NEW FEDERAL PERKINS LOAN GUIDANCE

The Federal Perkins Loan program was under a two-year extension authorized by the Perkins Loan Extension Act of 2015. Last month the program quietly ended. Now that the program has ended, there are three important considerations for schools.

Schools may no longer make new Perkins Loans to students after September 30, 2017. However, if an eligible undergraduate student receives a disbursement of a Perkins Loan before October 1, 2017, for the 2017-2018 award year, the student may receive any subsequent disbursements of that Perkins Loan through June 30, 2018. No Perkins Loan disbursements are permitted after June 30, 2018, under any circumstances.

Schools are required to return the federal share of their Federal Perkins Loan Revolving Fund to the Department. Since institutions are permitted to make subsequent disbursements to eligible borrowers through June 30, 2018, the Department will begin collecting the Federal share of institutions’ Perkins Loan Revolving Funds following the submission of the 2019-2020 Fiscal Operations and Application to Participate (FISAP), which is due October 1, 2018. Institutions may choose to continue servicing their Perkins Loans, the process of requiring the distribution of assets from the Perkins Loan Revolving Fund will continue on a regular basis, until such time as all of the institution’s outstanding Perkins Loans held by the institution have been paid in full or otherwise fully retired, or assigned to the Department.

Institutions are not required to assign Perkins Loans to the Department or liquidate their Perkins Loan Revolving Funds due to the wind-down of the Perkins Loan Program, however, institutions may choose to liquidate at any time in the future.  Institutions may continue to service their Perkins Loans (or contract with a third-party servicer for such servicing), and may assign both nondefaulted and defaulted Perkins Loans, or either, to the Department at any time. However, when an institution assigns a loan to the Department, the institution loses all rights and title to the loan without recompense. This means that the institution will not receive any share of the loan, including any amounts collected on the loan by the Department.