106 STAT. 2002 PUBLIC LAW 102-408—OCT. 13, 1992 full information to the borrower concerning the advantages and disadvantages of loan consolidation. Nothing in this section shall be construed to preclude the consolidation of the borrower's loans insured under this subpart under section 428C of the Higher Education Act of 1965. Any loans insured pursuant to this subpart that are consolidated under section 4280 of such Act shall not be eligible for special allowance payments under section 438 of such Act. 42 USC 292f. " SEC. 707. DEFAULT OF BORROWER. " (a) CoNDinoNS FOR PAYMENT TO BENEFICIARY. —Upon default by the borrower on any loan covered by Federal loan insurance pursuant to this subpart, and after a substantial collection effort (including, subject to subsection (h), commencement and prosecution of an action) as determined under regulations of the Secretary, the insurance beneficiary shall promptly notify the Secretary and the Secretary shall, if requested (at that time or after further collection efforts) by the beneficiary, or may on his own motion, if the insurance is still in effect, pay to the beneficiary the amount of the loss sustained by the insured upon that loan as soon as that amount has been determined. Not later than one year after the date of the enactment of the Health Professions Education Extension Amendments of 1992, the Secretary shall establish performance standards for lenders and holders of loans under this subpart, including fees to be imposed for failing to meet such standards. "(b) SUBROGATION.— Upon payment by the Secretary of the amount of the loss pursuant to subsection (a), the United States shall be subrogated for all of the rights of the holder of the obligation upon the insured loan and shall be entitled to an assignment of the note or other evidence of the insured loan by the insurance beneficiary. If the net recovery made by the Secretary on a loan after deduction of the cost of that recovery (including reasonable administrative costs) exceeds the amount of the loss, the excess shall be paid over to the insured. The Secretary may sell without recourse to eligible lenders (or other entities that the Secretary determines are capable of dealing in such loans) notes or other evidence of loans received through assignment under the first sentence. "(c) FORBEARANCE. —Nothing in this section or in this subpart shall be construed to preclude any forbearance for the benefit of the borrower which may be agreed upon by the parties to the insured loan and approved by the Secretary or to preclude forbearance by the Secretary in the enforcement of the insured obligation after payment on that insurance. "(d) REASONABLE CARE AND DILIGENCE REGARDING LOANS. — Nothing in this section or in this subpart shall be construed to excuse the eligible lender or holder of a federally insured loan from exercising reasonable care and diligence in the making of loans under the provisions of this subpart and from exercising a substantial effort in the collection of loans under the provisions of this subpart. If the Secretary, after reasonable notice and opportunity for nearing to an eligible lender, finds that the lender nas failed to exercise such care and diligence, to exercise such substantial efforts, to make the reports and statements required under section 706(a)(3), or to pay the required Federal loan insurance premiimis, he shall disqualify that lender from obtaining further
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