CFR

682.408—Loan disbursement through an escrow agent.

(a) General. (1) A guaranty agency or an eligible lender may act as an escrow agent for the purpose of receiving Stafford and PLUS loan proceeds disbursed by an eligible lender other than a school, State lender, or a State agency or instrumentality, and transmitting those proceeds to the borrower's school if the lender and the escrow agent have entered into a written agreement for this purpose.

(2) The agreement must provide that—

(i) The lender may make payments into an escrow account that is administered by the escrow agent in accordance with the requirements of paragraph (c) of this section and § 682.207(b)(1)(iv) ;

(ii) The lender shall promptly notify the borrower's school when funds are escrowed for the borrower; and

(iii) The escrow agent is authorized to—

(A) Transmit the proceeds according to the note evidencing the loan;

(B) Commingle the proceeds of the loans paid to it pursuant to an escrow agreement;

(C) Invest the loan proceeds only in obligations of the Federal Government or obligations that are insured or guaranteed by the Federal Government; and

(D) Retain for its own use interest or other earnings on those investments.

(b) Disbursement by the lender. Subject to § 682.207(b)(1)(iii), the lender may disburse the loan proceeds to the escrow agent using any method agreed to by the escrow agent and the lender.

(c) Transmittal of FFEL loan proceeds by an escrow agent. The escrow agent shall transmit Stafford and PLUS loan proceeds received from a lender under this section to a school in accordance with the requirements of § 682.207(b)(1)(ii) and (iv), or Stafford Loan proceeds to a borrower in accordance with the requirements of § 682.207(b)(1)(i) and (ii), not later than 10 days after the agent receives the funds from the lender.

(d) Return of untransmitted proceeds. The escrow agent shall return any untransmitted proceeds of a loan to the lender within 15 working days after receiving information indicating that the student has not enrolled, or has ceased to be enrolled on at least a half-time basis, for the period of enrollment for which the loan was intended.

Code of Federal Regulations

(Authority: 20 U.S.C. 1078, 1082 )

Code of Federal Regulations

[57 FR 60323, Dec. 18, 1992, as amended at 64 FR 18980, Apr. 16, 1999; 71 FR 45708, Aug. 9, 2006; 71 FR 64399, Nov. 1, 2006]

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