20 USC 1087 - Terms and conditions of loans

Collapse to view only § 1087e. Terms and conditions of loans

§ 1087a. Program authority
§ 1087b. Funds for origination of direct student loans
§ 1087c. Selection of institutions for participation and origination
§ 1087d. Agreements with institutions
§ 1087e. Terms and conditions of loans
§ 1087f. Contracts
§ 1087g. Repealed.
§ 1087h. Funds for administrative expenses
§ 1087i. Authority to sell loans
§ 1087i-1. Temporary authority to purchase student loans
§ 1087i-2. Temporary loan consolidation authority
§ 1087j. Loan cancellation for teachers

§ 1087a. Program authority

(a) In general

(b) Designation

(1) Program

(2) Direct loans

(Pub. L. 89–329, title IV, § 451, as added Pub. L. 99–498, title IV, § 404, Oct. 17, 1986, 100 Stat. 1437; amended Pub. L. 102–325, title IV, § 451, July 23, 1992, 106 Stat. 569; Pub. L. 103–66, title IV, § 4021, Aug. 10, 1993, 107 Stat. 341; Pub. L. 103–382, title III, § 358A, Oct. 20, 1994, 108 Stat. 3968; Pub. L. 110–227, § 7(a), May 7, 2008, 122 Stat. 746; Pub. L. 116–260, div. FF, title VII, § 702(a)(2), Dec. 27, 2020, 134 Stat. 3138.)

§ 1087b. Funds for origination of direct student loans

(a) In general

The Secretary shall provide, on the basis of the need and the eligibility of students at each participating institution, and parents of such students, for such loans, funds for student and parent loans under this part—

(1) directly to an institution of higher education that has an agreement with the Secretary under section 1087d(a) of this title to participate in the direct student loan programs under this part and that also has an agreement with the Secretary under section 1087d(b) of this title to originate loans under this part; or

(2) through an alternative originator designated by the Secretary to students (and parents of students) attending institutions of higher education that have an agreement with the Secretary under section 1087d(a) of this title but that do not have an agreement with the Secretary under section 1087d(b) of this title.

(b) No entitlement to participate or originate

(d) Institutions outside the United States

(Pub. L. 89–329, title IV, § 452, as added Pub. L. 99–498, title IV, § 404, Oct. 17, 1986, 100 Stat. 1437; amended Pub. L. 102–325, title IV, § 451, July 23, 1992, 106 Stat. 569; Pub. L. 103–66, title IV, § 4021, Aug. 10, 1993, 107 Stat. 341; Pub. L. 105–33, title VI, § 6102, Aug. 5, 1997, 111 Stat. 652; Pub. L. 105–244, title IV, § 401(g)(5), Oct. 7, 1998, 112 Stat. 1652; Pub. L. 111–152, title II, § 2209(a), Mar. 30, 2010, 124 Stat. 1077.)

§ 1087c. Selection of institutions for participation and origination

(a) General authority

(b) Selection criteria

(1) Application

(2) Selection procedure

(1) In general

The Secretary may enter into a supplemental agreement with an institution (or a consortium of such institutions) that—

(A) has an agreement under subsection 

(B) desires to originate loans under this part; and

(2) Selection criteria

The Secretary may approve an institution to originate loans only if such institution—

(A) is not on the reimbursement system of payment for any of the programs under subpart 1 or 3 of part A, part C, or part E of this subchapter;

(B) is not overdue on program or financial reports or audits required under this subchapter;

(C) is not subject to an emergency action, or a limitation, suspension, or termination under section 1078(b)(1)(T), 1082(h), or 1094(c) of this title;

(D) in the opinion of the Secretary, has not had severe performance deficiencies for any of the programs under this subchapter, including such deficiencies demonstrated by audits or program reviews submitted or conducted during the 5 calendar years immediately preceding the date of application;

(E) provides an assurance that such institution has no delinquent outstanding debts to the Federal Government, unless such debts are being repaid under or in accordance with a repayment arrangement satisfactory to the Federal Government, or the Secretary in the Secretary’s discretion determines that the existence or amount of such debts has not been finally determined by the cognizant Federal agency; and

(F) meets such other criteria as the Secretary may establish to protect the financial interest of the United States and to promote the purposes of this part.

(d) Eligible institutions

(e) Consortia

(Pub. L. 89–329, title IV, § 453, as added Pub. L. 99–498, title IV, § 404, Oct. 17, 1986, 100 Stat. 1438; amended Pub. L. 102–325, title IV, § 451, July 23, 1992, 106 Stat. 569; Pub. L. 103–66, title IV, § 4021, Aug. 10, 1993, 107 Stat. 342; Pub. L. 103–208, § 2(e), Dec. 20, 1993, 107 Stat. 2470; Pub. L. 105–244, title IV, § 451, Oct. 7, 1998, 112 Stat. 1715; Pub. L. 111–39, title IV, § 404(b)(1), July 1, 2009, 123 Stat. 1946.)

§ 1087d. Agreements with institutions

(a) Participation agreementsAn agreement with any institution of higher education for participation in the direct student loan program under this part shall—

(1) provide for the establishment and maintenance of a direct student loan program at the institution under which the institution will—

(A) identify eligible students who seek student financial assistance at such institution in accordance with section 1091 of this title;

(B) estimate the need of each such student as required by part F of this subchapter for an academic year, except that, any loan obtained by a student under this part with the same terms as loans made under section 1078–8 of this title (except as otherwise provided in this part), or a loan obtained by a parent under this part with the same terms as loans made under section 1078–2 of this title (except as otherwise provided in this part), or obtained under any State-sponsored or private loan program, may be used to offset the student aid index of the student for that year;

(C) provide a statement that certifies the eligibility of any student to receive a loan under this part that is not in excess of the annual or aggregate limit applicable to such loan, except that the institution may, in exceptional circumstances identified by the Secretary, refuse to certify a statement that permits a student to receive a loan under this part, or certify a loan amount that is less than the student’s determination of need (as determined under part F of this subchapter), if the reason for such action is documented and provided in written form to such student;

(D) set forth a schedule for disbursement of the proceeds of the loan in installments, consistent with the requirements of section 1078–7 of this title; and

(E) provide timely and accurate information—

(i) concerning the status of student borrowers (and students on whose behalf parents borrow under this part) while such students are in attendance at the institution and concerning any new information of which the institution becomes aware for such students (or their parents) after such borrowers leave the institution, to the Secretary for the servicing and collecting of loans made under this part; and

(ii) if the institution does not have an agreement with the Secretary under subsection (b), concerning student eligibility and need, as determined under subparagraphs (A) and (B), to the Secretary as needed for the alternative origination of loans to eligible students and parents in accordance with this part;

(2) provide assurances that the institution will comply with requirements established by the Secretary relating to student loan information with respect to loans made under this part;

(3) provide that the institution accepts responsibility and financial liability stemming from its failure to perform its functions pursuant to the agreement;

(4) provide for the implementation of a quality assurance system, as established by the Secretary and developed in consultation with institutions of higher education, to ensure that the institution is complying with program requirements and meeting program objectives;

(5) provide that the institution will not charge any fees of any kind, however described, to student or parent borrowers for origination activities or the provision of any information necessary for a student or parent to receive a loan under this part, or any benefits associated with such loan;

(6) provide assurances that, beginning July 1, 2026, the institution will comply with all requirements of subsection (c); and

(7) include such other provisions as the Secretary determines are necessary to protect the interests of the United States and to promote the purposes of this part.

(b) OriginationAn agreement with any institution of higher education, or consortia thereof, for the origination of loans under this part shall—

(1) supplement the agreement entered into in accordance with subsection (a);

(2) include provisions established by the Secretary that are similar to the participation agreement provisions described in paragraphs (1)(E)(ii), (2), (3), (4), (5), (6), and (7) of subsection (a), as modified to relate to the origination of loans by the institution or consortium;

(3) provide that the institution or consortium will originate loans to eligible students and parents in accordance with this part; and

(4) provide that the note or evidence of obligation on the loan shall be the property of the Secretary.

