As part of our commitment to keep you informed with the latest regulatory developments, we recently attended the Department of Education’s (DOE) 2016 Federal Student Aid (FSA) Training Conference in Las Vegas. A major focus of the FSA conference was related to the Federal Perkins Loan Program (Perkins Program). Subsequent to the FSA conference, Congress passed the Higher Education Extension Act of 2015 (HE Act) extending some of the provisions of the Perkins Program.

Below is a summary of the highlights from the FSA conference, as well as the HE Act.

FSA Conference Highlights

The Perkins Program is winding down, as stated in the DOE’s Dear Colleague Letter GEN-15-03. Amendments to the Higher Education Act of 1965 asked that educational institutions stop making Federal Perkins Loans to new borrowers after September 30, 2014. Amendments to the Act also allowed educational institutions an automatic one-year extension to comply.

The Excess Liquid Capital calculation requires institutions to calculate whether there was any excess liquid capital in their Perkins Program and return any such funds by December 31, 2015.

If your institution has not yet completed this calculation to determine if excess funds need to be returned, we suggest this be done as soon as possible.

Students participating in the Perkins Program on or before June 30, 2015, must meet all of the following eligibility restrictions at every disbursement to be able to receive Perkins Program funds:

• Enrolled in the same institution as the previous disbursement;
• Enrolled in the same academic program as the previous disbursement (two programs are considered the same if they share the first four digits of the Classification Instructional Program (CIP) code); and
• Have unmet need after being awarded Direct Subsidized Loan aid for which the student is eligible.

The following are observations from our attendance at the live sessions of the FSA conference regarding the Perkins Program wind-down:

• If program CIP codes have changed but are relatively the same, contact the DOE for an eligibility ruling, as they may be able to be considered the same.
• The DOE may be able to make accommodations on the collection of Excess Liquid Capital. Institutions should contact the DOE at the contact information provided in the DOE’s Dear Colleague Letter GEN-15-19.
• The institutional share of Excess Liquid Capital must be removed from the Perkins Program; however, these funds may be used at the discretion of the institution, including funding or creating institutional aid programs.
• When loans are assigned to the DOE, the institution loses all rights to Institutional Capital Contributions.
• If the institution is not actively disbursing Perkins Program funds, their Excess Liquid Capital calculation will yield large returns to the DOE, therefore liquidating at a faster pace.

HE Act Highlights

• Allows new undergraduate borrowers to receive Perkins loans through September 2017.
• Current and new borrowers may receive additional disbursements through March 31, 2018.
• The following are eligibility restrictions for students participating in the Perkins Program after June 30, 2015, to be able to receive Perkins Program funds. Students must meet all of them at every disbursement:
  • Enrolled in the same institution as the previous disbursement;
  • Enrolled in the same academic program as the previous disbursement (two programs are considered the same if they share the first four digits of the Classification Instructional Program (CIP) code); and
  • Must have unmet need after being awarded both Direct Subsidized and Unsubsidized Loan aid for which the student is eligible.

Next Steps

The future of the Perkins Program is still uncertain, and continued operation will allow institutions to recoup their investment in the program through the Excess Liquid Capital calculation.

The following should be considered before terminating participation:

• How reliant is your institution on Perkins loans?
• What are the cost/benefit implications to running the program?
• Identify all outstanding Perkins loans and ensure all are properly accounted for in the National Student Loan Data System (NSLDS).
• Should you choose to liquidate, your institution will be required to purchase any loans that are not eligible for assignment to the DOE.
• Once an institution notifies the DOE of their intent to liquidate there are a number of deadlines that must be met as per the Perkins Liquidation Procedures.

For more information about these and other topics discussed at the conference, please contact us.

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