N.Y. Education Law § 692: Education loans; special requirements

§ 692. Education loans; special requirements. In any year in which

fixed rate education loans are to be acquired using the proceeds of

bonds issued by the state of New York mortgage agency or other public

benefit corporation authorized to issue bonds for the purposes of this

program, preference shall be given to education loans made to eligible

borrowers for the benefit of students who demonstrate financial need

based on such student's family gross income, pursuant to rules and

regulations promulgated by the corporation after consultation with the

state of New York mortgage agency or other public benefit corporation

authorized to issue bonds for the purposes of this program. 1. Terms and

conditions. (a) eligible borrowers shall apply for education loans under

this program on forms prescribed by the corporation;

(b) except as may be provided by regulation, a student for whom an

education loan is made shall be required to first apply for and exhaust:

(i) their maximum eligibility of loans under the Federal Family

Education Loan Program (FFELP) and the Federal Direct Student Loan

Program (FDSLP), excluding PLUS loans; (ii) any other federal student

aid, other than HEAL loans and other aid permitted by the corporation to

be excluded; (iii) any state student aid; and (iv) any other student aid

as prescribed by the corporation before being eligible for any education

loan under this program;

(c) borrowers shall successfully complete a financial literacy course

as prescribed by the corporation;

(d) student borrowers must apply for education loans under this

program with an eligible co-signer;

(e) a borrower, or co-signer, who is in default on an education loan

made under this program, the Federal Family Education Loan Program, the

Williams D. Ford Program, or has failed to comply with the terms and

conditions of any award under this article and has failed to

satisfactorily cure such default or non-compliance as prescribed by

applicable law or regulation shall be ineligible to receive a loan under

this program, and shall further be ineligible for any other state

student aid while in default on an education loan made under this

program; and

(f) participating eligible colleges, lending institutions, and other

participants in this program shall be required to enter into a

participation agreement with the corporation and comply with all

reporting and processing requirements and procedures as established by

the corporation. These participation agreements shall contain such other

specific terms and conditions of the program as shall be determined by

the corporation.

2. Citizenship. A borrower must be (a) a citizen of the United States,

or

(b) a noncitizen lawfully admitted for permanent residence in the

United States, or

(c) an individual of a class of refugees paroled by the attorney

general of the United States under his or her parole authority

pertaining to the admission of noncitizens to the United States.

3. Loan limits. Education loans made under this program shall have

annual and cumulative loan limits as approved from time to time by the

corporation, subject to the approval of the state of New York mortgage

agency, or other public benefit corporation authorized to issue bonds

under the public authorities law for purposes of this program, with

respect to loans that are expected to be financed by such entity.

4. Interest rates. The interest rate of loans made under this program

shall be established in a manner that shall be approved at least

annually by the corporation, subject to the approval of the state of New

York mortgage agency, or other subject to public benefit corporation

authorized to issue bonds under the public authorities law for purposes

of this program, with respect to loans that are expected to be financed

by such entity.

5. Default fee. A percentage of the education loan shall be paid as a

default fee, by or on behalf of the borrower or the lender, in an amount

to be established at least annually by the corporation subject to the

approval of the state of New York mortgage agency, or other public

benefit corporation authorized to issue bonds under the public

authorities law for purposes of this program, with respect to loans that

are expected to be financed by such entity. The default fee established

by the corporation, subject to the approval of the state of New York

mortgage agency, or other public benefit corporation authorized to issue

bonds under the public authorities law for purposes of this program,

with respect to education loans that are expected to be financed by such

entity, shall be a percentage of the principal amount of such loans, as

determined by the corporation, that, together with other amounts on

deposit in the applicable default reserve fund, shall not exceed an

amount sufficient to ensure that the balance of such funds satisfies the

obligations of such default reserve fund and permits such loans to be

financed. This fee may be considered part of the cost of attendance for

the purposes of calculating the loan amount for this program and shall

be transmitted to the corporation in accordance with rules or

regulations promulgated by the corporation. The corporation shall

deposit these funds into a designated account within the New York higher

education loan program variable rate default reserve fund, the New York

higher education loan program fixed rate default reserve fund, or the

state of New York mortgage agency New York higher education loan program

default reserve fund, as applicable.

6. Consolidation. Education loans made pursuant to this program may be

eligible for consolidation upon the terms and conditions established by

the corporation. Any person consolidating education loans under this

program shall be considered a borrower for purposes of this part.

7. Default reserve funds. (a) General provisions. One or more default

reserve funds shall be established in the custody of the comptroller

pursuant to sections seventy-eight-a and seventy-eight-b of the state

finance law. One or more default reserve funds shall be established in

the custody of the state of New York mortgage agency pursuant to

subdivision six of section two thousand four hundred five-a of the

public authorities law. These funds shall be used by the corporation to

pay default claims to participating lenders and holders of education

loans made pursuant to this program.

(b) Deposits. The corporation shall promptly deposit or transfer into

the New York higher education loan program variable rate default reserve

fund created by section seventy-eight-a of the state finance law, the

New York higher education loan program fixed rate default reserve fund

created by section seventy-eight-b of the state finance law or the state

of New York mortgage agency New York higher education loan program

default reserve fund created by subdivision six of section two thousand

four hundred five-a of the public authorities law, with respect to

education loans, described in such provisions, any moneys received in

connection with this program other than payments of principal and

interest of education loans that are not in default status, including,

but not limited to: (i) default fees; (ii) fees received from eligible

colleges; (iii) funds received for the repayment of defaulted education

loans, the unpaid principal, capitalized and unpaid accrued interest of

which have been paid from the funds, including without limitation all

such amounts received through the operation of voluntary collection

activities, administrative wage garnishment or credit of tax

overpayments less any amounts received for collection fees assessed by

the corporation; (iv) contractual penalties and subsidy fees; (v) any

amount that may be appropriated to the corporation; (vi) any amount

received by the corporation or any agent from any other source for

deposit therein; and (vii) interest and investment income earned by the

funds.

8. Lender due diligence. Participating lenders shall be required to

perform all due diligence requirements as prescribed by the corporation

and incorporated into the participation agreement and into regulations

promulgated by the corporation.

9. Eligible college requirements. (a) Participating eligible colleges

shall be required to certify loan eligibility upon forms prescribed by

the corporation and incorporated into the participation agreement and

pursuant to regulations promulgated by the corporation.

(b) Participating eligible colleges shall be required to contribute a

one percent fee prescribed by the corporation, subject to the approval

of the state of New York mortgage agency, or other public benefit

corporation authorized to issue bonds under the public authorities law

for purposes of this program, with respect to loans that are expected to

be financed by such entity, based upon the loan dollar volume or have

the contribution made on its behalf, pursuant to the terms of the

participation agreement. This fee shall be deposited into a designated

account within the New York higher education loan program variable rate

default reserve fund the New York higher education loan program fixed

rate default reserve fund, or the state of New York mortgage agency New

York higher education loan program default reserve fund, as described in

subdivision seven of this section as applicable. This fee, or any other

college fee, shall not be assessed to the student or eligible borrower

in connection with this program.