(1) In general

(2) Low-earning outcome programs described

(3) Calculation of median earnings

(A) Working adultFor purposes of applying paragraph (2) to an educational program at an institution, a working adult described in this paragraph is a working adult who, for the corresponding year—

(i) is aged 25 to 34;

(ii) is not enrolled in an institution of higher education; and

(iii)(I) in the case of a determination made for an educational program that awards a baccalaureate or lesser degree, has only a high school diploma or its recognized equivalent; or(II) in the case of a determination made for a graduate or professional program, has only a baccalaureate degree.

(B) Source of dataFor purposes of applying paragraph (2) to an educational program at an institution, the median earnings of a working adult, as described in subparagraph (A), shall be based on data from the Bureau of the Census—

(i) with respect to an educational program that awards a baccalaureate or lesser degree—(I) for the State in which the institution is located; or(II) if fewer than 50 percent of the students enrolled in the institution reside in the State where the institution is located, for the entire United States; and

(ii) with respect to an educational program that is a graduate or professional program—(I) for the lowest median earnings of—(aa) a working adult in the State in which the institution is located;(bb) a working adult in the same field of study (as determined by the Secretary, such as by using the 2-digit CIP code) in the State in which the institution is located; and(cc) a working adult in the same field of study (as so determined) in the entire United States; or(II) if fewer than 50 percent of the students enrolled in the institution reside in the State where the institution is located, for the lower median earnings of—(aa) a working adult in the entire United States; or(bb) a working adult in the same field of study (as so determined) in the entire United States.

(4) Small programmatic cohortsFor any year for which the programmatic cohort described in paragraph (2) for an educational program of an institution is fewer than 30 individuals, the Secretary shall—

(A) first, aggregate additional years of programmatic data in order to achieve a cohort of at least 30 individuals; and

(B) second, in cases in which the cohort (including the individuals added under subparagraph (A)) is still fewer than 30 individuals, aggregate additional cohort years of programmatic data for educational programs of equivalent length in order to achieve a cohort of at least 30 individuals.

(5) Appeals process

(6) Notice to students

(A) In general

(B) Covered period

(7) Regaining programmatic eligibility

(d) Withdrawal and termination procedures

(Pub. L. 89–329, title IV, § 454, as added Pub. L. 99–498, title IV, § 404, Oct. 17, 1986, 100 Stat. 1438; amended Pub. L. 100–50, § 12, June 3, 1987, 101 Stat. 348; Pub. L. 102–325, title IV, § 451, July 23, 1992, 106 Stat. 571; Pub. L. 103–66, title IV, § 4021, Aug. 10, 1993, 107 Stat. 345; Pub. L. 111–152, title II, § 2210(a), Mar. 30, 2010, 124 Stat. 1078; Pub. L. 116–260, div. FF, title VII, § 704(1), Dec. 27, 2020, 134 Stat. 3199; Pub. L. 119–21, title VIII, § 84001, July 4, 2025, 139 Stat. 353.)

§ 1087e. Terms and conditions of loans

(a) In general

(1) Parallel terms, conditions, benefits, and amounts

(2) Designation of loansLoans made to borrowers under this part that, except as otherwise specified in this part, have the same terms, conditions, and benefits as loans made to borrowers under—

(A)section 1078 of this title shall be known as “Federal Direct Stafford Loans”;

(B)section 1078–2 of this title shall be known as “Federal Direct PLUS Loans”;

(C)section 1078–3 of this title shall be known as “Federal Direct Consolidation Loans”; and

(D)section 1078–8 of this title shall be known as “Federal Direct Unsubsidized Stafford Loans”.

(3) Termination of authority to make interest subsidized loans and federal direct plus loans to graduate and professional students

(A) Termination of authority to make interest subsidized loans to graduate and professional studentsSubject to subparagraph (B), and notwithstanding any provision of this part or part B—

(i) for any period of instruction beginning on or after July 1, 2012, a graduate or professional student shall not be eligible to receive a Federal Direct Stafford loan under this part; and

(ii) for any period of instruction beginning on July 1, 2012, and ending on June 30, 2026, the maximum annual amount of Federal Direct Unsubsidized Stafford loans such a student may borrow in any academic year (as defined in section 1088(a)(2) of this title) or its equivalent shall be the maximum annual amount for such student determined under section 1078–8 of this title, plus an amount equal to the amount of Federal Direct Stafford loans the student would have received in the absence of this subparagraph.

(B) Exception

(4) Graduate and professional annual and aggregate limits for Federal Direct Unsubsidized Stafford loans beginning July 1, 2026

(A) Annual limits beginning July 1, 2026Subject to paragraphs (7)(A) and (8), beginning on July 1, 2026, the maximum annual amount of Federal Direct Unsubsidized Stafford loans—

(i) a graduate student, who is not a professional student, may borrow in any academic year or its equivalent shall be $20,500; and

(ii) a professional student may borrow in any academic year or its equivalent shall be $50,000.

(B) Aggregate limitsSubject to paragraphs (6), (7)(A), and (8), beginning on July 1, 2026, the maximum aggregate amount of Federal Direct Unsubsidized Stafford loans, in addition to the amount borrowed for undergraduate education, that—

(i) a graduate student—(I) who is not (and has not been) a professional student, may borrow for programs of study described in subparagraph (C)(i) shall be $100,000; or(II) who is (or has been) a professional student, may borrow for programs of study described in subparagraph (C)(i) shall be an amount equal to—(aa) $200,000; minus(bb) the amount such student borrowed for programs of study described in subparagraph (C)(ii); and

(ii) a professional student—(I) who is not (and has not been) a graduate student, may borrow for programs of study described in subparagraph (C)(ii) shall be $200,000; or(II) who is (or has been) a graduate student, may borrow for programs of study described in subparagraph (C)(ii) shall be an amount equal to—(aa) $200,000; minus(bb) the amount such student borrowed for programs of study described in subparagraph (C)(i).

(i) Graduate student

(ii) Professional student

(5) Parent borrower annual and aggregate limits for Federal Direct PLUS loans beginning July 1, 2026

(A) Annual limits

(B) Aggregate limits

(6) Lifetime maximum aggregate amount for all students

(7) Additional rules regarding annual loan limits

(A) Less than full-time enrollment

(B) Institutionally determined limits

(8) Interim exception for certain students

(A) Application of prior limitsParagraphs (3)(C), (4), (5), and (6) shall not apply, and paragraph (3)(A)(ii) shall apply as such paragraph was in effect for periods of instruction ending before June 30, 2026, during the expected time to credential described in subparagraph (B), with respect to an individual who, as of June 30, 2026—

(i) is enrolled in a program of study at an institution of higher education; and

(ii) has received a loan (or on whose behalf a loan was made) under this part for such program of study.

(B) Expected time to credentialFor purposes of this paragraph, the expected time to credential of an individual shall be equal to the lesser of—

(i) three academic years; or

(ii) the period determined by calculating the difference between—(I) the program length for the program of study in which the individual is enrolled; and(II) the period of such program of study that such individual has completed as of the date of the determination under this subparagraph.

(b) Interest rate

(1) Rates for FDSL and FDUSLFor Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans for which the first disbursement is made on or after July 1, 1994, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—

(A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus

(B) 3.1 percent,

except that such rate shall not exceed 8.25 percent.

(2) In school and grace period rules

(A) Notwithstanding the provisions of paragraph (1), but subject to paragraph (3), with respect to any Federal Direct Stafford Loan or Federal Direct Unsubsidized Stafford Loan for which the first disbursement is made on or after July 1, 1995, the applicable rate of interest for interest which accrues—

(i) prior to the beginning of the repayment period of the loan; or

(ii) during the period in which principal need not be paid (whether or not such principal is in fact paid) by reason of a provision described in section 1078(b)(1)(M) or 1077(a)(2)(C) of this title,

shall not exceed the rate determined under subparagraph (B).

(B) For the purpose of subparagraph (A), the rate determined under this subparagraph shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—

(i) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction prior to such June 1; plus

(ii) 2.5 percent,

except that such rate shall not exceed 8.25 percent.

(3) Out-year ruleNotwithstanding paragraphs (1) and (2), for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans made on or after July 1, 1998, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—

(A) the bond equivalent rate of the security with a comparable maturity as established by the Secretary; plus

(B) 1.0 percent,

except that such rate shall not exceed 8.25 percent.

