Assignment of defaulted loans to the United States.
34 C.F.R. § 674.50
in effectEffective: 2024-07-01(a) An institution may submit a defaulted loan note to the Secretary for assignment to the United States if—
(1) The institution has been unable to collect on the loan despite complying with the diligence procedures, including at least a first level collection effort as described in § 674.45(a) and litigation, if required under § 674.46(a), to the extent these actions were required by regulations in effect on the date the loan entered default;
(2) The amount of the borrower's account to be assigned, including outstanding principal, accrued interest, collection costs and late charges is $25.00 or greater; and
(3) The loan has been accelerated.
(b) An institution may submit a defaulted note for assignment only during the submission period established by the Secretary.
(c) The Secretary may require an institution to submit the following documents for any loan it proposes to assign—
(1) An assignment form provided by the Secretary and executed by the institution, which must include a certification by the institution that it has complied with the requirements of this subpart, including at least a first level collection effort as described in § 674.45(a) in attempting collection on the loan.
(2) The original promissory note or a certified copy of the original note.
(3) A copy of the repayment schedule.
(4) A certified copy of any judgment order entered on the loan.
(5) A complete statement of the payment history.
(6) Copies of all approved requests for deferment and cancellation.
(7) A copy of the notice to the borrower of the effective date of acceleration and the total amount due on the loan.
(8) Documentation that the institution has withdrawn the loan from any firm that it employed for address search, billing, collection or litigation services, and has notified that firm to cease collection activity on the loans.
(9) Copies of all pleadings filed or received by the institution on behalf of a borrower who has filed a petition in bankruptcy and whose loan obligation is determined to be nondischargeable.
(10) Documentation that the institution has complied with all of the due diligence requirements described in paragraph (a)(1) of this section if the institution has a cohort default rate that is equal to or greater than 20 percent as of June 30 of the second year preceding the submission period.
(11) A record of disbursements for each loan made to a borrower on an MPN that shows the date and amount of each disbursement.
(12)(i) Upon the Secretary's request with respect to a particular loan or loans assigned to the Secretary and evidenced by an electronically signed promissory note, the institution that created the original electronically signed promissory note must cooperate with the Secretary in all activities necessary to enforce the loan or loans. Such institution must provide—
(A) An affidavit or certification regarding the creation and maintenance of the electronic records of the loan or loans in a form appropriate to ensure admissibility of the loan records in a legal proceeding. This affidavit or certification may be executed in a single record for multiple loans provided that this record is reliably associated with the specific loans to which it pertains; and
(B) Testimony by an authorized official or employee of the institution, if necessary, to ensure admission of the electronic records of the loan or loans in the litigation or legal proceeding to enforce the loan or loans.
(ii) The affidavit or certification in paragraph (c)(12)(i)(A) of this section must include, if requested by the Secretary—
(A) A description of the steps followed by a borrower to execute the promissory note (such as a flowchart);
(B) A copy of each screen as it would have appeared to the borrower of the loan or loans the Secretary is enforcing when the borrower signed the note electronically;
(C) A description of the field edits and other security measures used to ensure integrity of the data submitted to the originator electronically;
(D) A description of how the executed promissory note has been preserved to ensure that it has not been altered after it was executed;
(E) Documentation supporting the institution's authentication and electronic signature process; and
(F) All other documentary and technical evidence requested by the Secretary to support the validity or the authenticity of the electronically signed promissory note.
(iii) The Secretary may request a record, affidavit, certification or evidence under paragraph (a)(6) of this section as needed to resolve any factual dispute involving a loan that has been assigned to the Secretary including, but not limited to, a factual dispute raised in connection with litigation or any other legal proceeding, or as needed in connection with loans assigned to the Secretary that are included in a Title IV program audit sample, or for other similar purposes. The institution must respond to any request from the Secretary within 10 business days.
(iv) As long as any loan made to a borrower under a MPN created by an institution is not satisfied, the institution is responsible for ensuring that all parties entitled to access to the electronic loan record, including the Secretary, have full and complete access to the electronic loan record.
(d) Except as provided in paragraph (e) of this section, and subject to paragraph (g) of this section, the Secretary accepts an assignment of a note described in paragraph (a) of this section and submitted in accordance with paragraph (c) of this section.
(e) The Secretary does not accept assignment of a loan if—
(1) The institution has not provided the Social Security number of the borrower, unless the loan was made before September 13, 1982;
(2) The borrower has received a discharge in bankruptcy, unless—
(i) The bankruptcy court has determined that the loan obligation is nondischargeable and has entered judgment against the borrower; or
(ii) A court of competent jurisdiction has entered judgment against the borrower on the loan after the entry of the discharge order; or
(3) The institution has initiated litigation against the borrower, unless the judgment has been entered against the borrower and assigned to the United States.
(f)(1) The Secretary provides an institution written notice of the acceptance of the assignment of the note. By accepting assignment, the Secretary acquires all rights, title, and interest of the institution in that loan.
(2) The institution shall endorse and forward to the Secretary any payment received from the borrower after the date on which the Secretary accepted the assignment, as noted in the written notice of acceptance.
(g)(1) The Secretary may determine that a loan assigned to the United States is unenforceable in whole or in part because of the acts or omissions of the institution or its agent. The Secretary may make this determination with or without a judicial determination regarding the enforceability of the loan.
(2) The Secretary may require the institution to reimburse the Fund for that portion of the outstanding balance on a loan assigned to the United States which the Secretary determines to be unenforceable because of an act or omission of that institution or its agent.
(3) Upon reimbursement to the Fund by the institution, the Secretary shall transfer all rights, title and interest of the United States in the loan to the institution for its own account.
(h) An institution shall consider a borrower whose loan has been assigned to the United States for collection to be in default on that loan for the purpose of eligibility for title IV financial assistance, until the borrower provides the institution confirmation from the Secretary that he or she has made satisfactory arrangements to repay the loan.
Source: eCFRURL: https://www.ecfr.gov/api/versioner/v1/full/2024-07-01/title-34.xmlFetched: 7/26/2026