Although the Federal Perkins Loan Program ended a year ago, schools who haven’t exited the program and liquidated their Perkins Loan portfolio are still permitted to service them and must do so according to the instructions provided in an October 6, 2017, Dear Colleague Letter. As part of those instructions, schools still must meet several obligations under the Perkins Loan Program to ensure that certain administrative responsibilities and reporting requirements are met.
According to a recent reminder from Federal Student Aid (FSA), there are several important requirements schools must follow to ensure they are accurately reporting loans in the National Student Loan Data System and managing their Perkins Loan portfolio properly.
• Keep borrowers informed, of any and all changes that affect the borrowers’ rights or responsibilities;
• Respond to any and all inquiries from borrowers;
• Ensure that information available is provided to those offices (admissions, business, alumni, placement, financial aid, and registrar’s offices) responsible for billing and collecting loans (including third-party servicers), as needed to determine the—
• Enrollment status of borrower;
• Expected graduation or termination date of borrower;
• Date the borrower withdraws, is expelled, or ceases enrollment on at least a half-time basis; and
• Borrower’s current name, address, telephone number, and social security number.
Use of Contractors for Billing and Collection
Schools must ensure servicers and collection firms comply with the program rules in performing its duties as outlined by any contractual agreement with the school. Schools that contract with third-party servicers to perform billing, collection, or other program activities remain responsible for compliance with program requirements in performing these duties. This includes decisions regarding cancellation, postponement, or deferment of repayment, extension of the repayment period, other billing and collection matters, as well as the safeguarding of all funds collected by its employees and contractors.
Servicers should provide:
• Statements to the school detailing activity associated with each borrower account in the portfolio;
• Changes in the borrower’s name, address, telephone number, or the borrower’s Social Security number; and
• Amounts collected from the borrower
When borrowers do not respond to routine billing methods, more intensive collection procedures are required, potentially including litigation with the borrower.
If the school, or the firm it engages, pursues collection activity for up to 12 months and does not succeed in converting the account to regular repayment status, or the borrower does not qualify for deferment, postponement, or cancellation on the loan, the school shall –
• Litigate in accordance with the procedures in § 674.46;
• Make a second effort to collect the account as follows:
• If the school first attempted to collect the account using its own personnel, it shall refer the account to a collection firm.
•If the school first attempted to collect the account by using a collection firm, it shall either attempt to collect the account using school personnel, or place the account with a different collection firm; or
• Submit the account for assignment to the Secretary in accordance with the procedures set forth in § 674.50.
After twelve months of collection efforts, if the collection firm retained by the school is unsuccessful in placing an account into a successful repayment status, the school must require the collection firm to return the account to the institution for one of the actions described above.
If a school 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 principle, 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).
The Department recognizes that a school may have exhausted all of its collection options on some of its defaulted Perkins Loans and strongly encourages schools to assign these loans to the Department so additional steps can be taken to recover the loan funds. The Department has collection tools that are not available to schools, such as administrative wage garnishment, Treasury offset, and litigation by the Department of Justice.
Schools should also evaluate their portfolio, assess in particular the older defaulted loans, and ensure that collection procedures under 34 CFR 674.45 (including the assignment of defaulted loans) are being followed.
A school may cease collection activity on defaulted accounts with balances of less than $200 (including outstanding principal, accrued interest, collection costs, and late charges) if the school performed the required due diligence and the account has had no activity for four years. Although interest will continue to accrue and may put the account over $200, the school will not have to resume collection activity if it documents that it ceased collection activity when the account was under $200. The borrower is responsible for repaying the account, including any accrued interest. The account will be included in the school’s cohort default rate, if applicable, and the borrower will still be in default and ineligible for federal student aid funds. Schools are encouraged to assign these loans to the Department.
Schools, themselves or through their third-party servicers, are required to report enrollment and loan status information on all Perkins loans to NSLDS. Please be reminded of the following:
It is the school’s responsibility to ensure that the required reporting to NSLDS, including Perkins Loan account detail, is completed timely and accurately. Schools that use a third-party servicer must communicate the reporting requirements to their third-party servicer and ensure that the servicer complies with timely and accurate reporting. It is important for schools to understand that they are responsible for any non-compliance by the servicer.
Perkins Loan reporting includes enrollment data for each loan. It is important to report the actual location where the student is attending classes in the Code for Current School (NSLDS Perkins Data Provide Instructions (DPI), Field Code #286) for each loan record in the data extract file submitted to NSLDS. This ensures that the student is placed on the correct enrollment reporting roster and eliminates misreporting when the student is not attending classes at the main location.
For purposes of Perkins Loan assignment, it is very important that borrower loan information is accurate and kept current through the assignment process and until the loan has been officially accepted for assignment to the Department and the school is notified of the acceptance.
Schools should request a reconciliation report from NSLDS to ensure the school’s records are consistent with NSLDS, reconcile any discrepancies, and update NSLDS accordingly. ED strongly encourages schools to complete this reconciliation with NSLDS at least quarterly.
Schools can order a reconciliation report from the NSLDS Professional Access website. Once logged into the NSLDS Professional Access website, select “REC005 Perkins Extract by Parameters” under the Report tab. Be sure to order two separate report requests: one report should have the desired loan status of “Open” selected and the second report should have the desired loan status of “Open-Pending Transfers Only” selected. Note: Ordering only the “Open” status loans report will not necessarily return a report with the school’s complete open loan portfolio.
Until the Department accepts a loan for assignment and is able to successfully report on the loan in NSLDS, the loan is still the responsibility of the school. The school will receive an acceptance letter when the loan is accepted for assignment by the Department. At that time, the school must report the loan to NSLDS as transferred for assignment using the “AE” Code for Loan Status (NSLDS Perkins DPI, Field Code #263) and the assignment form’s “certification date” as the Date of Loan Status (NSLDS Perkins DPI, Field Code #262).