(4) Rates for FDPLUS

(A)

(i) For Federal Direct PLUS Loans for which the first disbursement is made on or after July 1, 1994, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on or before June 30, 2001, be determined on the preceding June 1 and be equal to—(I) the bond equivalent rate of 52-week Treasury bills auctioned at final auction held prior to such June 1; plus(II) 3.1 percent,

except that such rate shall not exceed 9 percent.

(ii) For any 12-month period beginning on July 1 of 2001 or any succeeding year, the applicable rate of interest determined under this subparagraph shall be determined on the preceding June 26 and be equal to—(I) the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the last calendar week ending on or before such June 26; plus(II) 3.1 percent,

except that such rate shall not exceed 9 percent.

(B) For Federal Direct PLUS loans made on or after July 1, 1998, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—

(i) the bond equivalent rate of the security with a comparable maturity as established by the Secretary; plus

(ii) 2.1 percent,

except that such rate shall not exceed 9 percent.

(5) Temporary interest rate provision

(A) Rates for FDSL and FDUSLNotwithstanding the preceding paragraphs of this subsection, for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans for which the first disbursement is made on or after July 1, 1998, and before October 1, 1998, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—

(i) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus

(ii) 2.3 percent,

except that such rate shall not exceed 8.25 percent.

(B) In school and grace period rulesNotwithstanding the preceding paragraphs of this subsection, with respect to any Federal Direct Stafford Loan or Federal Direct Unsubsidized Stafford Loan for which the first disbursement is made on or after July 1, 1998, and before October 1, 1998, the applicable rate of interest for interest which accrues—

(i) prior to the beginning of the repayment period of the loan; or

(ii) during the period in which principal need not be paid (whether or not such principal is in fact paid) by reason of a provision described in section 1078(b)(1)(M) or 1077(a)(2)(C) of this title,

shall be determined under subparagraph (A) by substituting “1.7 percent” for “2.3 percent”.

(C) PLUS loansNotwithstanding the preceding paragraphs of this subsection, with respect to Federal Direct PLUS Loan for which the first disbursement is made on or after July 1, 1998, and before October 1, 1998, the applicable rate of interest shall be determined under subparagraph (A)—

(i) by substituting “3.1 percent” for “2.3 percent”; and

(ii) by substituting “9.0 percent” for “8.25 percent”.

(6) Interest rate provision for new loans on or after October 1, 1998, and before July 1, 2006

(A) Rates for FDSL and FDUSLNotwithstanding the preceding paragraphs of this subsection, for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans for which the first disbursement is made on or after October 1, 1998, and before July 1, 2006, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—

(i) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus

(ii) 2.3 percent,

except that such rate shall not exceed 8.25 percent.

(B) In school and grace period rulesNotwithstanding the preceding paragraphs of this subsection, with respect to any Federal Direct Stafford Loan or Federal Direct Unsubsidized Stafford Loan for which the first disbursement is made on or after October 1, 1998, and before July 1, 2006, the applicable rate of interest for interest which accrues—

(i) prior to the beginning of the repayment period of the loan; or

(ii) during the period in which principal need not be paid (whether or not such principal is in fact paid) by reason of a provision described in section 1078(b)(1)(M) or 1077(a)(2)(C) of this title,

shall be determined under subparagraph (A) by substituting “1.7 percent” for “2.3 percent”.

(C) PLUS loansNotwithstanding the preceding paragraphs of this subsection, with respect to Federal Direct PLUS Loan for which the first disbursement is made on or after October 1, 1998, and before July 1, 2006, the applicable rate of interest shall be determined under subparagraph (A)—

(i) by substituting “3.1 percent” for “2.3 percent”; and

(ii) by substituting “9.0 percent” for “8.25 percent”.

(D) Consolidation loansNotwithstanding the preceding paragraphs of this subsection, any Federal Direct Consolidation loan for which the application is received on or after February 1, 1999, and before July 1, 2006, shall bear interest at an annual rate on the unpaid principal balance of the loan that is equal to the lesser of—

(i) the weighted average of the interest rates on the loans consolidated, rounded to the nearest higher one-eighth of one percent; or

(ii) 8.25 percent.

(E) Temporary rules for consolidation loansNotwithstanding the preceding paragraphs of this subsection, any Federal Direct Consolidation loan for which the application is received on or after October 1, 1998, and before February 1, 1999, shall bear interest at an annual rate on the unpaid principal balance of the loan that is equal to—

(i) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus

(ii) 2.3 percent,

except that such rate shall not exceed 8.25 percent.

(7) Interest rate provision for new loans on or after July 1, 2006 and before July 1, 2013

(A) Rates for FDSL and FDUSL

(B) PLUS loans

(C) Consolidation loansNotwithstanding the preceding paragraphs of this subsection, any Federal Direct Consolidation loan for which the application is received on or after July 1, 2006, and before July 1, 2013, shall bear interest at an annual rate on the unpaid principal balance of the loan that is equal to the lesser of—

(i) the weighted average of the interest rates on the loans consolidated, rounded to the nearest higher one-eighth of one percent; or

(ii) 8.25 percent.

(D) Reduced rates for undergraduate FDSLNotwithstanding the preceding paragraphs of this subsection and subparagraph (A) of this paragraph, for Federal Direct Stafford Loans made to undergraduate students for which the first disbursement is made on or after July 1, 2006, and before July 1, 2013, the applicable rate of interest shall be as follows:

(i) For a loan for which the first disbursement is made on or after July 1, 2006, and before July 1, 2008, 6.8 percent on the unpaid principal balance of the loan.

(ii) For a loan for which the first disbursement is made on or after July 1, 2008, and before July 1, 2009, 6.0 percent on the unpaid principal balance of the loan.

(iii) For a loan for which the first disbursement is made on or after July 1, 2009, and before July 1, 2010, 5.6 percent on the unpaid principal balance of the loan.

(iv) For a loan for which the first disbursement is made on or after July 1, 2010, and before July 1, 2011, 4.5 percent on the unpaid principal balance of the loan.

(v) For a loan for which the first disbursement is made on or after July 1, 2011, and before July 1, 2013, 3.4 percent on the unpaid principal balance of the loan.

(8) Interest rate provisions for new loans on or after July 1, 2013

(A) Rates for undergraduate FDSL and FDUSLNotwithstanding the preceding paragraphs of this subsection, for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans issued to undergraduate students, for which the first disbursement is made on or after July 1, 2013, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of—

(i) a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus 2.05 percent; or

(ii) 8.25 percent.

(B) Rates for graduate and professional FDUSLNotwithstanding the preceding paragraphs of this subsection, for Federal Direct Unsubsidized Stafford Loans issued to graduate or professional students, for which the first disbursement is made on or after July 1, 2013, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of—

(i) a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus 3.6 percent; or

(ii) 9.5 percent.

(C) PLUS loansNotwithstanding the preceding paragraphs of this subsection, for Federal Direct PLUS Loans, for which the first disbursement is made on or after July 1, 2013, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of—

(i) a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus 4.6 percent; or

(ii) 10.5 percent.

(D) Consolidation loans

(E) Consultation

(F) Rate

(9) Repayment incentives

(A) Incentives for loans disbursed before July 1, 2012

(B) Accountability

(10) Publication

(1) In general

(2) Subsequent reductionParagraph (1) shall be applied to loans made under this part, other than Federal Direct Consolidation loans and Federal Direct PLUS loans—

(A) by substituting “3.0 percent” for “4.0 percent” with respect to loans for which the first disbursement of principal is made on or after February 8, 2006, and before July 1, 2007;

(B) by substituting “2.5 percent” for “4.0 percent” with respect to loans for which the first disbursement of principal is made on or after July 1, 2007, and before July 1, 2008;

(C) by substituting “2.0 percent” for “4.0 percent” with respect to loans for which the first disbursement of principal is made on or after July 1, 2008, and before July 1, 2009;

(D) by substituting “1.5 percent” for “4.0 percent” with respect to loans for which the first disbursement of principal is made on or after July 1, 2009, and before July 1, 2010; and

(E) by substituting “1.0 percent” for “4.0 percent” with respect to loans for which the first disbursement of principal is made on or after July 1, 2010.

