ED Issues Disbursement, Grandfathering Guidance In Case Of Perkins Wind-Down

By NASFAA Policy & Federal Relations Staff 

On Friday the Department of Education (ED) issued Dear Colleague Letter (DCL) GEN-15-03 on the “wind-down” of the Federal Perkins Loan Program. The DCL specifically addresses disbursement criteria for the 2015-16 award year and the limited instances in which schools can continue to make loans to students beyond September 30, 2015. Perkins, as currently authorized, is set to expire September 30, 2015. 

As a reminder, the Perkins Loan Program was initially set to expire September 30, 2014, but was provided a one-year automatic extension, along with the other Higher Education Act (HEA) programs, through the General Education Provision Act (GEPA). The automatic extension can only occur once, so this year congressional action will be needed to reauthorize the program. As such, according to the DCL, “schools may not make Federal Perkins Loans to new borrowers after September 30, 2015.” “Making” a loan refers to making the first disbursement of a loan. However, the DCL states, “If prior to October 1, 2015, a school makes the first disbursement of a Federal Perkins Loan to a student for the 2015-2016 award year, the school may make any remaining disbursements of that 2015-2016 loan after September 30, 2015.”

NASFAA’s Perkins-related reauthorization recommendations called for a “grandfathering” provision should the program close out, and this DCL addresses the limited instances in which schools can continue to award and disburse new loans beyond September 30, 2015. According to the DCL, there is a narrow provision in the law that allows schools to continue to make Perkins to certain prior Perkins Loan borrowers to assist them complete their studies. According to the DCL, schools could make Perkins Loans “to certain students for up to five additional years (through September 30, 2020) to enable students who received loans for award years that end prior to October 1, 2015” to complete their studies. 

The DCL clarifies that the award year that ends prior to October 1, 2015, is the 2014-15 award year, ending on June 30, 2015. Schools may make a new Perkins Loan to a student after September 1, 2015 if the all of the following conditions, outlined in the DCL, are met: 

  1. The school made at least one Perkins loan disbursement to the student on or before June 30, 2015.
  2. The student is enrolled at the same institution where the last Perkins Loan disbursement was received. For example, a student who received a Perkins Loan disbursement at School A, and then received a Perkins Loan disbursement at School B, would be considered to be an eligible grandfathered borrower at School B, provided all other conditions are met, but not for a subsequent enrollment at School A.
  3. The student is enrolled in the same academic program for which the student received his or her last Perkins disbursement. ED considers an academic program to be the same program only if the first four digits of the program’s Classification of Instructional (CIP) code are identical to the first four digits of the CIP code for the program for which the student received his or her last Perkins Loan disbursement.
  4. While the law provides for this limited “grandfathering” continued eligibility for Perkins Loans “as may be necessary to enable students…to continue or complete courses of study,” many of these grandfathered students could have their need met by a combination of other student aid and thus will not need a Perkins Loan to “enable [them]...to continue or complete [their] course of student.” Therefore, a Perkins Loan can be made to an otherwise eligible grandfathered student to meet all or some of the student’s unmet need only after the student has been awarded all Direct Subsidized Loan aid for which the student is eligible.

The DCL reinforces that the grandfathering provision only applies to students who have received Perkins Loans for award year 2014-2015 or earlier, so students who receive their first Perkins Loan in the 2015-2016 award year will not be eligible for grandfathering. ED acknowledged that multiple other aspects of the Perkins program will need to be addressed in a wind-down, including the settlement of schools’ revolving funds and outstanding loan portfolios and they plan to provide additional guidance over the coming months. 

NASFAA continues to advocate for the Perkins Loan program on Capitol Hill, and has covered and will continue to cover any developments as we approach September 30, 2015.  

 

Publication Date: 2/2/2015


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