1. (1) A default fee associated with a program loan shall be assessed to each college on loans made to or on behalf of students attending such college during an academic year in an amount equal to one percent of the original principal amount of the program loans originated on behalf of students. The corporation and the agency shall determine the mechanism for collecting the assessed fee no less frequently than annually, as prescribed in section 692 of the Education Law.
2. (2) An entity other than a student or borrower may be permitted to pay the college default fee on behalf of a college consistent with applicable laws. The corporation shall determine how such funds will be transferred, subject to the approval of the agency, or other public benefit corporation authorized to issue bonds under the Public Authorities Law for purpose of this program, with respect to loans that are expected to be financed by such entity.

3. (3) If the college pays the default fee, the corporation’s electronic funds transfer (EFT) process will proportionately reduce the amount of the borrower’s disbursement(s) to reflect payment of the college’s default fees. Colleges shall, if applicable, credit the student’s account to reflect reimbursement of the college default fee. The corporation’s EFT process will reflect the amount of the borrowers’ disbursements including the college’s default fees. The college’s default fees will be deducted from the amount deposited in the college’s bank account.

   (b) Borrower default fees.

4. (1) A borrower fee may be included in the calculation of the student's cost of attendance. This fee shall be deducted proportionately from each disbursement made on a program loan through the corporation’s electronic funds transfer process to be deposited into the appropriate default reserve fund. Any entity may pay or subsidize all or a portion of the borrower’s default fee on behalf of the borrower as approved by the corporation consistent with applicable laws.
5. (2) The corporation shall determine the amount of the fee to be deducted, subject to approval by the agency, as prescribed in section 692 of the Education Law.
6. (3) Fees shall be deposited into a separate account, held solely for the purposes of this program, for timely deposit into the applicable default reserve fund.

(a) College default fees.