(d) Repayment plans

(1) Design and selectionConsistent with criteria established by the Secretary, the Secretary shall offer a borrower of a loan made under this part before July 1, 2026, who has not received a loan made under this part on or after July 1, 2026, a variety of plans for repayment of such loan, including principal and interest on the loan. The borrower shall be entitled to accelerate, without penalty, repayment on the borrower’s loans under this part. The borrower may choose—

(A) a standard repayment plan, consistent with subsection (a)(1) of this section and with section 1078(b)(9)(A)(i) of this title;

(B) a graduated repayment plan, consistent with section 1078(b)(9)(A)(ii) of this title;

(C) an extended repayment plan, consistent with section 1078(b)(9)(A)(iv) of this title, except that the borrower shall annually repay a minimum amount determined by the Secretary in accordance with section 1078(b)(1)(L) of this title;

(D) before June 30, 2028, an income contingent repayment plan, with varying annual repayment amounts based on the income of the borrower, paid over an extended period of time prescribed by the Secretary, not to exceed 25 years, except that the plan described in this subparagraph shall not be available to the borrower of a Federal Direct PLUS loan made on behalf of a dependent student;

(E) beginning on July 1, 2009, an income-based repayment plan in accordance with section 1098e of this title, except that the plan described in this subparagraph shall not be available to the borrower of a Federal Direct PLUS Loan made on behalf of a dependent student or an excepted Consolidation Loan (as defined in section 1098e(a)(2) of this title); and

(F) beginning on July 1, 2026, the income-based Repayment Assistance Plan under subsection (q), provided that—

(i) such Plan shall not be available for the repayment of excepted loans (as defined in paragraph (7)(E)); and

(ii) the borrower is required to pay each outstanding loan of the borrower made under this part under such Repayment Assistance Plan, except that a borrower of an excepted loan (as defined in paragraph (7)(E)) may repay the excepted loan separately from other loans under this part obtained by the borrower.

(2) Selection by Secretary

(3) Changes in selections

(4) Alternative repayment plans

(5) Repayment after defaultThe Secretary may require any borrower who has defaulted on a loan made under this part to—

(A) pay all reasonable collection costs associated with such loan; and

(B) repay the loan pursuant to an income-based repayment plan under subsection (q) or section 1098e of this title, as applicable.

(6) Termination and limitation of repayment authority

(A) Sunset of repayment plans available before July 1, 2026

(B) ProhibitionsThe Secretary may not, for any loan made under this part on or after July 1, 2026—

(i) authorize a borrower of such a loan to repay such loan pursuant to a repayment plan that is not described in paragraph (7)(A); or

(ii) carry out or modify a repayment plan that is not described in such paragraph.

(7) Repayment plans for loans made on or after July 1, 2026

(A) Design and selectionBeginning on July 1, 2026, the Secretary shall offer a borrower of a loan made under this part on or after such date (including such a borrower who also has a loan made under this part before such date) two plans for repayment of the borrower’s loans under this part, including principal and interest on such loans. The borrower shall be entitled to accelerate, without penalty, repayment on such loans. The borrower may choose—

(i) a standard repayment plan—(I) with a fixed monthly repayment amount paid over a fixed period of time equal to the applicable period determined under subclause (II); and(II) with the applicable period of time for repayment determined based on the total outstanding principal of all loans of the borrower made under this part before, on, or after July 1, 2026, at the time the borrower is entering repayment under such plan, as follows—(aa) for a borrower with total outstanding principal of less than $25,000, a period of 10 years;(bb) for a borrower with total outstanding principal of not less than $25,000 and less than $50,000, a period of 15 years;(cc) for a borrower with total outstanding principal of not less than $50,000 and less than $100,000, a period of 20 years; and(dd) for a borrower with total outstanding principal of $100,000 or more, a period of 25 years; or

(ii) the income-based Repayment Assistance Plan under subsection (q).

(B) Selection by Secretary

(D) Changes of repayment planA borrower may change the borrower’s selection of—

(i) the standard repayment plan under subparagraph (A)(i), or the Secretary’s selection of such plan for the borrower under subparagraph (B), as the case may be, to the Repayment Assistance Plan under subparagraph (A)(ii) at any time; and

(ii) the Repayment Assistance Plan under subparagraph (A)(ii) to the standard repayment plan under subparagraph (A)(i) at any time.

(E) Repayment for borrowers with excepted loans made on or after July 1, 2026

(i) Standard repayment plan required

(ii) Excepted loan definedFor the purposes of this paragraph, the term “excepted loan” means a loan with an outstanding balance that is—(I) a Federal Direct PLUS Loan that is made on behalf of a dependent student; or(II) a Federal Direct Consolidation Loan, if the proceeds of such loan were used to discharge the liability on—(aa) an excepted PLUS loan, as defined in section 1098e(a)(1) of this title; or(bb) an excepted consolidation loan (as such term is defined in section 1098e(a)(2)(A) of this title, notwithstanding subparagraph (B) of such section).

(e) Income contingent repayment

(1) Information and procedures

(2) Repayment based on adjusted gross income

(3) Additional documents

(4) Repayment schedules

(5) Calculation of balance due

(6) Notification to borrowers

(7) Maximum repayment periodIn calculating the extended period of time for which an income contingent repayment plan under this subsection may be in effect for a borrower, the Secretary shall include all time periods during which a borrower of loans under part B, part D, or part E—

(A) is not in default on any loan that is included in the income contingent repayment plan; and

(B)

(i) is in deferment due to an economic hardship described in section 1085(o) of this title;

(ii) makes monthly payments under paragraph (1) or (6) of section 1098e(b) of this title;

(iii) makes monthly payments of not less than the monthly amount calculated under section 1078(b)(9)(A)(i) of this title or subsection (d)(1)(A), based on a 10-year repayment period, when the borrower first made the election described in section 1098e(b)(1) of this title;

(iv) makes payments of not less than the payments required under a standard repayment plan under section 1078(b)(9)(A)(i) of this title or subsection (d)(1)(A) with a repayment period of 10 years; or

(v) makes payments under an income contingent repayment plan under subsection (d)(1)(D).

(8) Automatic recertification

(A) In generalThe Secretary shall establish and implement, with respect to any borrower described in subparagraph (B), procedures to—

(i) use return information disclosed under section 6103(l)(13) of title 26, pursuant to approval provided under section 1098h of this title, to determine the repayment obligation of the borrower without further action by the borrower;

(ii) allow the borrower (or the spouse of the borrower), at any time, to opt out of disclosure under such section 6103(l)(13) and instead provide such information as the Secretary may require to determine the repayment obligation of the borrower (or withdraw from the repayment plan under this subsection); and

(iii) provide the borrower with an opportunity to update the return information so disclosed before the determination of the repayment obligation of the borrower.

(B) ApplicabilitySubparagraph (A) shall apply to each borrower of a loan made under this part who, on or after the date on which the Secretary establishes procedures under such subparagraph—

(i) selects, or is required to repay such loan pursuant to, an income-contingent repayment plan; or

(ii) recertifies income or family size under such plan.

(f) Deferment; Forbearance

(1) Effect on principal and interestA borrower of a loan made under this part who meets the requirements described in paragraph (2) shall be eligible for a deferment, during which periodic installments of principal need not be paid, and interest—

(A) shall not accrue, in the case of a—

(i) Federal Direct Stafford Loan; or

(ii) a Federal Direct Consolidation Loan that consolidated only Federal Direct Stafford Loans, or a combination of such loans and Federal Stafford Loans for which the student borrower received an interest subsidy under section 1078 of this title; or

(B) shall accrue and be capitalized or paid by the borrower, in the case of a Federal Direct PLUS Loan, a Federal Direct Unsubsidized Stafford Loan, or a Federal Direct Consolidation Loan not described in subparagraph (A)(ii).

