Electronic announcements May 3, 2019 and May 24, 2019
Colleges and universities who participate in the Federal Perkins Program are no longer able to award or disburse new Perkins Loans. The Department of Education (“Department”) continues to release new announcements and thus, changes and updates to the program that participating colleges and universities should consider related to collections, reporting, and distribution of assets to the Department as they relate to Perkins Loans.
In May 2019, there were two Electronic Announcements issued by Federal Student Aid (an office of the Department of Education) discussing changes to the Perkins program.
May 3, 2019 Announcement
On May 3, 2019, the Department issued an updated Assignment and Liquidation Guide on the IFAP website. This new guide provides clearer details on the various steps in the assignment of loans and for the liquidation process of a school’s loan portfolio. According to the electronic announcement, the guide is now divided into two parts and has three appendices:
- Part I: The Assignment Process provides schools that are not liquidating with the procedures for assigning loans to the Department for any reason.
- Part II: The Liquidation Process provides schools that may have questions about liquidation or schools that wish to begin liquidation with complete information and procedures about the process.
- Appendix A provides contact information
- Appendix B is a quick reference guide for the liquidation process and data entry details for Common Origination and Disbursement (COD)
- Appendix C provides an “Assignments at a Glance” table showing documentation required when submitting loans for assignment to the Department.
As discussed in the announcement, a school can assign Perkins Loans to the Department at any time. Assigning loans to the Department means that the school is transferring all rights and responsibilities for servicing and collecting on the loans to the Department and the school loses its right to any share of the amount collected by the Department after the loan is assigned to, and accepted. The majority of loans that are assigned to the Department tend to be loans that are in default, meaning these loans are in such a status where the school has exhausted all of its available options to collect on the loans. The Department has additional steps, not available to the school, which can be taken to recover the loan funds.
A school may choose to liquidate the loan portfolio if the school wants to end participation in the Federal Perkins program, is unable to properly service its loan portfolio, had its eligibility to participate in Title IV programs terminated by the Department, or is closing. The school will be required to assign all outstanding Federal Perkins Loans in the school’s portfolio to the Department and the school will lose its rights to any share of the amount collected on future payments on the loans. The process of liquidating the school portfolio varies based on the size of the portfolio and when a school begins the process. According to the Liquidation Guide, the process could reasonably take up to 180 days or longer.
May 24, 2019 Announcement
On May 24, 2019, the Department issued a “Delay of Revolving Fund Distribution of Assets” via an electronic announcement. According to the announcement, the Department decided not to require a distribution of assets for the 2018-2019 award year as previously announced on July 11, 2018. The reason for the delay is that the Department is continuing to explore options to reimburse institutions for their Federal Perkins Loans service cancellations. With the delay of the payment, the institutions will not report repayment of any federal share or institutional share in the institution’s next Fiscal Operations Report and Application to Participate (FISAP) due October 1, 2019. This means that the amount of the federal share and the institutional share should be the same amounts as reported on the FISAP submitted by October 1, 2018, unless a repayment was made before the announcement. If a repayment of federal share and institutional share was made you should report these repayments on the FISAP for the 2018-19 Award Year.
Blue and Co., LLC has performed a closeout audit on a school’s liquidation of Perkins Loans, made recommendations with regard to the assignment of loans, and assisted schools with the calculation of distributions of the revolving funds to the Department.
If you feel you would benefit from a discussion regarding the Perkins Program Assignment or Liquidation or other changes with the Perkins Program, we would be happy to schedule a time to discuss any concerns. You can contact Joseph Duruttya (email@example.com) or your local Blue & Co. advisor.