§ 1072b. Agency Operating Fund
(a)
Establishment
Each guaranty agency shall, not later than 60 days after October 7, 1998, establish a fund designated as the Operating Fund.
(b)
Investment of funds
Funds deposited into the Operating Fund shall be invested at the discretion of the guaranty agency in accordance with prudent investor standards.
(c)
Additional deposits
After the establishment of the Operating Fund, the guaranty agency shall deposit into the Operating Fund—
(1)
the loan processing and issuance fee paid by the Secretary pursuant to section
1078
(f) of this title;
(2)
30 percent of amounts received after October 7, 1998, from the Secretary as payment for administrative cost allowances for loans upon which insurance was issued prior to October 7, 1998;
(3)
the account maintenance fee paid by the Secretary in accordance with section
1087h of this title;
(d)
Uses of funds
(1)
In general
Funds in the Operating Fund shall be used for application processing, loan disbursement, enrollment and repayment status management, default aversion activities (including those described in section
1072
(h)(8) of this title), default collection activities, school and lender training, financial aid awareness and related outreach activities, compliance monitoring, and other student financial aid related activities, as selected by the guaranty agency.
(2)
Special rule
The guaranty agency may, in the agency’s discretion, transfer funds from the Operating Fund to the Federal Fund for use pursuant to section
1072a of this title. Such transfer shall be irrevocable, and any funds so transferred shall become the sole property of the United States.
(3)
Definitions
For purposes of this subsection:
(A)
Default collection activities
The term “default collection activities” means activities of a guaranty agency that are directly related to the collection of the loan on which a default claim has been paid to the participating lender, including the due diligence activities required pursuant to regulations of the Secretary.
(B)
Default aversion activities
The term “default aversion activities” means activities of a guaranty agency that are directly related to providing collection assistance to the lender on a delinquent loan, prior to the loan’s being legally in a default status, including due diligence activities required pursuant to regulations of the Secretary.
(C)
Enrollment and repayment status management
The term “enrollment and repayment status management” means activities of a guaranty agency that are directly related to ascertaining the student’s enrollment status, including prompt notification to the lender of such status, an audit of the note or written agreement to determine if the provisions of that note or agreement are consistent with the records of the guaranty agency as to the principal amount of the loan guaranteed, and an examination of the note or agreement to assure that the repayment provisions are consistent with the provisions of this part.
(e)
Ownership and regulation of Operating Fund
(3)
Exception
Notwithstanding paragraphs (1) and (2), during any period in which funds are owed to the Federal Fund as a result of transfer under section
1072a
(f) of this title—
[1] See References in Text note below.