(2) EligibilityA borrower of a loan made under this part shall be eligible for a deferment during any period—

(A) during which the borrower—

(i) is carrying at least one-half the normal full-time work load for the course of study that the borrower is pursuing, as determined by the eligible institution (as such term is defined in section 1085(a) of this title) the borrower is attending; or

(ii) is pursuing a course of study pursuant to a graduate fellowship program approved by the Secretary, or pursuant to a rehabilitation training program for individuals with disabilities approved by the Secretary,

except that no borrower shall be eligible for a deferment under this subparagraph, or a loan made under this part (other than a Federal Direct PLUS Loan or a Federal Direct Consolidation Loan), while serving in a medical internship or residency program;

(B) subject to paragraph (7), not in excess of 3 years during which the borrower is seeking and unable to find full-time employment;

(i) is serving on active duty during a war or other military operation or national emergency; or

(ii) is performing qualifying National Guard duty during a war or other military operation or national emergency,

and for the 180-day period following the demobilization date for the service described in clause (i) or (ii); or

(D) subject to paragraph (7), not in excess of 3 years during which the Secretary determines, in accordance with regulations prescribed under section 1085(o) of this title, that the borrower has experienced or will experience an economic hardship.

(3) Deferment for borrowers receiving cancer treatment

(A) Effect on principal and interest

(B) EligibilityA borrower of a loan made under this part shall be eligible for a deferment during—

(i) any period in which such borrower is receiving treatment for cancer; and

(ii) the 6 months after such period.

(i) made on or after September 28, 2018; or

(ii) in repayment on September 28, 2018.

(4) Deferment for dislocated military spouses

(A) Duration and effect on principal and interestA borrower of a loan made under this part who meets the requirements of subparagraph (B) shall be eligible for a deferment for an aggregate period of 180 days, during which periodic installments of principal need not be paid, and interest—

(i) shall not accrue, in the case of a—(I) Federal Direct Stafford Loan; or(II) a Federal Direct Consolidation Loan that consolidated only Federal Direct Stafford Loans, or a combination of such loans and Federal Stafford Loans for which the student borrower received an interest subsidy under section 1078 of this title; or

(ii) shall accrue and be capitalized or paid by the borrower, in the case of a Federal Direct PLUS Loan, a Federal Direct Unsubsidized Stafford Loan, or a Federal Direct Consolidation Loan not described in clause (i)(II).

(B) EligibilityA borrower of a loan made under this part shall be eligible for a deferment under subparagraph (A) if the borrower—

(i) is the spouse of a member of the Armed Forces serving on active duty; and

(ii) has experienced a loss of employment as a result of relocation to accommodate a permanent change in duty station of such member.

(i) In generalA borrower may establish eligibility for a deferment under subparagraph (A) by providing to the Secretary—(I) the documentation described in clause (ii); or(II) such other documentation as the Secretary determines appropriate.

(ii) DocumentationThe documentation described in this clause is—(I) evidence that the borrower is the spouse of a member of the Armed Forces serving on active duty;(II) evidence that a military permanent change of station order was issued to such member; and(III)(aa) evidence that the borrower is eligible for unemployment benefits due to a loss of employment resulting from relocation to accommodate such permanent change in duty station; or(bb) a written certification, or an equivalent as approved by the Secretary, that the borrower is registered with a public or private employment agency due to a loss of employment resulting from relocation to accommodate such permanent change in duty station.

(5) “Borrower” defined

(6) Deferments for previous part B loan borrowers

(7) Sunset of unemployment and economic hardship deferments

(8) Forbearance on loans made under this part on or after July 1, 2027

(g) Federal Direct Consolidation Loans

(1) In general

(2) Separating joint consolidation loans

(A) In general

(i) Authorization

(ii) Eligibility for borrowers in default

(B) Secretarial requirementsNotwithstanding section 1078–3(a)(3)(A) of this title or any other provision of law, for each individual borrower who applies under subparagraph (A), the Secretary shall—

(i) make a separate Federal Direct Consolidation Loan under this part that—(I) shall be for an amount equal to the product of—(aa) the unpaid principal and accrued unpaid interest of the joint consolidation loan (as of the date that is the day before such separate consolidation loan is made) and any outstanding charges and fees with respect to such loan; and(bb) the percentage of the joint consolidation loan attributable to the loans of the individual borrower for whom such separate consolidation loan is being made, as determined—(AA) on the basis of the loan obligations of such borrower with respect to such joint consolidation loan (as of the date such joint consolidation loan was made); or(BB) in the case in which both borrowers request, on the basis of proportions outlined in a divorce decree, court order, or settlement agreement; and(II) has the same rate of interest as the joint consolidation loan (as of the date that is the day before such separate consolidation loan is made); and

(ii) in a timely manner, notify each individual borrower that the joint consolidation loan had been repaid and of the terms and conditions of their new loans.

(i) Joint application

(ii) Separate applicationAn individual borrower in a married couple (or previously married couple) may apply for a separate consolidation loan under subparagraph (A) separately and without regard to whether or when the other individual borrower in the married couple (or previously married couple) applies under subparagraph (A), in a case in which—(I) the individual borrower certifies to the Secretary that such borrower—(aa) has experienced an act of domestic violence (as defined in section 12291 of title 34 from the other individual borrower;(bb) has experienced economic abuse (as defined in section 12291 of title 34 from the other individual borrower; or(cc) is unable to reasonably reach or access the loan information of the other individual borrower; or(II) the Secretary determines that authorizing each individual borrower to apply separately under subparagraph (A) would be in the best fiscal interests of the Federal Government.

(iii) Remaining obligation from separate application

(3) Consolidation loans made on or after July 1, 2026

(h) Borrower defenses

(i) Loan application and promissory note

(j) Loan disbursement

(1) In general

(2) Payment periods

(k) Fiscal control and fund accountability

(1) In general

(A) An institution shall maintain financial records in a manner consistent with records maintained for other programs under this subchapter.

(B) Except as otherwise required by regulations of the Secretary 1 an institution may maintain loan funds under this part in the same account as other Federal student financial assistance.

(2) Payments and refunds

(3) Transaction histories

(l) Armed Forces and NOAA Commissioned Officer Corps student loan interest payment programs

(1) Authority

(2) Forbearance

(m) Repayment plan for public service employees

(1) In generalThe Secretary shall cancel the balance of interest and principal due, in accordance with paragraph (2), on any eligible Federal Direct Loan not in default for a borrower who—

(A) has made 120 monthly payments on the eligible Federal Direct Loan after October 1, 2007, pursuant to any one or a combination of the following—

(i) payments under an income-based repayment plan under section 1098e of this title;

(ii) payments under a standard repayment plan under subsection (d)(1)(A), based on a 10-year repayment period;

(iii) monthly payments under a repayment plan under subsection (d)(1) or (g) of not less than the monthly amount calculated under subsection (d)(1)(A), based on a 10-year repayment period;

(iv) payments under an income contingent repayment plan under subsection (d)(1)(D) (as in effect on the day before the date of the repeal of subsection (e) of this section); or

(v) on-time payments under the Repayment Assistance Plan under subsection (q); and

(B)

(i) is employed in a public service job at the time of such forgiveness; and

(ii) has been employed in a public service job during the period in which the borrower makes each of the 120 payments described in subparagraph (A).

(2) Loan cancellation amount

(3) DefinitionsIn this subsection:

(A) Eligible Federal Direct Loan

(B) Public service jobThe term “public service job” means—

(i) a full-time job in emergency management, government (excluding time served as a member of Congress), military service, public safety, law enforcement, public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations, as such terms are defined by the Bureau of Labor Statistics), public education, social work in a public child or family service agency, public interest law services (including prosecution or public defense or legal advocacy on behalf of low-income communities at a nonprofit organization), early childhood education (including licensed or regulated childcare, Head Start, and State funded prekindergarten), public service for individuals with disabilities, public service for the elderly, public library sciences, school-based library sciences and other school-based services, or at an organization that is described in section 501(c)(3) of title 26 and exempt from taxation under section 501(a) of such title; or

(ii) teaching as a full-time faculty member at a Tribal College or University as defined in section 1059c(b) of this title and other faculty teaching in high-needs subject areas or areas of shortage (including nurse faculty, foreign language faculty, and part-time faculty at community colleges), as determined by the Secretary.

