 
      CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE
 
                    SUBCHAPTER IV--STUDENT ASSISTANCE
 
              Part B--Federal Family Education Loan Program
 
Sec. 1079. Certificate of Federal loan insurance--effective date 
        of insurance
        

(a) Loan-by-loan insurance

         (1) Authority to issue certificates on application

        If, upon application by an eligible lender, made upon such form, 
    containing such information, and supported by such evidence as the 
    Secretary may require, and otherwise in conformity with this 
    section, the Secretary finds that the applicant has made a loan to 
    an eligible student which is insurable under the provisions of this 
    part, he may issue to the applicant a certificate of insurance 
    covering the loan and setting forth the amount and terms of the 
    insurance.

                  (2) Effectiveness of certificate

        Insurance evidenced by a certificate of insurance pursuant to 
    subsection (a)(1) of this section shall become effective upon the 
    date of issuance of the certificate, except that the Secretary is 
    authorized, in accordance with regulations, to issue commitments 
    with respect to proposed loans, or with respect to lines (or 
    proposed lines) of credit, submitted by eligible lenders, and in 
    that event, upon compliance with subsection (a)(1) of this section 
    by the lender, the certificate of insurance may be issued effective 
    as of the date when any loan, or any payment by the lender pursuant 
    to a line of credit, to be covered by such insurance was made. Such 
    insurance shall cease to be effective upon 60 days' default by the 
    lender in the payment of any installment of the premiums payable 
    pursuant to subsection (c) of this section.

                    (3) Contents of applications

        An application submitted pursuant to subsection (a)(1) of this 
    section shall contain (A) an agreement by the applicant to pay, in 
    accordance with regulations, the premiums fixed by the Secretary 
    pursuant to subsection (c) of this section, and (B) an agreement by 
    the applicant that if the loan is covered by insurance the applicant 
    will submit such supplementary reports and statement during the 
    effective period of the loan agreement, upon such forms, at such 
    times, and containing such information as the Secretary may 
    prescribe by or pursuant to regulation.

(b) Comprehensive insurance coverage certificate

              (1) Establishment of system by regulation

        In lieu of requiring a separate insurance application and 
    issuing a separate certificate of insurance for each student loan 
    made by an eligible lender as provided in subsection (a) of this 
    section, the Secretary may, in accordance with regulations 
    consistent with section 1074 of this title, issue to any eligible 
    lender applying therefor a certificate of comprehensive insurance 
    coverage which shall, without further action by the Secretary, 
    insure all insurable loans made by that lender, on or after the date 
    of the certificate and before a specified cutoff date, within the 
    limits of an aggregate maximum amount stated in the certificate. 
    Such regulations may provide for conditioning such insurance, with 
    respect to any loan, upon compliance by the lender with such 
    requirements (to be stated or incorporated by reference in the 
    certificate) as in the Secretary's judgment will best achieve the 
    purpose of this subsection while protecting the United States from 
    the risk of unreasonable loss and promoting the objectives of this 
    part, including (but not limited to) provisions as to the reporting 
    of such loans and information relevant thereto to the Secretary and 
    as to the payment of initial and other premiums and the effect of 
    default therein, and including provision for confirmation by the 
    Secretary from time to time (through endorsement of the certificate) 
    of the coverage of specific new loans by such certificate, which 
    confirmation shall be incontestable by the Secretary in the absence 
    of fraud or misrepresentation of fact or patent error.

                         (2) Uncovered loans

        If the holder of a certificate of comprehensive insurance 
    coverage issued under this subsection grants to a student a line of 
    credit extending beyond the cutoff date specified in that 
    certificate, loans or payments thereon made by the holder after that 
    date pursuant to the line of credit shall not be deemed to be 
    included in the coverage of that certificate except as may be 
    specifically provided therein; but, subject to the limitations of 
    section 1074 of this title, the Secretary may, in accordance with 
    regulations, make commitments to insure such future loans or 
    payments, and such commitments may be honored either as provided in 
    subsection (a) of this section or by inclusion of such insurance on 
    comprehensive coverage under the subsection for the period or 
    periods in which such future loans or payments are made.

(c) Charges for Federal insurance

    The Secretary shall, pursuant to regulations, charge for insurance 
on each loan under this part a premium in an amount not to exceed one-
fourth of 1 percent per year of the unpaid principal amount of such loan 
(excluding interest added to principal), payable in advance, at such 
times and in such manner as may be prescribed by the Secretary. Such 
regulations may provide that such premium shall not be payable, or if 
paid shall be refundable, with respect to any period after default in 
the payment of principal or interest or after the borrower has died or 
becomes totally and permanently disabled, if (1) notice of such default 
or other event has been duly given, and (2) requests for payment of the 
loss insured against has been made or the Secretary has made such 
payment on his own motion pursuant to section 1080(a) of this title.

(d) Assignability of insurance

    The rights of an eligible lender arising under insurance evidenced 
by a certificate of insurance issued to it under this section may be 
assigned as security by such lender only to another eligible lender, and 
subject to regulation by the Secretary.

(e) Consolidation not to affect insurance

    The consolidation of the obligations of two or more federally 
insured loans obtained by a student borrower in any fiscal year into a 
single obligation evidenced by a single instrument of indebtedness shall 
not affect the insurance by the United States. If the loans thus 
consolidated are covered by separate certificates of insurance issued 
under subsection (a) of this section, the Secretary may upon surrender 
of the original certificates issue a new certificate of insurance in 
accordance with that subsection upon the consolidated obligation; if 
they are covered by a single comprehensive certificate issued under 
subsection (b) of this section, the Secretary may amend that certificate 
accordingly.

(Pub. L. 89-329, title IV, Sec. 429, as added Pub. L. 99-498, title IV, 
Sec. 402(a), Oct. 17, 1986, 100 Stat. 1395.)


                            Prior Provisions

    A prior section 1079, Pub. L. 89-329, title IV, Sec. 429, Nov. 8, 
1965, 79 Stat. 1243; Pub. L. 94-482, title I, Sec. 127(a), Oct. 12, 
1976, 90 Stat. 2123; Pub. L. 96-374, title XIII, Sec. 1391(a)(1), (2), 
Oct. 3, 1980, 94 Stat. 1503, related to certificates of Federal loan 
insurance, prior to the general revision of this part by Pub. L. 99-498.

                  Section Referred to in Other Sections

    This section is referred to in sections 1073, 1078-3, 1080, 1082, 
1085, 1087-2 of this title.
