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:
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