 
      CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE
 
                    SUBCHAPTER IV--STUDENT ASSISTANCE
 
              Part B--Federal Family Education Loan Program
 
Sec. 1078-2. Federal PLUS loans


(a) Authority to borrow

                    (1) Authority and eligibility

        Parents of a dependent student shall be eligible to borrow funds 
    under this section in amounts specified in subsection (b) of this 
    section, if--
            (A) the parents do not have an adverse credit history as 
        determined pursuant to regulations promulgated by the Secretary; 
        and
            (B) the parents meet such other eligibility criteria as the 
        Secretary may establish by regulation, after consultation with 
        guaranty agencies, eligible lenders, and other organizations 
        involved in student financial assistance.

                 (2) Terms, conditions, and benefits

        Except as provided in subsections (c), (d), and (e) of this 
    section, loans made under this section shall have the same terms, 
    conditions, and benefits as all other loans made under this part.

                          (3) Special rule

        Whenever necessary to carry out the provisions of this section, 
    the terms ``student'' and ``borrower'' as used in this part shall 
    include a parent borrower under this section.

(b) Limitation based on need

    Any loan under this section may be counted as part of the expected 
family contribution in the determination of need under this subchapter 
and part C of subchapter I of chapter 34 of title 42, but no loan may be 
made to any parent under this section for any academic year in excess of 
(A) the student's estimated cost of attendance, minus (B) other 
financial aid as certified by the eligible institution under section 
1078(a)(2)(A) of this title. The annual insurable limit on account of 
any student shall not be deemed to be exceeded by a line of credit under 
which actual payments to the borrower will not be made in any year in 
excess of the annual limit.

(c) PLUS loan disbursement

    All loans made under this section shall be disbursed in accordance 
with the requirements of section 1078-7 of this title and shall be 
disbursed by--
        (1) an electronic transfer of funds from the lender to the 
    eligible institution; or
        (2) a check copayable to the eligible institution and the parent 
    borrower.

(d) Payment of principal and interest

                    (1) Commencement of repayment

        Repayment of principal on loans made under this section shall 
    commence not later than 60 days after the date such loan is 
    disbursed by the lender, subject to deferral during any period 
    during which the parent meets the conditions required for a deferral 
    under section 1077(a)(2)(C) or 1078(b)(1)(M) of this title.

                   (2) Capitalization of interest

        Interest on loans made under this section for which payments of 
    principal are deferred pursuant to paragraph (1) of this subsection 
    shall, if agreed upon by the borrower and the lender (A) be paid 
    monthly or quarterly, or (B) be added to the principal amount of the 
    loan not more frequently than quarterly by the lender. Such 
    capitalization of interest shall not be deemed to exceed the annual 
    insurable limit on account of the borrower.

                      (3) Subsidies prohibited

        No payments to reduce interest costs shall be paid pursuant to 
    section 1078(a) of this title on loans made pursuant to this 
    section.

                  (4) Applicable rates of interest

        Interest on loans made pursuant to this section shall be at the 
    applicable rate of interest provided in section 1077a of this title.

                          (5) Amortization

        The amount of the periodic payment and the repayment schedule 
    for any loan made pursuant to this section shall be established by 
    assuming an interest rate equal to the applicable rate of interest 
    at the time the repayment of the principal amount of the loan 
    commences. At the option of the lender, the note or other written 
    evidence of the loan may require that--
            (A) the amount of the periodic payment will be adjusted 
        annually, or
            (B) the period of repayment of principal will be lengthened 
        or shortened,

    in order to reflect adjustments in interest rates occurring as a 
    consequence of section 1077a(c)(4) of this title.

(e) Refinancing

             (1) Refinancing to secure combined payment

        An eligible lender may at any time consolidate loans held by it 
    which are made under this section to a borrower, including loans 
    which were made under this section as in effect prior to October 17, 
    1986, under a single repayment schedule which provides for a single 
    principal payment and a single payment of interest, and shall 
    calculate the repayment period for each included loan from the date 
    of the commencement of repayment of the most recent included loan. 
    Unless the consolidated loan is obtained by a borrower who is 
    electing to obtain variable interest under paragraph (2) or (3), 
    such consolidated loan shall bear interest at the weighted average 
    of the rates of all included loans. The extension of any repayment 
    period of an included loan pursuant to this paragraph shall be 
    reported (if required by them) to the Secretary or guaranty agency 
    insuring the loan, as the case may be, but no additional insurance 
    premiums shall be payable with respect to any such extension. The 
    extension of the repayment period of any included loan shall not 
    require the formal extension of the promissory note evidencing the 
    included loan or the execution of a new promissory note, but shall 
    be treated as an administrative forbearance of the repayment terms 
    of the included loan.

