RECOVERY OF EXCESS CASH RESERVES ACCUMULATED UNDER THE GUARANTEED STUDENT LOAN PROGRAM.

SEC. 3001. RECOVERY OF EXCESS CASH RESERVES ACCUMULATED UNDER THE GUARANTEED STUDENT LOAN PROGRAM. (a) In General.— Section 422 of the Higher Education Act of 1965 (2() U.S.C. 1072) is amended by adding at the end thereof the following new subsection: “(e) Reduction of Excess Cash Reserves.— “(1) Limitation on maximum cash reserves.— A guaranty agency shall not accumulate cash reserves in excess of the greater of— “(A) 40 percent of the total amount paid by that agency on insurance claims during the preceding fiscal year; 101 STAT. 1330–37 “(B) 0.3 percent of original principal amount of loans that are insured by that agency and that are outstanding at the end of such preceding fiscal year; “(C) an amount which, when combined with all other parts of total agency reserves, equals 0.4 percent of such original principal amount; “(D) $500,000; or “(E) the amount required to comply with the reserve requirements of a State law as in effect on October 17, 1986. “(2) Recovery of excess cash reserves.— The Secretary shall, not later than March 31, 1988, determine for each guaranty agency the maximum cash reserve permitted under paragraph (1) for fiscal year 1986. Subject to paragraphs (3) and (4), if the Secretary determines that any guaranty agency had, at the end of fiscal year 1986, a cash reserve that exceeded such maximum, the Secretary shall direct the agency to eliminate such excess by any one or more of the following methods, as selected by the guaranty agency: “(A) by repaying any advances to such agency made by the Secretary under this section that are not required to be repaid under subsection (d); “(B) by withholding and canceling claims for reimbursement otherwise payable under section 428(c)(1); “(C) by reducing the amount of payments for which application will be made by such agency under section 428(f); or “(D) by any other method of reducing payments from or increasing payments to the Federal Government, including payment of additional reinsurance fees in addition to the fees required by section 428(c)(9), as proposed by the agency and agreed to by the Secretary. “(3) Appeals based on special circumstances.— (A) If the Secretary determines, on the basis of an application from a guaranty agency, that— “(i) the agency’s financial position has deteriorated significantly since the end of the preceding fiscal year; “(ii) significant changes in the economic circumstances (such as a change in agency current cash reserves) or the loan insurance program render the limitations of paragraph (1) inadequate for the continued functioning of the agency; or “(iii) in recovering funds as required by this subsection, a guaranty agency would be compelled to violate contractual obligations existing on the date of enactment of this subsection that require a specified level of reserve funds to be maintained by such agency; the Secretary may waive, in whole or in part, the imposition of the remedies required by paragraph (2) for such agency. “(B) The Secretary shall respond to request for waivers from guaranty agencies in an expedited manner and, except for unusual circumstances or with the consent of the guaranty agency, shall resolve such request within 6 weeks of submission. “(4) Recovery limits.— The Secretary shall not require a total reduction of cash reserves for all guaranty agencies in excess of $250,000,000 during fiscal year 1988. If the total of cash reserves of all guaranty agencies exceeds the maximum amounts permitted under paragraph (1) by more than $250,000,000, the101 STAT. 1330–38 Secretary shall ratably reduce the amounts that guaranty agencies are directed to eliminate under paragraph (2), so that the total excess cash reserves to be eliminated equals $250,000,000. “(5) Definitions.— As used in this subsection— “(A) the ‘cash reserves’ for any guaranty agency for any fiscal year are equal to the agency’s cumulative cash receipts less the agency’s cumulative cash disbursements at the end of such fiscal year; “(B) the ‘total reserves’ for any guaranty agency for any fiscal year are equal to the agency’s cash reserves plus the agency’s cumulative accounts receivable less the agency’s accounts payable, as of the end of such fiscal year; “(C) the term ‘cumulative cash receipts’ includes such receipts as insurance premiums. Federal reinsurance payments, and collections on defaulted loans; “(D) the term ‘cumulative cash disbursements’ includes such disbursements as payments for default claims, repayment of Federal advances, transfers to other State activities, and payment of collection costs and other operating costs; “(E) the term ‘accounts receivable’ includes Federal reinsurance payments and administrative cost allowances owed but not yet paid to the guaranty agency, as of the end of a fiscal year; and “(F) the term ‘accounts payable’ includes collections and reinsurance fees due (but not paid) to the Department of Education, as of the end of a fiscal year.”. (b) Conforming Amendments.— (1) The second sentence of section 428(c)(1)(A) of such Act (20 U.S.C. 1078(c)(1)(A)) is amended by striking out “shall be deemed” and inserting “shall, subject to section 422(e), be deemed”. (2) Section 428(c)(9)(A) of such Act is amended by striking out “an amount equal to” and inserting “an amount, subject to section 422(e), equal to”. (3) The second sentence of section 428(f)(l)(B) of such Act is amended by striking out “shall be deemed” and inserting “shall, subject to section 422(e), be deemed”.