FEDERAL PERKINS LOAN REVOLVING FUND DISTRIBUTION OF ASSETS AND TIMELINES FOR 2018–19
If your school participated in the Federal Perkins Loan Program and continues to service their loans either in house or through a third-party servicer, keep an eye open in December for a notification from ED. The Department will be notifying schools that have cash in their Perkins Fund subject how much to of their federal and institutional shares need to be returned to the Department and how much gets distributed to the institution. The Department will send a notification to institutions that have cash in their Perkins Fund as reported on the most recent FISAP. Institutions should NOT remove and return any funds to the Department or the institution until the institution has been notified to do so.
The Department will also notify institutions of the amount of partial reimbursement for Perkins Loan service cancellations the institution must remove from the Perkins Fund and return to the institution prior to the deadline. Click here to read the entire Electronic Announcement.
ED also released updated Federal Perkins Loan Data Provider Instructions. Schools participating in the Federal Perkins Loan (Perkins Loan) Program are required to report detailed loan information to NSLDS. This manual explains Perkins Loan reporting requirements and the processes used to add or update Perkins Loans on NSLDS, including how to use the Perkins DataPrep software. The updated manual, dated October 2020, replaces the June 2018 version.
Federal Student Aid recently published an electronic announcement informing schools that they really need to try to collect on their delinquent and defaulted Perkins Loans and must maintain good corroborating documentation of their efforts and activities. Although the Perkins Loan Program has ended, institutions are still expected to comply with the program rules outlined in the Higher Education Act. One of those rules requires institutions to maintain documentation of their collection efforts for defaulted loans. According to the EA, schools that don’t maintain acceptable records, may be required to assign the loans to the Department “without recompense”. In the Department’s view, “the fact that a loan has been in default for more than two years suggests a lack of compliance with the collection procedure criteria established by regulation.” Thus, unless an institution can demonstrate with adequate documentation that they have tried to collect on a defaulted loan in accordance with the HEA’s requirements, they will be required to assign those loans to the Department. The Department said they will begin notifying institutions to provide documentation on their collection efforts shortly.
Although institutions can now voluntarily assign Perkins loans, including those loans that have an acceptable collection record or are not in default, at any time, there are specific rules to follow when pursuing collection themselves.
If the institution, or the firm it engages, pursues collection activity for up to 12 months and is not successful in converting the account to regular repayment status, or the borrower does not qualify for deferment, postponement, or cancellation on the loan, the institution shall:
• Litigate in accordance with the procedures in § 674.46;
• Make a second effort to collect the account as follows:
o If the institution first attempted to collect the account using its own personnel, it shall refer the account to a collection firm.
o If the institution first attempted to collect the account by using a collection firm, it shall either attempt to collect the account using institution personnel, or place the account with a different collection firm; or
o Submit the account for assignment to the Secretary in accordance with the procedures set forth in § 674.50.
If an institution is unsuccessful in its efforts to place a loan in repayment after extensive collection efforts, it must continue to service the loan by making yearly attempts to collect from the borrower until the loan is
• recovered through litigation;
• assigned to the Department; or
• written off only if the outstanding principal, accrued interest, collection costs and late charges are within the allowable thresholds as prescribed under § 674.47(h) (loans with a balance of less than $25; or loans with a balance of less than $50 if the borrower has been billed for this balance for at least 2 years).
In an electronic announcement from the U.S. Department of Education’s Office of the Under Secretary, ED announced that they will be reimbursing institutions for the institutional share of Perkins Loan Service Cancellations from the Perkins fund later this year. Before the end of the year ED is expected to send a letter to institutions participating in the Perkins Loan Program information about the specific amounts, what procedures to follow and the applicable deadlines. Institutions should not remove and return any funds to the Department or the institution until the institution has been notified to do so. More information is in this electronic announcement.
At last year’s Federal Student Aid Conference, Department officials announced that institutions were not required to return the federal share of their Perkins Loan Fund because the Department was still exploring ways to reimburse institutions for their Federal Perkins Loan Service Cancellations. In a recent announcement FSA stated that institutions should not remove the institutional share from their Perkins Loan Fund and return it to their institution either.
FSA is instructing institutions to forgo reporting repayment of any federal share or institutional share in its next Fiscal Operations Report and Application to Participate (FISAP) due October 1, 2019. The amounts in both the “Repayment of Fund capital to federal government” in Part III, Section A, Line 28 and “Distribution of excess/liquid fund capital” in Part III, Section A, line 30.2 should be the same amounts as the institution reported on the FISAP submitted by October 1, 2018. Note: Institutions that have already returned the federal share of their Perkins Fund to the Department and removed their institutional share from the Perkins Fund for the 2018–19 Award Year should report these repayments on the FISAP.
The Office of Management and Budget recently released an updated Perkins Loan Assignment Form. Schools that wish to assign Perkins Loans to the Department must begin using the new form by June 30, 2019 unless they complete assignments electronically via the Perkins Loan Assignment System online. The revised form replaces the one that recently expired on December 31, 2018. The new Expiration Date is December 31, 2021 and the form itself has a few other minor changes. According to the electronic announcement from Federal Student Aid, the Date of First Disbursement was moved from the required manifest portion (Section C) of the Institutional Certification page to the historical loan information portion (Section C) of the Borrower and Loan Information page. As a result, some of the data fields on the Borrower and Loan Information page have been shifted and renumbered. The Date of First Disbursement is the new field 20, followed by the Date of Last Disbursement as new field 21, and so on.
This change places the historical loan information together and should help ensure schools and third-party servicers provide all required data on the form.
With the change in field numbers, we also made corresponding updates to the Perkins. The revised form and the instructions have been posted to the Campus-Based Processing Information Page on the IFAP Website.