          (2) Refinancing to secure variable interest rate

        An eligible lender may reissue a loan which was made under this 
    section before July 1, 1987, or under this section as in effect 
    prior to October 17, 1986, in order to permit the borrower to obtain 
    the interest rate provided under section 1077a(c)(4) of this title. 
    A lender offering to reissue a loan or loans for such purpose may 
    charge a borrower an amount not to exceed $100 to cover the 
    administrative costs of reissuing such loan or loans, not more than 
    one-half of which shall be paid to the guarantor of the loan being 
    reissued to cover costs of reissuance. Reissuance of a loan under 
    this paragraph shall not affect any insurance applicable with 
    respect to the loan, and no additional insurance fee may be charged 
    to the borrower with respect to the loan.

            (3) Refinancing by discharge of previous loan

        A borrower who has applied to an original lender for reissuance 
    of a loan under paragraph (2) and who is denied such reissuance may 
    obtain a loan from another lender for the purpose of discharging the 
    loan from such original lender. A loan made for such purpose--
            (A) shall bear interest at the applicable rate of interest 
        provided under section 1077a(c)(4) of this title;
            (B) shall not result in the extension of the duration of the 
        note (other than as permitted under subsection (c)(5)(B) of this 
        section);
            (C) may be subject to an additional insurance fee but shall 
        not be subject to the administrative cost charge permitted by 
        paragraph (2) of this subsection; and
            (D) shall be applied to discharge the borrower from any 
        remaining obligation to the original lender with respect to the 
        original loan.

      (4) Certification in lieu of promissory note presentation

        Each new lender may accept certification from the original 
    lender of the borrower's original loan in lieu of presentation of 
    the original promissory note.

    (5) Notification to borrowers of availability of refinancing 
                                   options

        Each holder of a loan made under this section or under this 
    section as in effect prior to October 17, 1986, shall, not later 
    than October 1, 1987, in the case of loans made before October 17, 
    1986, notify the borrower of such loan--
            (A) of the refinancing options for which the borrower is 
        eligible under this subsection;
            (B) of those options which will be made available by the 
        holder and of the practical consequences of such options in 
        terms of interest rates and monthly and total payments for a set 
        of loan examples; and
            (C) that, with respect to any option that the holder will 
        not make available, the holder will, to the extent practicable, 
        refer the borrower to an eligible lender offering such option.

(f) Verification of immigration status and social security number

    A parent who wishes to borrow funds under this section shall be 
subject to verification of the parent's--
        (1) immigration status in the same manner as immigration status 
    is verified for students under section 1091(g) of this title; and
        (2) social security number in the same manner as social security 
    numbers are verified for students under section 1091(p) of this 
    title.

(Pub. L. 89-329, title IV, Sec. 428B, as added Pub. L. 99-498, title IV, 
Sec. 402(a), Oct. 17, 1986, 100 Stat. 1386; amended Pub. L. 100-50, 
Sec. 10(o), (p)(2), (q), (r)(1), June 3, 1987, 101 Stat. 343, 344; Pub. 
L. 102-325, title IV, Sec. 418, July 23, 1992, 106 Stat. 531; Pub. L. 
103-66, title IV, Sec. 4109(a), Aug. 10, 1993, 107 Stat. 369; Pub. L. 
105-178, title VIII, Sec. 8301(a)(2), June 9, 1998, 112 Stat. 497; Pub. 
L. 105-244, title IV, Secs. 416(a)(2), 419, Oct. 7, 1998, 112 Stat. 
1680, 1694.)

                          Codification

    October 17, 1986, referred to in subsec. (e)(5), was in the original 
``the date of enactment of this Act'', which was translated as meaning 
the date of enactment of Pub. L. 99-498 which enacted this section in 
the general revision of this part, to reflect the probable intent of 
Congress.


                            Prior Provisions

    A prior section 1078-2, Pub. L. 89-329, title IV, Sec. 428B, as 
added Pub. L. 96-374, title IV, Sec. 419, Oct. 3, 1980, 94 Stat. 1424; 
amended Pub. L. 97-35, title V, Secs. 532(b)(3), 534(a)(2), (c)(1), (2), 
Aug. 13, 1981, 95 Stat. 452, 454; Pub. L. 98-79, Sec. 12, Aug. 15, 1983, 
97 Stat. 484, related to auxiliary loans to assist students, prior to 
the general revision of this part by Pub. L. 99-498.


