OFFICES


OIG: Office of Inspector General
   Current Section

Reauthorization of the Higher Education Act Section 417(b)7(B)

The Reauthorization of the Higher Education Act (Oct 98) at Section 417(b)7(B) no longer requires Lenders with portfolios < $5million to have the audit as set forth below:

(7) LIMITATION, SUSPENSION, AND TERMINATION- Section 428(b)(1)(U) is amended--

(U) provides (i) for the eligibility of all lenders de-scribed in section 435(d)(1) under reasonable criteria, un-less (I) that lender is eliminated as a lender under regulations for the emergency action, limitation, suspension, or termination of a lender under the Federal student loan insurance program or is eliminated as a lender pursuant to criteria issued under the student loan insurance program which are substantially the same as regulations with respect to such eligibility as a lender issued under the Federal student loan insurance program, or (II) there is a State constitutional prohibition affecting the eligibility of a lender, (ii) assurances that the guaranty agency will report to the Secretary concerning changes in such criteria, including any procedures in effect under such program to take emergency action, limit, suspend, or terminate lenders, and (iii) for (I) a compliance audit of each lender that originates or holds more than $5,000,000 in loans made under this title for any lender fiscal year (except that each lender described in section 435(d)(1)(A)(ii)(III) shall annually submit the results of an audit required by this clause), at least once a year and covering the period since the most recent audit, conducted by a qualified, independent organization or person in accordance with standards established by the Comptroller General for the audit of governmental organizations, programs, and functions, and as prescribed in regulations of the Secretary, the results of which shall be submitted to the Secretary, or (II) with regard to a lender that is audited under chapter 75 of title 31, United States Code, such audit shall be deemed to satisfy the requirements of subclause (I) for the period covered by such audit, except that the Secretary may waive the requirements of this clause (iii) if the lender submits to the Secretary the results of an audit conducted for other purposes that the Secretary determines provides the same information as the audits required by this clause;

435 (d) ELIGIBLE LENDER.—

(1) IN GENERAL.—Except as provided in paragraphs (2) through (6), the term ‘‘eligible lender’’ means—

(A) a National or State chartered bank, a mutual savings bank, a savings and loan association, a stock savings bank, or a credit union which— (i) is subject to examination and supervision by an agency of the United States or of the State in which its principal place of operation is established, and (ii) does not have as its primary consumer credit function the making or holding of loans made to students under this part unless (I) it is a bank which is wholly owned by a State, or a bank which is subject to examination and supervision by an agency of the

United States, makes student loans as a trustee pursuant to an express trust, operated as a lender under this part prior to January 1, 1975, and which meets

the requirements of this provision prior to the enactment of the Higher Education Amendments of 1992, (II) it is a single wholly owned subsidiary of a bank

holding company which does not have as its primary consumer credit function the making or holding of loans made to students under this part, or (III) it is

a bank (as defined in section 3(a)(1) of the Federal De-posit Insurance Act (12 U.S.C. 1813(a)(1)) that is a wholly owned subsidiary of a nonprofit foundation, the foundation is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(1) of such Code, and the bank

makes loans under this part only to undergraduate students who are age 22 or younger and has a port-folio of such loans that is not more than $5,000,000;


 
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Last Modified: 02/23/2005