(4) Ineligibility for double benefits

(n) Identity fraud protection

(o) No accrual of interest for active duty service members

(1) In general

(2) Consolidation loans

(3) Eligible military borrowerIn this subsection, the term “eligible military borrower” means an individual who—

(A)

(i) is serving on active duty during a war or other military operation or national emergency; or

(ii) is performing qualifying National Guard duty during a war or other military operation or national emergency; and

(B) is serving in an area of hostilities in which service qualifies for special pay under section 310, or paragraph (1) or (3) of section 351(a), of title 37.

(4) Limitation

(p) Disclosures

(q) Repayment Assistance Plan

(1) In generalNotwithstanding any other provision of this chapter, beginning on July 1, 2026, the Secretary shall carry out an income-based repayment plan (to be known as the “Repayment Assistance Plan”), that shall have the following terms and conditions:

(A) The total monthly repayment amount owed by a borrower for all of the loans of the borrower that are repaid pursuant to the Repayment Assistance Plan shall be equal to the applicable monthly payment of a borrower calculated under paragraph (4)(B), except that the borrower may not be precluded from repaying an amount that exceeds such amount for any month.

(B) The Secretary shall apply the borrower’s applicable monthly payment under this paragraph first toward interest due on each such loan, next toward any fees due on each loan, and then toward the principal of each loan.

(D) A borrower who is not in a period of deferment or forbearance shall make an applicable monthly payment for each month until the earlier of—

(i) the date on which the outstanding balance of principal and interest due on all of the loans of the borrower that are repaid pursuant to the Repayment Assistance Plan is $0; or

(ii) the date on which the borrower has made 360 qualifying monthly payments.

(E) The Secretary shall cancel any outstanding balance of principal and interest due on a loan made under this part to a borrower—

(i) who, for any period of time, participated in the Repayment Assistance Plan under this subsection;

(ii) whose most recent payment for such loan prior to the loan cancellation under this subparagraph was made under such Repayment Assistance Plan; and

(iii) who has made 360 qualifying monthly payments on such loan.

(F) For the purposes of this subsection, the term “qualifying monthly payment” means any of the following:

(i) An on-time applicable monthly payment under this subsection.

(ii) An on-time monthly payment under the standard repayment plan under subsection (d)(7)(A)(i) of not less than the monthly payment required under such plan.

(iii) A monthly payment under any repayment plan (excluding the Repayment Assistance Plan under this subsection) of not less than the monthly payment that would be required under a standard repayment plan under subsection (d)(1)(A) with a repayment period of 10 years.

(iv) A monthly payment under section 1098e of this title of not less than the monthly payment required under such section, including a monthly payment equal to the minimum payment amount permitted under such section.

(v) A monthly payment made before July 1, 2028, under an income contingent repayment plan carried out under subsection (d)(1)(D) (or under an alternative repayment plan in lieu of repayment under such an income contingent repayment plan, if placed in such an alternative repayment plan by the Secretary) of not less than the monthly payment required under such a plan, including a monthly payment equal to the minimum payment amount permitted under such a plan.

(vi) A month when the borrower did not make a payment because the borrower was in deferment under subsection (f)(2)(B) or due to an economic hardship described in subsection (f)(2)(D).

(vii) A month that ended before July 4, 2025, when the borrower did not make a payment because the borrower was in a period of deferment or forbearance described in section 685.209(k)(4)(iv) of title 34, Code of Federal Regulations (as in effect on July 4, 2025).

(G) The procedures established by the Secretary under section 1098e(c) of this title shall apply for annually determining the borrower’s eligibility for the Repayment Assistance Plan, including verification of a borrower’s annual income and the annual amount due on the total amount of loans eligible to be repaid under this subsection, and such other procedures as are necessary to effectively implement income-based repayment under this subsection. With respect to carrying out section 1098h(a)(2) of this title for the Repayment Assistance Plan, an individual may elect to opt out of the disclosures required under section 1098h(a)(2)(A)(ii) of this title in accordance with the procedures established under section 1098e(c)(2) of this title.

(2) Balance assistance for distressed borrowers

(A) Interest subsidy

(B) Matching principal paymentWith respect to a borrower of a loan made under this part and not in a period of deferment or forbearance, for each month for which a borrower makes an on-time applicable monthly payment required under paragraph (1)(A) and such monthly payment reduces the total outstanding principal balance of all loans of the borrower repaid pursuant to the Repayment Assistance Plan under this subsection by less than $50, the Secretary shall reduce such total outstanding principal balance of the borrower by an amount that is equal to—

(i) the amount that is the lesser of—(I) $50; or(II) the total amount paid by the borrower for such month pursuant to paragraph (1)(A); minus

(ii) the total amount paid by the borrower for such month pursuant to paragraph (1)(A) that is applied to such total outstanding principal balance.

(3) Additional documents

(4) DefinitionsIn this subsection:

(A) Adjusted gross income

(B) Applicable monthly payment

(i) In generalExcept as provided in clause (ii), (iii), or (vi), the term “applicable monthly payment” means, when used with respect to a borrower, the amount equal to—(I) the applicable base payment of the borrower, divided by 12; minus(II) $50 for each dependent of the borrower (which, in the case of a married borrower filing a separate Federal income tax return, shall include only each dependent that the borrower claims on that return).

(ii) Minimum amount

(iii) Final payment

(iv) Base paymentThe amount of the applicable base payment for a borrower with an adjusted gross income of—(I) not more than $10,000, is $120;(II) more than $10,000 and not more than $20,000, is 1 percent of such adjusted gross income;(III) more than $20,000 and not more than $30,000, is 2 percent of such adjusted gross income;(IV) more than $30,000 and not more than $40,000, is 3 percent of such adjusted gross income;(V) more than $40,000 and not more than $50,000, is 4 percent of such adjusted gross income;(VI) more than $50,000 and not more than $60,000, is 5 percent of such adjusted gross income;(VII) more than $60,000 and not more than $70,000, is 6 percent of such adjusted gross income;(VIII) more than $70,000 and not more than $80,000, is 7 percent of such adjusted gross income;(IX) more than $80,000 and not more than $90,000, is 8 percent of such adjusted gross income;(X) more than $90,000 and not more than $100,000, is 9 percent of such adjusted gross income; and(XI) more than $100,000, is 10 percent of such adjusted gross income.

(v) Dependent

(vi) Special ruleIn the case of a borrower who is required by the Secretary to provide information to the Secretary to determine the applicable monthly payment of the borrower under this subparagraph, and who does not comply with such requirement, the applicable monthly payment of the borrower shall be—(I) the sum of the monthly payment amounts the borrower would have paid for each of the borrower’s loans made under this part under a standard repayment plan with a fixed monthly repayment amount, paid over a period of 10 years, based on the outstanding principal due on such loan when such loan entered repayment; and(II) determined pursuant to this clause until the date on which the borrower provides such information to the Secretary.

