ED Announces Intent for Institutional Reimbursement for Cancelled Perkins Loans

By Allie Arcese, Sr. Director of Strategic Communications & Engagement

By Allie Bidwell, NASFAA Managing Editor

Following months of pressure from the higher education and financial aid community, the Department of Education (ED) on Tuesday announced that it will release guidance by the end of 2019 on how it will reimburse colleges and universities more than $400 million for cancelled loans through the Perkins Loan program, which expired in 2017.

Although ED is statutorily required to reimburse institutions for cancelled Perkins loans, it has failed to do so since fiscal year 2010, usually citing a lack of federal appropriations. 

Recently, however, ED "determined that it has the authority to reimburse institutions the institutional share of Perkins Loan Service Cancellations from the Perkins Fund," Tuesday's announcement reads

Institutions will later this year receive a letter from ED regarding the amount and deadline for which institutions must return the federal share, and for which ED will remove and return to the institution the institutional share of the revolving fund. The letter will also contain information regarding the amount of reimbursement for Perkins loan cancellations, which ED said may be a partial reimbursement, adding that ED "anticipates providing additional reimbursements in future years." 

"We consider this a very big step forward in the right direction," said NASFAA President Justin Draeger, who added that the community will be waiting anxiously for ED's methodology in future guidance. 

NASFAA, along with the American Council on Education (ACE), initially wrote to ED in July 2018 to clarify the agency's obligation to reimburse institutions for cancelled Perkins loans. 

The Higher Education Act (HEA) requires participating schools to cancel or discharge portions of a student's Perkins loan 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. 

NASFAA and ACE again wrote to ED in October 2018, noting that during this time period, some schools have had to use more than $3 million of their own funds to meet cancellation requirements.

At a minimum, the groups urged in the two letters, ED should delay requiring institutions participating in the Perkins loan program to return any funds until the issue was resolved. ED agreed to that request and officially announced that it would delay asking institutions to return funds in December 2018.


Publication Date: 9/11/2019

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