 
      CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE
 
                    SUBCHAPTER IV--STUDENT ASSISTANCE
 
              Part B--Federal Family Education Loan Program
 
Sec. 1078-7. Requirements for disbursement of student loans


(a) Multiple disbursement required

                   (1) Two disbursements required

        The proceeds of any loan made, insured, or guaranteed under this 
    part that is made for any period of enrollment shall be disbursed in 
    2 or more installments, none of which exceeds one-half of the loan.

                    (2) Minimum interval required

        The interval between the first and second such installments 
    shall be not less than one-half of such period of enrollment, except 
    as necessary to permit the second installment to be disbursed at the 
    beginning of the second semester, quarter, or similar division of 
    such period of enrollment.

                          (3) Special rule

        An institution whose cohort default rate (as determined under 
    section 1085(m) of this title) for each of the 3 most recent fiscal 
    years for which data are available is less than 10 percent may 
    disburse any loan made, insured, or guaranteed under this part in a 
    single installment for any period of enrollment that is not more 
    than 1 semester, 1 trimester, 1 quarter, or 4 months.

(b) Disbursement and endorsement requirements

                       (1) First year students

        The first installment of the proceeds of any loan made, insured, 
    or guaranteed under this part that is made to a student borrower who 
    is entering the first year of a program of undergraduate education, 
    and who has not previously obtained a loan under this part, shall 
    not (regardless of the amount of such loan or the duration of the 
    period of enrollment) be presented by the institution to the student 
    for endorsement until 30 days after the borrower begins a course of 
    study, but may be delivered to the eligible institution prior to the 
    end of that 30-day period. An institution whose cohort default rate 
    (as determined under section 1085(m) of this title) for each of the 
    three most recent fiscal years for which data are available is less 
    than 10 percent shall be exempt from the requirements of this 
    paragraph.

                         (2) Other students

        The proceeds of any loan made, insured, or guaranteed under this 
    part that is made to any student other than a student described in 
    paragraph (1) shall not be disbursed more than 30 days prior to the 
    beginning of the period of enrollment for which the loan is made.

(c) Method of multiple disbursement

    Disbursements under subsection (a) of this section--
        (1) shall be made in accordance with a schedule provided by the 
    institution (under section 1078(a)(2)(A)(i)(III) \1\ of this title) 
    that complies with the requirements of this section;
---------------------------------------------------------------------------
    \1\ See References in Text note below.
---------------------------------------------------------------------------
        (2) may be made directly by the lender or, in the case of a loan 
    under sections 1078 and 1078-1 \1\ of this title, may be disbursed 
    pursuant to the escrow provisions of section 1078(i) of this title; 
    and
        (3) notwithstanding subsection (a)(2) of this section, may, with 
    the permission of the borrower, be disbursed by the lender on a 
    weekly or monthly basis, provided that the proceeds of the loan are 
    disbursed in substantially equal weekly or monthly installments, as 
    the case may be, over the period of enrollment for which the loan is 
    made.

(d) Withholding of second disbursement

                      (1) Withdrawing students

        A lender or escrow agent that is informed by the borrower or the 
    institution that the borrower has ceased to be enrolled before the 
    disbursement of the second or any succeeding installment shall 
    withhold such disbursement. Any disbursement which is so withheld 
    shall be credited to the borrower's loan and treated as a prepayment 
    thereon.

                 (2) Students receiving over-awards

        If the sum of a disbursement for any student and the other 
    financial aid obtained by such student exceeds the amount of 
    assistance for which the student is eligible under this subchapter 
    and part C of subchapter I of chapter 34 of title 42, the 
    institution such student is attending shall withhold and return to 
    the lender or escrow agent the portion (or all) of such installment 
    that exceeds such eligible amount, except that overawards permitted 
    pursuant to section 2753(b)(4) of title 42 shall not be construed to 
    be overawards for purposes of this paragraph. Any portion (or all) 
    of a disbursement installment which is so returned shall be credited 
    to the borrower's loan and treated as a prepayment thereon.

(e) Exclusion of consolidation and foreign study loans

    The provisions of this section shall not apply in the case of a loan 
made under section 1078-3 of this title, made to a student to cover the 
cost of attendance at an eligible institution outside the United States, 
or made to a student to cover the cost of attendance in a program of 
study abroad approved by the home eligible institution if the home 
eligible institution has a cohort default rate (as calculated under 
section 1085(m) of this title) of less than 5 percent.

(f) Beginning of period of enrollment

    For purposes of this section, a period of enrollment begins on the 
first day that classes begin for the applicable period of enrollment.

(g) Sales prior to disbursement prohibited

    An eligible lender shall not sell or transfer a promissory note for 
any loan made, insured, or guaranteed under this part until the final 
disbursement of such loan has been made, except that the prohibition of 
this subsection shall not apply if--
        (1) the sale of the loan does not result in a change in the 
    identity of the party to whom payments will be made for the loan; 
    and
        (2) the first disbursement of such loan has been made.

(Pub. L. 89-329, title IV, Sec. 428G, as added Pub. L. 101-239, title 
II, Sec. 2004(a), Dec. 19, 1989, 103 Stat. 2115; amended Pub. L. 101-
508, title III, Sec. 3003(a), Nov. 5, 1990, 104 Stat. 1388-26; Pub. L. 
102-325, title IV, Sec. 421, July 23, 1992, 106 Stat. 534; Pub. L. 103-
66, title IV, Sec. 4109(b), Aug. 10, 1993, 107 Stat. 369; Pub. L. 103-
208, Sec. 2(c)(41), Dec. 20, 1993, 107 Stat. 2466; Pub. L. 105-244, 
title IV, Sec. 422(a)-(c), Oct. 7, 1998, 112 Stat. 1696.)

