NASFAA, ACE Urge ED to Delay a Recall of Perkins Funds and Reimburse Cancellations

By Joelle Fredman, NASFAA Staff Reporter

NASFAA and the American Council on Education (ACE) wrote to the Department of Education (ED) last week urging it to publicly announce its intentions to resume reimbursing institutions for cancelled Perkins Loans, which it has failed to do since fiscal year (FY) 2010. This letter follows an initial attempt by the groups in July to call on ED to address this issue.

The Higher Education Act (HEA) requires participating schools to cancel or discharge portions of a student’s Perkins Loans if the student takes a qualifying job in public service such as teaching, law enforcement, or military service. While ED must reimburse institutions for the money that they loaned to students when the debt was cancelled according to the HEA, they have not been paid for cancellations since Congress stopped appropriating funds for cancellations in FY 2010. Over this period of time, the groups wrote in the letter last week, some schools have had to use more than $3 million of their own funds to meet cancellation requirements. Meanwhile, the federal government has accumulated millions of dollars that it owes to colleges over this period of time, the groups wrote in a previous letter regarding the same issue in July.

“Colleges should not be financially punished for partnering with government to meet government or societal needs,” the groups wrote in the July letter. “There are a number of programs requiring reimbursable outlays which will be affected if partnering non-governmental institutions cannot be sure of the federal commitment.”

While ED has acknowledged its obligation to reimburse schools as recently as May 2018, it stated that it has been unable to do so due to a lack of funds appropriated by Congress for this purpose. The groups emphasized in their most recent letter, however, that “the failure of Congress to appropriate funds to enable an agency to satisfy a mandatory statutory obligation does not allow an agency to avoid meeting their obligations under the law.”

In fact, the groups cited several court cases in their letter that have found that certain statutory obligations, such as ED’s in this case, are not dependent on congressional appropriations. They also pointed to the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act of 2019 and Continuing Appropriations Act of 2019, signed into law by the president last month, which stated that “funds appropriated in this Act under the heading ‘Student Aid Administration’ may be available for payments for student loan servicing to an institution of higher education that services outstanding Federal Perkins Loans under part E of title IV of the Higher Education Act of 1965.”

“Federal case law, recent congressional action and Department of Education statements all make clear that this is an issue that needs to be addressed immediately. The matter is increasingly urgent as the Department has announced that it will release guidance on the return of Perkins Loan funds,” the groups wrote.

In the July letter, the groups wrote that while colleges appear to have solid ground for a legal claim against ED on this issue, “this is not a matter that needs to result in legal action, especially since the Department has repeatedly reiterated its obligation to reimburse institutions.”

Instead, the groups urged ED to announce its intention to reimburse institutions for cancelled Perkin Loans, and at a minimum delay requiring institutions participating in the Perkins Program to return any funds until the issue of cancellation costs is resolved, which would have the added benefit of avoiding any administrative difficulties of multiple exchanges of payments between schools and ED.

Schools with questions about NASFAA’s work in this area are encouraged to reach out at [email protected].


Publication Date: 10/11/2018

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