US Laws, Codes, Statutes & Cases

From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 20USC1087]

 
                           TITLE 20--EDUCATION
 
      CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE
 
                    SUBCHAPTER IV--STUDENT ASSISTANCE
 
              Part B--Federal Family Education Loan Program
 
Sec. 1087. Repayment by Secretary of loans of bankrupt, 
        deceased, or disabled borrowers; treatment of borrowers 
        attending closed schools or falsely certified as eligible to 
        borrow
        

(a) Repayment in full for death and disability

    If a student borrower who has received a loan described in 
subparagraph (A) or (B) of section 1078(a)(1) of this title dies or 
becomes permanently and totally disabled (as determined in accordance 
with regulations of the Secretary), then the Secretary shall discharge 
the borrower's liability on the loan by repaying the amount owed on the 
loan.

(b) Payment of claims on loans in bankruptcy

    The Secretary shall pay to the holder of a loan described in section 
1078(a)(1)(A) or (B), 1078-1,\1\ 1078-2, 1078-3, or 1078-8 of this 
title, the amount of the unpaid balance of principal and interest owed 
on such loan--
---------------------------------------------------------------------------
    \1\ See References in Text note below.
---------------------------------------------------------------------------
        (1) when the borrower files for relief under chapter 12 or 13 of 
    title 11;
        (2) when the borrower who has filed for relief under chapter 7 
    or 11 of such title commences an action for a determination of 
    dischargeability under section 523(a)(8)(B) of such title; or
        (3) for loans described in section 523(a)(8)(A) of such title, 
    when the borrower files for relief under chapter 7 or 11 of such 
    title.

(c) Discharge

                           (1) In general

        If a borrower who received, on or after January 1, 1986, a loan 
    made, insured, or guaranteed under this part and the student 
    borrower, or the student on whose behalf a parent borrowed, is 
    unable to complete the program in which such student is enrolled due 
    to the closure of the institution or if such student's eligibility 
    to borrow under this part was falsely certified by the eligible 
    institution, or if the institution failed to make a refund of loan 
    proceeds which the institution owed to such student's lender, then 
    the Secretary shall discharge the borrower's liability on the loan 
    (including interest and collection fees) by repaying the amount owed 
    on the loan and shall subsequently pursue any claim available to 
    such borrower against the institution and its affiliates and 
    principals or settle the loan obligation pursuant to the financial 
    responsibility authority under subpart 3 of part G of this 
    subchapter. In the case of a discharge based upon a failure to 
    refund, the amount of the discharge shall not exceed that portion of 
    the loan which should have been refunded. The Secretary shall report 
    to the Committee on Education and the Workforce of the House of 
    Representatives and the Committee on Labor and Human Resources of 
    the Senate annually as to the dollar amount of loan discharges 
    attributable to failures to make refunds.

                           (2) Assignment

        A borrower whose loan has been discharged pursuant to this 
    subsection shall be deemed to have assigned to the United States the 
    right to a loan refund up to the amount discharged against the 
    institution and its affiliates and principals.

              (3) Eligibility for additional assistance

        The period of a student's attendance at an institution at which 
    the student was unable to complete a course of study due to the 
    closing of the institution shall not be considered for purposes of 
    calculating the student's period of eligibility for additional 
    assistance under this subchapter and part C of subchapter I of 
    chapter 34 of title 42.

                          (4) Special rule

        A borrower whose loan has been discharged pursuant to this 
    subsection shall not be precluded from receiving additional grants, 
    loans, or work assistance under this subchapter and part C of 
    subchapter I of chapter 34 of title 42 for which the borrower would 
    be otherwise eligible (but for the default on such discharged loan). 
    The amount discharged under this subsection shall be treated the 
    same as loans under section 1087ee(a)(5) of this title.

                            (5) Reporting

        The Secretary shall report to credit bureaus with respect to 
    loans which have been discharged pursuant to this subsection.

(d) Repayment of loans to parents

    If a student on whose behalf a parent has received a loan described 
in section 1078-2 of this title dies, then the Secretary shall discharge 
the borrower's liability on the loan by repaying the amount owed on the 
loan.

(Pub. L. 89-329, ti