34 C.F.R. § 674.46

Litigation procedures

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(a)(1) If the collection efforts described in § 674.45 do not result in the repayment of a loan, the institution shall determine at least once every two years whether—

(i) The total amount owing on the borrower's account, including outstanding principal, accrued interest, collection costs and late charges on all of the borrower's Federal Perkins, NDSL and National Defense Student Loans held by that institution, is more than $500;

(ii) The borrower can be located and served with process;

(iii)(A) The borrower has sufficient assets attachable under State law to satisfy a major portion of the oustanding debt; or

(B) The borrower has income from wages or salary which may be garnished under applicable State law sufficient to satisfy a major portion of the debt over a reasonable period of time;

(iv) The borrower does not have a defense that will bar judgment for the institution; and

(v) The expected cost of litigation, including attorney's fees, does not exceed the amount which can be recovered from the borrower.

(2) The institution shall sue the borrower if it determines that the conditions in paragraph (a)(1) of this section are met.

(3) The institution may sue a borrower in default, even if the conditions in paragraph (a)(1) of this section are not met.

(b) The institution shall assess against and attempt to recover from the borrower—

(1) All litigation costs, including attorney's fees, court costs and other related costs, to the extent permitted under applicable law; and

(2) All prior collection costs incurred and not yet paid by the borrower.

(c)(1) An institution shall ensure that any funds collected as a result of litigation procedures are—

(i) Deposited in interest-bearing bank accounts that are—

(A) Insured by an agency of the Federal Government; or

(B) Secured by collateral of reasonably equivalent value; or

(ii) Invested in low-risk income-producing securities, such as obligations issued or guaranteed by the United States.

(2) An institution shall exercise the level of care required of a fiduciary with regard to these deposits and investments.

(d) If the institution is unable to collect the full amount owing on the loan after following the procedures set forth in §§ 674.41 through 674.46, the institution may—

(1) Submit the account to the Secretary for assignment in accordance with the procedures in § 674.50; or

(2) With the Secretary's approval, refer the account to the Department for collection.

(Authority: 20 U.S.C. 424, 1087cc) [52 FR 45555, Nov. 30, 1987, as amended at 59 FR 61412, 61415, Nov. 30, 1994; 67 FR 67077, Nov. 1, 2002]

Notes of Decisions

Cited in 7 cases, 1983–2006 · leading case: Franklin Coll. v. Turner, 844 N.E.2d 99 (Ind. Ct. App. 2006).

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Franklin Coll. v. Turner, 844 N.E.2d 99 (Ind. Ct. App. 2006). · cites it 4× “" When a postsecondary school institutes an action to collect on a delinquent Perkins loan, 34 C.F.R. § 674.46 (b) provides that the institution "shall assess against and attempt to recover from the borrower (1)[alll litigation costs, including attorney's fees, court costs and…”

Trs. of Tufts Coll. v. Ramsdell, 554 N.E.2d 34 (Mass. App. Ct. 1990). · cites it 2× “45 (1989) is entitled “Collection procedures,” and 34 C.F.R, § 674.46 (1989) is entitled “Litigation procedures.”

La. Bus. Coll. v. Crump, 474 So. 2d 1366 (La. Ct. App. 1985). “See 34 C.F.R. § 674.46 (1982). Although the note is made payable to the business college, it is subject to federal regulation and the lending institution is severely restricted in its use of these *1370 funds.”

Whitehead v. Ohio, Univ. of Cincinnati (In Re Whitehead), 31 B.R. 381 (Bankr. S.D. Ohio 1983). “34 C.F.R. § 674.46 (1981); 45 C.F.R. 177.”

Snyder v. Nebraska (In Re Snyder), 228 B.R. 712 (Bankr. D. Neb. 1998). “1087cc(a), 34 CFR 674.46. Based upon its representation that the other defendants were fully empowered to represent the interest of the United States by virtue of specific statutes and regulations, the request for dismissal was granted.”

Vanderbilt Univ. v. Pamela Henderson (Tenn. Ct. App. 1999). · cites it 2× “5 34 C.F.R. § 674.46 (a)(2), (3) (2000). -6- other related costs, to the extent permitted under applicable law .”

Tufts Univ. v. Ramsdell, 1989 Mass. App. Div. 143 (Mass. Dist. Ct., App. Div. 1989). “A, § 1091 a and 34 C.F.R., § 674.46 . The court, finding the requested fee of one-third of the recovery to be unreasonable and confiscatory under the circumstances of this case, assessed attorney’s fees in the amount of 16% of the bálance claimed.”

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