                               Amendments

    1998--Subsec. (a). Pub. L. 105-244, Sec. 419(1), amended heading and 
text of subsec. (a) generally. Prior to amendment, text read as follows: 
``Parents of a dependent student, who do not have an adverse credit 
history as determined pursuant to regulations of the Secretary, shall be 
eligible to borrow funds under this section in amounts specified in 
subsection (b) of this section, and unless otherwise specified in 
subsections (c), (d), and (e) of this section, such loans shall have the 
same terms, conditions, and benefits as all other loans made under this 
part. Whenever necessary to carry out the provisions of this section, 
the terms `student' and `borrower' as used in this part shall include a 
parent borrower under this section.''
    Subsec. (d)(4). Pub. L. 105-244, Sec. 416(a)(2), substituted 
``section 1077a'' for ``section 1077a(c)''.
    Pub. L. 105-178 which directed substitution of ``section 1077a of 
this title for loans made under this section'' for ``section 1077a(c) of 
this title'' in ``section 428B(d)(4) (20 U.S.C. 1078-2(d)(4))'' could 
not be executed because it did not indicate what act was to be amended.
    Subsec. (f). Pub. L. 105-244, Sec. 419(2), added subsec. (f).
    1993--Subsec. (c). Pub. L. 103-66 inserted ``shall be disbursed in 
accordance with the requirements of section 1078-7 of this title and'' 
after ``under this section''.
    1992--Pub. L. 102-325, Sec. 418(a), substituted ``Federal PLUS'' for 
``PLUS'' in section catchline.
    Subsec. (a). Pub. L. 102-325, Sec. 418(b)(1), substituted 
``subsections (c), (d), and (e)'' for ``subsections (c) and (d)'' and 
inserted ``, who do not have an adverse credit history as determined 
pursuant to regulations of the Secretary,'' after ``a dependent 
student''.
    Subsec. (b). Pub. L. 102-325, Sec. 418(b)(2), struck out subsec. (b) 
designation and heading, redesignated par. (3) as subsec. (b), and 
struck out pars. (1) and (2) which set the annual limit on the amount 
parents may borrow for one student in any academic year at $4,000 and 
set the aggregate insured principal amount for insured loans at not to 
exceed $20,000.
    Subsec. (c). Pub. L. 102-325, Sec. 418(b)(4), added subsec. (c). 
Former subsec. (c) redesignated (d).
    Subsec. (d). Pub. L. 102-325, Sec. 418(c), (d), amended pars. (1) 
and (2) generally. Prior to amendment, pars. (1) and (2) read as 
follows:
    ``(1) Commencement of repayment.--Repayment of principal on loans 
made under this section shall commence not later than 60 days after the 
date such loan is disbursed by the lender, subject to deferral (A) 
during any period during which the parent meets the conditions required 
for a deferral under clause (i), (viii), or (ix) of section 
1077(a)(2)(C) or 1078(b)(1)(M) of this title; and (B) during any period 
during which the borrower has a dependent student for whom a loan 
obligation was incurred under this section and who meets the conditions 
required for a deferral under clause (i) of either such section.
    ``(2) Capitalization of interest.--Interest on loans made under this 
section for which payments of principal are deferred pursuant to 
paragraph (1) of this subsection shall, if agreed upon by the borrower 
and the lender (A) be paid monthly or quarterly or (B) be added to the 
principal amount of the loan on a quarterly basis by the lender. Such 
capitalization of interest shall not be deemed to exceed the annual 
insurable limit on account of the student.''
    Pub. L. 102-325, Sec. 418(b)(3), redesignated subsec. (c) as (d). 
Former subsec. (d) redesignated (e).
    Subsec. (e). Pub. L. 102-325, Sec. 418(b)(3), redesignated subsec. 
(d) as (e).
    1987--Subsec. (a). Pub. L. 100-50, Sec. 10(o)(2)(A), struck out ``, 
but such a parent borrower shall not be eligible for any deferment 
pursuant to section 1077(a)(2)(C) or 1078(b)(1)(M) of this title except 
for the deferments allowed (with respect to the student) under clauses 
(i), (viii), and (ix) of such sections'' after ``borrower under this 
section''.
    Subsec. (b)(3). Pub. L. 100-50, Sec. 10(p)(2), amended first 
sentence generally, substituting ``for any academic year in excess of 
(A) the student's estimated cost of attendance, minus (B) other 
financial aid'' for ``which would cause the combined loans of the parent 
and the student for any academic year to exceed the student's estimated 
cost of attendance minus such student's estimated financial 
assistance''.
    Subsec. (c)(1). Pub. L. 100-50, Sec. 10(o)(2)(B), struck out 
``pursuant to sections 1077(a)(2)(C)(i), (viii), and (ix) and 
1078(b)(1)(M)(i), (viii), and (ix) of this title'' after ``subject to 
deferral'' and inserted in lieu cls. (A) and (B).
    Subsec. (c)(2). Pub. L. 100-50, Sec. 10(o)(1), (2)(C), (q), in 
introductory provisions, struck out ``and interest'' after first 
reference to ``principal'', and substituted ``pursuant to paragraph (1) 
of this subsection'' for ``under sections 1077(a)(2)(C)(i) and 
1078(b)(1)(M)(i) of this title'', and, in subpar. (A), inserted 
``monthly or'' before ``quarterly''.
    Subsec. (d)(1). Pub. L. 100-50, Sec. 10(r)(1)(A), inserted ``at any 
time'' after ``eligible lender may'' in first sentence, substituted 
``the consolidated loan is obtained by a borrower who is electing to 
obtain variable interest under paragraph (2) or (3)'' for ``the borrower 
complies with the requirements of paragraph (2)'' in second sentence, 
and inserted ``(if required by them)'' after ``shall be reported'' in 
third sentence.
    Subsec. (d)(2). Pub. L. 100-50, Sec. 10(r)(1)(B), inserted ``under 
this section before July 1, 1987, or'' before ``under this section'' and 
substituted ``to reissue a loan or loans'' for ``to reissue a loan'' and 
``reissuing such loan or loans'' for ``reissuing such loan''.
    Subsec. (d)(5). Pub. L. 100-50, Sec. 10(r)(1)(C), substituted 
``October 1, 1987'' for ``January 1, 1987'' and, in subpar. (B), 
inserted ``and of the practical consequences of such options in terms of 
interest rates and monthly and total payments for a set of loan 
examples'' before semicolon at end.


