 1980, 
94 Stat. 1503; Pub. L. 99-272, title XVI, Sec. 16011, Apr. 7, 1986, 100 
Stat. 339, authorized advances to establish or strengthen reserve funds 
of State and nonprofit private loan insurance programs, prior to the 
general revision of this part by Pub. L. 99-498.


                               Amendments

    1998--Subsec. (a)(2). Pub. L. 105-244, Sec. 412(1), substituted 
``section 1078(c)(9)(E)'' for ``section 1078(c)(10)(E)'' in concluding 
provisions.
    Subsec. (c)(6)(B)(i). Pub. L. 105-244, Sec. 412(2)(A), substituted 
``written, electronic,'' for ``written''.
    Subsec. (c)(7)(A). Pub. L. 105-244, Sec. 412(2)(B), struck out 
``during the transition from the Federal Family Education Loan Program 
under this part to the Federal Direct Student Loan Program under part C 
of this subchapter'' after ``lender-of-last-resort''.
    Subsec. (c)(7)(B). Pub. L. 105-244, Sec. 412(2)(C), substituted 
``section 1078(c)(9)(F)(v)'' for ``section 1078(c)(10)(F)(v)''.
    Subsec. (g)(1). Pub. L. 105-244, Sec. 412(3), struck out ``or the 
program authorized by part C of this subchapter'' after ``program 
authorized by this part'' in first and second sentences.
    Subsec. (i). Pub. L. 105-244, Sec. 412(4), added subsec. (i).
    1997--Subsec. (h). Pub. L. 105-33 added subsec. (h).
    1993--Subsec. (c)(7). Pub. L. 103-66, Sec. 4041(a)(2)(A), 
substituted ``to a guaranty agency--'' and subpars. (A) and (B) for ``to 
a guaranty agency in accordance with section 1078(c)(10)(F)(v) of this 
title in order to assist the agency in meeting its immediate cash needs 
and ensure the uninterrupted payment of default claims by lenders.''
    Subsec. (c)(7)(B). Pub. L. 103-208 substituted a period for 
semicolon at end. See Codification note above.
    Subsec. (g). Pub. L. 103-66, Sec. 4042, added subsec. (g).
    1992--Subsec. (a)(2). Pub. L. 102-325, Sec. 412(1), inserted at end 
``Except as provided in section 1078(c)(10)(E) or (F) of this title, 
such unencumbered non-Federal portion shall not be subject to recall, 
repayment, or recovery by the Secretary.''
    Subsec. (c)(5), (7). Pub. L. 102-325, Sec. 416(p)(8), substituted 
``Except as provided in paragraph (7), advances'' for ``Advances'' in 
par. (5) and added par. (7).
    Subsecs. (e), (f). Pub. L. 102-325, Sec. 412(2), added subsecs. (e) 
and (f).
    1987--Subsec. (e). Pub. L. 100-203, Sec. 3002(a), struck out subsec. 
(e) which related to reduction of excess cash reserves.
    Pub. L. 100-203, Sec. 3001(a), added subsec. (e).


                    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.


                    Effective Date of 1993 Amendment

    Amendment by Pub. L. 103-208 effective as if included in the Higher 
Education Amendments of 1992, Pub. L. 102-325, except as otherwise 
provided, see section 5(a) of Pub. L. 103-208, set out as a note under 
section 1051 of this title.


                    Effective Date of 1987 Amendment

    Section 3002(a) of Pub. L. 100-203 provided that the amendment made 
by that section 3002(a) is effective Sept. 30, 1989.

                  Section Referred to in Other Sections

    This section is referred to in sections 1071, 1072a, 1072b, 1073, 
1078, 1078-1, 1081 of this title.