(Pub. L. 89–329, title IV, § 455, as added Pub. L. 99–498, title IV, § 404, Oct. 17, 1986, 100 Stat. 1439; amended Pub. L. 102–325, title IV, § 451, July 23, 1992, 106 Stat. 572; Pub. L. 103–66, title IV, § 4021, Aug. 10, 1993, 107 Stat. 346; Pub. L. 103–382, title III, § 359, Oct. 20, 1994, 108 Stat. 3968; Pub. L. 105–178, title VIII, § 8301(c), June 9, 1998, 112 Stat. 498; Pub. L. 105–244, title IV, §§ 401(g)(6), 452(a)(1), (b), (c), Oct. 7, 1998, 112 Stat. 1652, 1715–1717; Pub. L. 106–554, § 1(a)(1) [title III, § 318(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–49; Pub. L. 107–139, § 1(b), (c), Feb. 8, 2002, 116 Stat. 9; Pub. L. 107–314, div. A, title VI, § 651(c), Dec. 2, 2002, 116 Stat. 2580; Pub. L. 109–171, title VIII, §§ 8007(b), 8008(b), (c)(2), (3), 8009(d), Feb. 8, 2006, 120 Stat. 160, 162–164; Pub. L. 110–84, title II, §§ 201(b), 202(b), 203(b)(3), 205, title IV, § 401, Sept. 27, 2007, 121 Stat. 791, 795, 800; Pub. L. 110–315, title I, § 103(b)(8), title IV, §§ 425(b)(3), 451, Aug. 14, 2008, 122 Stat. 3089, 3234, 3261; Pub. L. 111–39, title IV, § 404(b)(2), July 1, 2009, 123 Stat. 1946; Pub. L. 111–152, title II, § 2211(a), Mar. 30, 2010, 124 Stat. 1078; Pub. L. 112–25, title V, §§ 502, 503, Aug. 2, 2011, 125 Stat. 266; Pub. L. 112–141, div. F, title III, §§ 100301, 100302(a), July 6, 2012, 126 Stat. 979; Pub. L. 113–28, § 2(a), Aug. 9, 2013, 127 Stat. 506; Pub. L. 114–328, div. A, title VI, § 618(e), Dec. 23, 2016, 130 Stat. 2160; Pub. L. 115–245, div. B, title III, § 309(a), Sept. 28, 2018, 132 Stat. 3105; Pub. L. 116–91, § 4(a), Dec. 19, 2019, 133 Stat. 1192; Pub. L. 116–259, title II, § 202(b)(2), Dec. 23, 2020, 134 Stat. 1163; Pub. L. 116–260, div. FF, title VII, § 705(a), Dec. 27, 2020, 134 Stat. 3200; Pub. L. 117–200, § 2(a), Oct. 11, 2022, 136 Stat. 2219; Pub. L. 118–31, div. A, title X, § 1054(a), Dec. 22, 2023, 137 Stat. 397; Pub. L. 119–21, title VIII, §§ 81001, 82001(b), (c)(1), (d), (e), 82002, 82004, July 4, 2025, 139 Stat. 334, 337, 340, 341, 345, 348.)

§ 1087f. Contracts

(a) Contracts for supplies and services

(1) In general

(2) Entities

(3) Rule of construction

(b) Contracts for origination, servicing, and data systems

The Secretary may enter into contracts for—

(1) the alternative origination of loans to students attending institutions of higher education with agreements to participate in the program under this part (or their parents), if such institutions do not have agreements with the Secretary under section 1087d(b) of this title;

(2) the servicing and collection of loans made or purchased under this part;

(3) the establishment and operation of 1 or more data systems for the maintenance of records on all loans made or purchased under this part; and

(4) such other aspects of the direct student loan program as the Secretary determines are necessary to ensure the successful operation of the program.

(Pub. L. 89–329, title IV, § 456, as added Pub. L. 102–325, title IV, § 451, July 23, 1992, 106 Stat. 572; amended Pub. L. 103–66, title IV, § 4021, Aug. 10, 1993, 107 Stat. 352; Pub. L. 105–244, title IV, § 453, Oct. 7, 1998, 112 Stat. 1717; Pub. L. 110–227, § 7(c), May 7, 2008, 122 Stat. 747; Pub. L. 111–152, title II, § 2212(a), Mar. 30, 2010, 124 Stat. 1078; Pub. L. 113–67, div. A, title V, § 502(1), Dec. 26, 2013, 127 Stat. 1187.)

§ 1087g. Repealed. Pub. L. 111–39, title IV, § 404(b)(3), July 1, 2009, 123 Stat. 1946

§ 1087h. Funds for administrative expenses

(a) Administrative expenses

(1) Additional mandatory funds for servicing

(2) Repealed. Pub. L. 113–67, div. A, title V, § 502(2), Dec. 26, 2013, 127 Stat. 1187

(3) Authorization for administrative costs beginning in fiscal years 2007 through 2014

(4) Continuing mandatory funds for account maintenance fees

(5) Account maintenance fees

(6) Technical assistance to institutions of higher education

(A) Provision of assistance

(B) Funds

(7) Additional payments

(A) Provision of assistance

(B) Funds

(8) Carryover

(b) Calculation basis

(Pub. L. 89–329, title IV, § 458, as added Pub. L. 102–325, title IV, § 451, July 23, 1992, 106 Stat. 573; amended Pub. L. 103–66, title IV, § 4021, Aug. 10, 1993, 107 Stat. 353; Pub. L. 104–19, title I, § 601, July 27, 1995, 109 Stat. 219; Pub. L. 105–33, title VI, § 6103, Aug. 5, 1997, 111 Stat. 652; Pub. L. 105–78, title VI, § 609(l), Nov. 13, 1997, 111 Stat. 1524; Pub. L. 105–244, title IV, § 454, Oct. 7, 1998, 112 Stat. 1717; Pub. L. 109–171, title VIII, § 8015, Feb. 8, 2006, 120 Stat. 172; Pub. L. 109–292, § 5, Sept. 30, 2006, 120 Stat. 1341; Pub. L. 110–84, title III, § 306, Sept. 27, 2007, 121 Stat. 800; Pub. L. 110–315, title IV, § 452, Aug. 14, 2008, 122 Stat. 3263; Pub. L. 111–152, title II, § 2212(b), Mar. 30, 2010, 124 Stat. 1080; Pub. L. 113–67, div. A, title V, § 502(2), Dec. 26, 2013, 127 Stat. 1187; Pub. L. 114–113, div. H, title III, § 310, Dec. 18, 2015, 129 Stat. 2638; Pub. L. 115–31, div. H, title III, § 309, May 5, 2017, 131 Stat. 552; Pub. L. 115–141, div. H, title III, § 309, Mar. 23, 2018, 132 Stat. 750; Pub. L. 115–245, div. B, title III, § 307, Sept. 28, 2018, 132 Stat. 3105; Pub. L. 116–94, div. A, title III, § 306, Dec. 20, 2019, 133 Stat. 2595; Pub. L. 116–260, div. H, title III, § 306, Dec. 27, 2020, 134 Stat. 1608; Pub. L. 119–21, title VIII, § 82005, July 4, 2025, 139 Stat. 349.)

§ 1087i. Authority to sell loans

The Secretary, in consultation with the Secretary of the Treasury, is authorized to sell loans made under this part on such terms as the Secretary determines are in the best interest of the United States, except that any such sale shall not result in any cost to the Federal Government. Notwithstanding any other provision of law, the proceeds of any such sale may be used by the Secretary to offer reductions in the interest rate paid by a borrower of a loan made under this part as the Secretary determines appropriate to encourage on-time repayment in accordance with section 1087e(b)(7) of this title. Such reductions may be offered only if the Secretary determines the reductions are in the best financial interests of the Federal Government.

(Pub. L. 89–329, title IV, § 459, as added Pub. L. 105–244, title IV, § 455, Oct. 7, 1998, 112 Stat. 1718.)

§ 1087i–1. Temporary authority to purchase student loans

(a) Authority to purchase

(1) Authority; determination required

(2) Federal Register noticeThe Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget, shall jointly publish a notice in the Federal Register prior to any purchase of loans under paragraph (1) that—

(A) establishes the terms and conditions governing the purchases authorized by paragraph (1);

(B) includes an outline of the methodology and factors that the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget, will jointly consider in evaluating the price at which to purchase loans made under section 1078, 1078–2, or 1078–8 of this title; and

(C) describes how the use of such methodology and consideration of such factors used to determine purchase price will ensure that loan purchases do not result in any net cost to the Federal Government (including the cost of servicing the loans purchased).

(3) Temporary authority to purchase rehabilitated loans

(A) Authority

(B) Federal Register noticeThe Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget shall jointly publish a notice in the Federal Register prior to any purchase of loans under this paragraph that—

(i) establishes the terms and conditions governing the purchases authorized by this paragraph;

(ii) includes an outline of the methodology and factors that the Secretary, the Secretary of the Treasury, and the Director of the Office of Management and Budget will jointly consider in evaluating the price at which to purchase loans rehabilitated pursuant to section 1078–6(a) of this title; and

(iii) describes how the use of such methodology and consideration of such factors used to determine purchase price will ensure that loan purchases do not result in any net cost to the Federal Government (including the cost of servicing the loans purchased).

(b) ProceedsThe Secretary shall require, as a condition of any purchase under subsection (a), that the funds paid by the Secretary to any eligible lender under this section be used—

(1) to ensure continued participation of such lender in the Federal student loan programs authorized under part B of this subchapter; and

(2)

(A) in the case of loans purchased pursuant to subsection (a)(1), to originate new Federal loans to students, as authorized under part B of this subchapter; or

(B) in the case of loans purchased pursuant to subsection (a)(3), to originate such new Federal loans to students, or to purchase loans in accordance with section 1078–6(a) of this title.