                          Amendment of Section

        For termination of amendment by section 422(d) of Pub. L. 105-
    244, see Effective and Termination Dates of 1998 Amendment note 
    below.

                       References in Text

    Section 1078(a)(2)(A)(i)(III) of this title, referred to in subsec. 
(c)(1), was repealed by Pub. L. 105-244, title IV, Sec. 417(a)(1)(A), 
Oct. 7, 1998, 112 Stat. 1682. Provisions similar to those contained in 
section 1078(a)(2)(A)(i)(III) are now contained in section 
1078(a)(2)(A)(i)(II).
    Section 1078-1 of this title, referred to in subsec. (c)(2), was 
repealed by Pub. L. 103-66, title IV, Sec. 4047(b)-(d), Aug. 10, 1993, 
107 Stat. 364, eff. July 1, 1994, except with respect to loans provided 
under that section as it existed prior to Aug. 10, 1993. Subsequently, a 
new section 1078-1, relating to voluntary flexible agreements with 
guaranty agencies, was enacted by Pub. L. 105-244, title IV, Sec. 418, 
Oct. 7, 1998, 112 Stat. 1691.


                               Amendments

    1998--Subsec. (a)(3). Pub. L. 105-244, Sec. 422(a), (d), temporarily 
added par. (3). See Effective and Termination Dates of 1998 Amendment 
note below.
    Subsec. (b)(1). Pub. L. 105-244, Sec. 422(b), (d), temporarily 
inserted at end ``An institution whose cohort default rate (as 
determined under section 1085(m) of this title) for each of the three 
most recent fiscal years for which data are available is less than 10 
percent shall be exempt from the requirements of this paragraph.'' See 
Effective and Termination Dates of 1998 Amendment note below.
    Subsec. (e). Pub. L. 105-244, Sec. 422(c), substituted ``, made to a 
student'' for ``or made to a student'' and inserted before the period at 
end ``, or made to a student to cover the cost of attendance in a 
program of study abroad approved by the home eligible institution if the 
home eligible institution has a cohort default rate (as calculated under 
section 1085(m) of this title) of less than 5 percent''.
    1993--Subsec. (c)(3). Pub. L. 103-208 directed the substitution of 
``disbursed by the lender'' for ``disbursed'' and was executed by making 
the substitution the first place ``disbursed'' appeared, to reflect the 
probable intent of Congress.
    Subsec. (e). Pub. L. 103-66 substituted ``consolidation'' for 
``PLUS, consolidation,'' in heading and ``section 1078-3'' for ``section 
1078-2 or 1078-3'' in text.
    1992--Subsec. (c)(3). Pub. L. 102-325, Sec. 421(a), added par. (3).
    Subsec. (d)(2). Pub. L. 102-325, Sec. 421(b), inserted ``, except 
that overawards permitted pursuant to section 2753(b)(4) of title 42 
shall not be construed to be overawards for purposes of this paragraph'' 
before period at end of first sentence.
    Subsec. (g). Pub. L. 102-325, Sec. 421(c), added subsec. (g).
    1990--Subsec. (b)(1). Pub. L. 101-508 amended par. (1) generally. 
Prior to amendment, par. (1) read as follows: ``The first installment of 
the proceeds of any loan made under section 1078-1 of this title that is 
made to a student borrower who has not successfully completed the first 
year of a program of undergraduate education shall not (regardless of 
the amount of such loan or the duration of the period of enrollment) be 
presented by the institution to the student for endorsement until--
        ``(A) 30 days after the borrower begins a course of study; and
        ``(B) the institution certifies that the borrower continues to 
    be enrolled and in attendance at the end of such 30-day period, and 
    is maintaining satisfactory progress;
but may be disbursed to the eligible institution prior to the end of 
such 30-day period.''


            Effective and Termination Dates of 1998 Amendment

    Amendment by section 422(c) 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.
    Pub. L. 105-244, title IV, Sec. 422(d), Oct. 7, 1998, 112 Stat. 
1696, provided that: ``The amendments made by subsections (a) and (b) 
[amending this section] shall be effective during the period beginning 
on October 1, 1998, and ending on September 30, 2002.''


                    Effective Date of 1993 Amendments

    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.
    Amendment by Pub. L. 103-66 effective with respect to loans for 
which the first disbursement is made on or after Oct. 1, 1993, see 
section 4109(c) of Pub. L. 103-66, set out as a note under section 1078-
2 of this title.


                    Effective Date of 1990 Amendment

    Section 3003(b) of Pub. L. 101-508 provided that: ``The amendment 
made by this section [amending this section] shall be effective for 
loans made on or after the date of enactment of this Act [Nov. 5, 1990] 
to cover the cost of instruction for periods of enrollment beginning on 
or after January 1, 1991.''


                             Effective Date

    Section applicable with respect to loans made to cover cost of 
instruction for periods of enrollment beginning on or after Jan. 1, 
1990, see section 2004(c) of Pub. L. 101-239, set out as an Effective 
Date of 1989 Amendment note under section 1077 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 1077, 1078, 1078-2, 1078-8, 
1087d of this title.