                    Effective Date of 1998 Amendment

    Amendment by section 416(a)(2) of Pub. L. 105-244 applicable with 
respect to any loan made, insured, or guaranteed under this part for 
which the first disbursement is made on or after Oct. 1, 1998, and 
before July 1, 2003, except that such amendment is applicable with 
respect to any loan made under section 1078-3 of this title for which 
application is received by an eligible lender on or after Oct. 1, 1998, 
and before July 1, 2003, see section 416(c) of Pub. L. 105-244, set out 
as a note under section 1077a of this title.
    Amendment by section 419 of 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

    Section 4109(c) of Pub. L. 103-66 provided that: ``The amendments 
made by this section [amending this section and section 1078-7 of this 
title] shall be effective with respect to loans for which the first 
disbursement is made on or after October 1, 1993.''


                    Effective Date of 1992 Amendment

    Amendment by Pub. L. 102-325 effective July 23, 1992, except that 
changes made in subsec. (b), relating to annual and aggregate loan 
limits, are applicable with respect to loans for which first 
disbursement is made on or after July 1, 1993, changes made in subsec. 
(a) with respect to use of credit histories are applicable with respect 
to loans for which first disbursement is made on or after July 1, 1993, 
and subsec. (c), as added by Pub. L. 102-325, relating to disbursement 
of Federal PLUS Loans, is applicable with respect to loans for which 
first disbursement is made on or after Oct. 1, 1992, see section 432 of 
Pub. L. 102-325, set out as a note under section 1078 of this title.


                    Effective Date of 1987 Amendment

    Amendment by Pub. L. 100-50 effective as if enacted as part of the 
Higher Education Amendments of 1986, Pub. L. 99-498, see section 27 of 
Pub. L. 100-50, set out as a note under section 1001 of this title.


 Amendment of Note or Other Written Evidence of Loan by Eligible Lender 
        at Request of Borrower; Circumstances; Denial of Request

    Section 10(r)(2) of Pub. L. 100-50 provided that: ``An eligible 
lender who has refinanced a loan or loans under section 428A(d) [former 
20 U.S.C. 1078-1(d)] or 428B(d) [20 U.S.C. 1078-2(d)] between the date 
of enactment of the Higher Education Amendments of 1986 [Oct. 17, 1986] 
and July 1, 1987, may, at the request of a borrower or with the written 
consent of the borrower, amend the note or other written evidence of 
loan as necessary to comply with the requirements of such sections and 
section 427A(c)(4) [20 U.S.C. 1077a(c)(4)] as amended by this Act. Any 
borrower who is denied such a request shall be treated as eligible to 
obtain a loan from another lender under section 428A(d)(3) or 
428B(d)(3), as applicable, for the purposes of discharging the loan from 
the original lender, and a borrower exercising this option shall not be 
subject to an additional insurance fee under section 428A(d)(3)(C) or 
428B(d)(3)(C).''

                  Section Referred to in Other Sections

    This section is referred to in sections 1075, 1077, 1077a, 1078, 
1078-8, 1078-11, 1082, 1083, 1085, 1087, 1087-1, 1087d, 1087e, 1091, 
1091b, 1092 of this title; title 26 section 144; title 42 section 12604.