(c) Maintaining servicing arrangementsThe Secretary may, if agreed upon by an eligible lender selling loans under this section, contract with such lender for the servicing of the loans purchased, provided that—

(1) the cost of such servicing arrangement does not exceed the cost the Federal Government would otherwise incur for the servicing of loans purchased, as determined under subsection (a); and

(2) such servicing arrangement is in the best interest of the borrowers whose loans are purchased.

(d) Guaranty agency responsibilities and paymentsNotwithstanding any other provision of this chapter, beginning on the date on which the Secretary purchases a loan under this section—

(1) the guaranty agency that insured such loan shall cease to have any obligations, responsibilities, or rights (including rights to any payment) under this chapter for any activity related to the administration of such loan that is carried out or required to be carried out on or after the date of such purchase; and

(2) the insurance issued by such agency pursuant to section 1078(b) of this title for such loan shall cease to be effective with respect to any default on such loan that occurs on or after the date of such purchase.

(e) Reports and cost estimatesThe Secretary shall prepare, transmit to the authorizing committees, and make available to the public, the following:

(1) Quarterly reports

(A) ContentsNot later than 60 days after the end of each quarter during the period beginning July 1, 2008, and ending September 30, 2010, a quarterly report on—

(i) the number of loans the Secretary has agreed to purchase, or has purchased, using the authority provided under this section, and the total amount of outstanding principal and accrued interest of such loans, during such period; and

(ii) the number of loans in which the Secretary has purchased a participation interest, and the total amount of outstanding principal and accrued interest of such loans, during such period.

(B) Disaggregated information

(2) Estimates of purchase program costsNot later than February 15, 2011, an estimate of the costs associated with the program of purchasing loans described in paragraph (1)(A)(i) during the period beginning July 1, 2008, and ending September 30, 2010, and an estimate of the costs associated with the program of purchasing a participation interest in loans described in paragraph (1)(A)(ii) during such period. Each such estimate shall—

(A) contain the same level of detail, and be reported in a similar manner, as the budget estimates provided for the loan program under part B and the direct student loan program under this part in the President’s annual budget submission to Congress, except that current and future administrative costs shall also be reported;

(B) include an estimate of the gross and net outlays that have been, or will be, incurred by the Federal Government (including subsidy and administrative costs, and any payments made by the Department to lenders, trusts, or other entities related to such activities) in purchasing such loans or purchasing a participation interest in such loans during such period (as applicable); and

(i) the average amount of the gross and net outlays (including costs and payments) described in subparagraph (B) for each $100 of loans purchased or for which a participation interest was purchased (as applicable) during such period, disaggregated by type of loan; with

(ii) the average amount of such gross and net outlays (including costs and payments) to the Federal Government for each $100 of comparable loans made under this part and part B during such period, disaggregated by part and by type of loan.

(3) Annual cost estimates

(f) Expiration of authority

(Pub. L. 89–329, title IV, § 459A, as added Pub. L. 110–227, § 7(b), May 7, 2008, 122 Stat. 746; amended Pub. L. 110–315, title IV, § 453, Aug. 14, 2008, 122 Stat. 3263; Pub. L. 110–350, § 1, Oct. 7, 2008, 122 Stat. 3947; Pub. L. 111–39, title IV, § 404(a), July 1, 2009, 123 Stat. 1945.)

§ 1087i–2. Temporary loan consolidation authority

(a) Temporary loan consolidation authority

(1) In general

(2) Categories of loans that may be consolidatedThe categories of loans that may be consolidated under paragraph (1) are—

(A) loans made under this part;

(B) loans purchased by the Secretary pursuant to section 1087i–1 of this title; and

(C) loans made under part B that are held by an eligible lender, as such term is defined in section 1085(d) of this title.

(3) Time period in which loans may be consolidated

(b) Terms of loansA Federal Direct Consolidation Loan made under this section shall have the same terms and conditions as a Federal Direct Consolidation Loan made under section 1087e(g) of this title, except that—

(1) in determining the applicable rate of interest on the Federal Direct Consolidation Loan made under this section (other than on a Federal Direct Consolidation Loan described in paragraph (2)), section 1077a(l)(3) of this title shall be applied without rounding the weighted average of the interest rate on the loans consolidated to the nearest higher one-eighth of 1 percent as described in subparagraph (A) of section 1077a(l)(3) of this title; and

(2) if a Federal Direct Consolidation Loan made under this section that repays a loan which is subject to an interest rate determined under section 1077a(g)(2), (j)(2), or (k)(2) of this title, then the interest rate for such Federal Direct Consolidation Loan shall be calculated—

(A) by using the applicable rate of interest described in section 1077a(g)(2), (j)(2), or (k)(2) of this title, respectively; and

(B) in accordance with section 1077a(l)(3) of this title.

(Pub. L. 89–329, title IV, § 459B, as added Pub. L. 111–152, title II, § 2206(b), Mar. 30, 2010, 124 Stat. 1075.)

§ 1087j. Loan cancellation for teachers

(a) Statement of purpose

(b) Program authorizedThe Secretary shall carry out a program of canceling the obligation to repay a qualified loan amount in accordance with subsection (c) for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans made under this part for any new borrower on or after October 1, 1998, who—

(1) has been employed as a full-time teacher for 5 consecutive complete school years—

(A) in a school or location that qualifies under section 1087ee(a)(2)(A) of this title for loan cancellation for Perkins loan recipients who teach in such schools or locations; and

(B) if employed as an elementary school or secondary school teacher, is highly qualified as defined in section 9101 1

1 See References in Text note below.

of the Elementary and Secondary Education Act of 1965 [20 U.S.C. 7801], or meets the requirements of subsection (g)(3); and

(2) is not in default on a loan for which the borrower seeks forgiveness.

(1) In general

(2) Treatment of consolidation loans

(3) Additional amounts for teachers in mathematics, science, or special educationNotwithstanding the amount specified in paragraph (1), the aggregate amount that the Secretary shall cancel under this section shall be not more than $17,500 in the case of—

(A) a secondary school teacher—

(i) who meets the requirements of subsection (b); and

(ii) whose qualifying employment for purposes of such subsection is teaching mathematics or science on a full-time basis; and

(B) an elementary school or secondary school teacher—

(i) who meets the requirements of subsection (b);

(ii) whose qualifying employment for purposes of such subsection is as a special education teacher whose primary responsibility is to provide special education to children with disabilities (as those terms are defined in section 1401 of this title); and

(iii) who, as certified by the chief administrative officer of the public or non-profit private elementary school or secondary school in which the borrower is employed, or, in the case of a teacher who is employed by an educational service agency, as certified by the chief administrative officer of such agency, is teaching children with disabilities that correspond with the borrower’s special education training and has demonstrated knowledge and teaching skills in the span areas of the elementary school or secondary school curriculum that the borrower is teaching.

(d) Regulations

(e) Construction

(f) List

(g) Additional eligibility provisions

(1) Continued eligibilityAny teacher who performs service in a school that—

(A) meets the requirements of subsection (b)(1)(A) in any year during such service; and

(B) in a subsequent year fails to meet the requirements of such subsection, may continue to teach in such school and shall be eligible for loan cancellation pursuant to subsection (b).

(2) Prevention of double benefitsNo borrower may, for the same voluntary service, receive a benefit under both this section and—

(A)section 1078–11 of this title;

(B)section 1087e(m) of this title; or

(3) Private school teachers

(h) “Year” defined

(Pub. L. 89–329, title IV, § 460, as added Pub. L. 105–244, title IV, § 456, Oct. 7, 1998, 112 Stat. 1719; amended Pub. L. 108–409, § 3(a)(1)(B), (b)(2), Oct. 30, 2004, 118 Stat. 2300, 2301; Pub. L. 109–171, title VIII, § 8013(e)(2), Feb. 8, 2006, 120 Stat. 167; Pub. L. 110–315, title IV, § 454, Aug. 14, 2008, 122 Stat. 3265; Pub. L. 111–39, title IV, § 404(b)(4), July 1, 2009, 123 Stat. 1946.)