What’s the Status of Perkins?
The Perkins Loan Program is set to expire in less than two months. Sound familiar? That’s probably because the end of Perkins has been consistently on the horizon over the past several years, as last-minute reauthorizations and extensions have kept the program on life support. Whether that is likely to happen again this year remains to be seen, but in this article we detail what we know so far.
Authorization for the Federal Perkins Loan Program originally expired on Sept. 30, 2014; however, the General Education Provisions Act (GEPA) provided an automatic one-year extension of the program until Sept. 30, 2015. The program then officially expired—temporarily—following the failure of a last-ditch bipartisan effort
to extend the program for one year on the eve of the program’s expiration. In December 2015, Congress passed the Federal Perkins Loan Program Extension Act of 2015
. The act eliminated eligibility for graduate and professional students on Sept. 30, 2016, but extended the program for new and current undergraduate Perkins borrowers through Sept. 30, 2017. The act also eliminated existing grandfathering provisions, thereby ensuring the complete expiration of the program following the 2017-18 award year. Notably, the act prohibits any additional extensions of the Perkins program, and support for an extension was not included in President Trump’s fiscal year (FY) 2018 budget proposal.
Standing in the way of an extension are the phantom costs associated with continuing the program. Because an extension would postpone the return of federal capital contributions (FCC) from institutional revolving funds, the Congressional Budget Office (CBO) has scored any extension as a cost to the federal government, as it would be “losing” an expected revenue stream. It should be noted, however, that the federal government has not contributed to institutional revolving funds since FY 2006. Congressional budget rules require legislation to include an offset of other federal dollars if the piece of legislation costs money. Notably, the bill does not include an offset making the measure more symbolic than practical at this point.
But the program is not dead yet, as there is a bipartisan bill
in the House of Representatives that would extend the Perkins Loan Program for a period of two years. The bill, which has more than 77 cosponsors, including 18 Republicans, was referred to the House Committee on Education and the Workforce in May, but has not been debated or voted on.It is unclear when a vote may happen, as the House has been focused on other legislative priorities like repealing the Affordable Care Act, beginning work on tax reform legislation, and passing a FY 2018 budget.
In the meantime, NASFAA is working to make sure institutions know what to expect if the program does wind down. In a letter sent to the Department of Education (ED) in June
, NASFAA asked for certain procedures to assist institutions and borrowers during the wind down of Perkins. The letter states that while it is NASFAA’s strong preference that the program continue until Congress can conduct a comprehensive review of the Title IV aid programs during reauthorization of the Higher Education Act, steps must be taken now to ensure a smooth and equitable close-out process in the event that the program ends, as scheduled, at the end of September.
The letter makes several requests to protect institutions’ interests during the potential wind down of the program, including:
- Accommodations to ensure an institution receives its fair share of the revolving fund in cases where it made one or more short-term loans to its loan fund, and subsequently repaid itself the lent amount;
- Payments to institutions for unreimbursed loan cancellations;
- If close-out audits will be required, the ability to charge the cost of the audit against the loan fund, and an extended deadline to secure an audit letter of engagement; and
- Flexibility for the institution to decide if it would prefer to continue servicing outstanding Perkins loans, or assign them to ED for servicing.
While passage of the extension bill is uncertain, any action on the measure would likely take place toward the end of September and will be done quickly. Stay tuned to Today’s News for updates and more information.
Publication Date: 8/10/2017