August 2006
CB-06-12
SUBJECT: Revised
Assignment Form and Procedures for Assigning Perkins Loans
SUMMARY: This letter
provides the revised form and procedures for the assignment of defaulted
Federal Perkins Loans, National Direct Student Loans and National Defense
Student Loans to the U.S. Department of Education for collection.
Dear Colleague:
Attached to this
Dear Colleague Letter are the revised assignment form and procedures for
the assignment of defaulted Federal Perkins Loans, National Direct Student
Loans (NDSL), and National Defense Student Loans (Defense Loans) to the
Department of Education (ED). Institutions that wish to assign defaulted
Perkins, NDSL, or Defense Loans to ED must do so in accordance with these
procedures. In addition, institutions that close or otherwise wish to
end their participation in the Federal Perkins Loan Program must liquidate
their Perkins loan portfolios by assigning their outstanding defaulted
and non-defaulted Perkins Loans to ED in accordance with these procedures
and the liquidation procedures, which we will provide in a forthcoming
Dear Colleague Letter.
Institutions may
assign defaulted loans to ED at any time during the program year. All
loans that an institution assigns to ED are assigned without recompense.
ED will not reimburse the institution's Federal Perkins Loan Fund for
the loans, and all rights, authorities, and privileges associated with
the loan are transferred to the United States. The institution is relieved
of incurring additional expenses in attempting to collect on the loan.
Any funds collected by ED on these loans are the property of the United
States. Note that assignment of defaulted loans will not affect the calculation
of the institution's Perkins Loan cohort default rate.
We recognize that
an institution may have exhausted all of its available collection options
on some of their defaulted Perkins loans. We encourage these institutions
to assign these loans to ED so that we can take additional steps to recover
the loan funds. We have collection tools that are not available to institutions,
such as administrative wage garnishment, federal offset, and litigation
by the Department of Justice.
Please carefully
read and follow the assignment procedures (Attachment 1). Loan assignment
submissions not adhering to these procedures may be rejected. Instructions
for completing the Perkins Assignment Form are provided in Attachment
2. The form itself is provided in Attachments 3 and 4. Institutions must
submit accounts for assignment using the Perkins Assignment Form. A photocopy
or a computer facsimile of the form is acceptable.
We have made the
following major additions to the assignment procedures and the assignment
form
Assignment of
Loans Made Using an Electronically Signed Promissory Note-If a school
assigns loans that were made using an electronically signed promissory
note, the school must submit, annually, a certification describing the
school's electronic signature authentication process. In addition, the
school's most recent audit must verify the extent to which the school's
electronic signature authentication process meets ED's "Standards
for Electronic Signatures in Electronic Student Loan Transactions",
as specified in Dear Partner Letter GEN-01-06 (see Attachment 1, page
5).
Assignment of
Loans Made Under a Perkins MPN-If a school assigns loans made under
an MPN, the school must maintain disbursement records documenting the
principal amount loaned to the borrower until the loan is paid-in-full
or otherwise satisfied. Schools also have the option of including disbursement
records with the assignment submission (See Attachment 1, pages 4 and
8).
Reporting "Date(s)
of First Disbursement" on the Manifest-Schools are now required
to report the date of first disbursement for each loan listed on the manifest
attached to the Institutional Certification page of the Perkins Assignment
Form. We are collecting first disbursement date to more accurately match
loans that have been assigned to ED with the loans as they were reported
to the National Student Loan Data System (NSLDS). Therefore, the dates
listed in this column must match the date of first disbursement initially
reported by the school to NSLDS. If a borrower received more than one
Perkins Loan, but the loans were rolled up into one loan and reported
to NSLDS as one loan, the school lists the date of first disbursement
for the first loan the borrower received. If the loans were reported to
NSLDS as separate loans, the school lists date of first disbursement for
each separate loan the borrower received. First disbursement dates are
listed on the manifest in column format, under the heading "Date(s)
of First Disbursement" (see Attachment 2, page 3).
NOTE: Under
the "Total Amount Outstanding" heading on the manifest, schools
continue to report the aggregate outstanding amount for all of the borrower's
loans that are included in the assignment submission, unless the loans
are of different types or interest rates. This amount must match the total
amount outstanding reported on the Borrower and Loan Information page
of the Perkins Assignment Form. If a borrower's loans are listed separately
because they are of different types or interest rates, a separate Borrower
and Loan Information page must be submitted for each type of loan being
submitted for assignment for that borrower.
Currently, we can
accept the Perkins Assignment Form in PDF or WORD format. However, due
to requirements of the Privacy Act, we cannot accept assignment packages
via e-mail. The Borrower and Loan Information page of the Perkins Assignment
Form can be submitted to ED using a CD-ROM or a 3.5-inch diskette. Schools
submitting assignments using these disk formats should mail the CD-ROM
or diskette to the Perkins Loan Assignment Processing Center. Schools
should include with the diskette or CD-ROM the original paper promissory
note(s)for the loan(s) being assigned and the Institutional Certification
page, signed by the appropriate institutional official. The school is
still responsible for all information submitted using these media.
Upon assigning a
loan to ED, the institution must update the status of the assigned loan
with the national credit bureau(s) to which it had reported the loan.
In most cases, this may be done either by withdrawing the account entirely
from the credit bureau or requesting that the credit bureau recode the
account to indicate that the loan is being assigned to ED (see Attachment
1, Page 9).
Institutions must
have successfully reported the loan to the National Student Loan Data
System (NSLDS) before the loan may be assigned. Before submitting a loan
to ED for assignment, the institution must also update the NSLDS record,
using a Loan Transfer Code of "AE", to reflect the assignment.
Questions regarding
assignment procedures should be directed to the offices listed in Section
VI. ("Information Sources") of Attachment 1. Please do not contact the
Assignment Processing Center. For information on the repayment status
of past assignments, contact the appropriate ED Regional Office. All other
questions on Perkins loan assignments should be directed to Federal Student
Aid, Borrower Services, Collections Group at (202) 377-3373.
Institutions that
will no longer be participating in the Federal Perkins Loan Program should
direct questions on liquidation procedures to Rhonda Herbert of our Federal
Student Aid Campus-Based Operations staff at (202) 377-3180. Institutions
that have closed or are in the process of closing should contact the appropriate
Federal Student Aid, Application, Student Eligibility and Delivery Service,
School Participation Team list on page 15 and 16 of the Assignment Submission
Procedures (Attachment1).
Sincerely,
Jeff Baker, Director
Policy Liaison and Implementation
Federal Student Aid
Attachments/Enclosures:
CB-06-12:
Revised Assignment Form and Procedures for Assigning Perkins Loans
Attachment
1 - Assignment Submission Procedures in MS Word Format, 101KB, 16 pages
Attachment
2 - Perkins Assignment Form Instructions in MS Word Format, 46KB, 6 pages
Attachment
3 - Assignment Form: Institutional Certification in MS Word Format, 30KB,
1 page
Attachment
4 - Assignment Form: Borrower and Loan Information in MS Word Format,
41KB, 2 pages
Posted August 2, 2006 on www.NASFAA.org, the Web Site of the
National Association of Student Financial Aid Administrators (NASFAA).
Please submit Web Site questions or comments to Web@NASFAA.org
