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What We Do (and Don’t) Know About Perkins Loan Program Wind-down

By Joan Berkes and Mandy Sponholtz, Policy & Federal Relations Staff

It was easy to miss the recent death of the Perkins Loan Program amidst the prolonged flurry of confused activity around gainful employment reporting.  This nation's oldest federal student aid program had its origins in the National Defense Education Act of 1958, as the Soviet Union's launch of the Sputnik satellite prompted the United States to recognize that the defense of the nation rests in educating its populace. The program became the model for subsidized loans and the proving ground for service-based loan forgiveness. Despite the efforts of the student aid community, the Senate failed last month to allow even a one-year reprieve for the Perkins Loan Program, thus consigning it to history's trash bin without benefit of considered debate in the context of a full HEA reauthorization effort.  

So, what happens now? The program is winding down under a somewhat complicated set of rules that have a number of significant dates. This article lays out questions schools have posed; some which have answers and some which do not yet. NASFAA is also working on a grandfathering flow chart and key dates timeline that will be published upon receipt of answers to some questions we've posed to the Department of Education (ED). This article will be updated as we receive more information. You may also want to check out the October 15, 2015, NASFAA Washington Update webinar, now available on demand, for more on the Perkins wind-down.

You may scroll down to read through all of the questions and answers or use the links in the bulleted list below to jump down to a particular topic:

Questions and Answers

Definitions (DEF)

DEF-Q1: Who is a new borrower?  

DEF-A1: A new borrower is a student who never received a Perkins Loan before the 2015-16 award year.

DEF-Q2: Who is a continuing borrower?

DEF-A2: A continuing borrower is a student who received a Perkins Loan before the 2015-16 award year.  These are the only students who may qualify for grandfathering. Note that a student who had borrowed under the Perkins Loan Program (which includes NDSL and Defense loans) at any time prior to 2015-16 is a continuing borrower even if there is no longer an outstanding balance on the prior loan.

DEF-Q3: Who is a grandfathered borrower?

DEF-A3: According to Dear Colleague Letter GEN-15-03, a continuing borrower is grandfathered  for purposes of a new loan made on or after October 1, 2015, if he or she meets the following criteria:

  • Received a Perkins loan on or before June 30, 2015;
  • Is enrolled at the same institution for which he or she received his or her last Perkins Loan disbursement; and
  • Is enrolled in the same academic program for which he or she received the most recent Perkins loan disbursement.

NOTE: NASFAA sent clarifying questions to the Department of Education (ED) regarding the definitions of “same academic program” and “last Perkins Loan disbursement.” In verbal discussions, ED pointed out that the law limits grandfathering to borrowers who received Perkins Loans prior to 2015-16; therefore, the last disbursement for purposes of determining what is the “same institution” and “same academic program” is the last disbursement received prior to 2015-16 (i.e., for 2014-15 or an earlier award year). See also GR-Q&A4. We will notify members of updates via Today’s News as we receive answers to our questions and more information.  

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Current Awards (CA)

CA-Q1: What is the difference between a “new borrower” and a “grandfathered borrower”?  Can a student ever fall into both borrowing categories?

CA-A1: A new borrower of Perkins Loan funds for 2015-16 does not meet the grandfathering provisions, and can only receive Perkins Loans for the 2015-16 award year. A grandfathered student may continue to receive Perkins Loan funds, provided he or she meets all the grandfathering criteria, until September 30, 2020. So, no, a student may never be both a new and a grandfathered borrower.

CA-Q2: Can my school award Perkins Loans for the 2015-16 award year?

CA-A2: New borrowers: Yes, but the school must have made the student’s first disbursement of the funds prior to October 1, 2015. If the school did not make the first disbursement prior to that date, the student no longer qualifies for the funds.  If the school did make the first disbursement prior to October 1, 2015, the school may continue making disbursements of the loan, and even increase the award amount for 2015-16 and disburse the additional funds as well.  

Continuing borrowers: Yes, without any additional restrictions or requirements.

CA-Q3: Will a student receiving a Perkins Loan for the first time for the 2015-16 award year be eligible for Perkins Loans in future years?

CA-A3: No. See additional information in DEF-Q&A3 and questions under Grandfathering.

CA-Q4: Am I required to award a new borrower from the 2015-16 award year?

CA-A4: Maybe not. ED requires schools to prioritize students with exceptional financial need when awarding Perkins Loan funds. A school also must have established policies and procedures that it applies uniformly. Those policies may include establishing categories for awarding purposes. Recent guidance from ED allows schools to place new students who will not qualify for grandfathering into a low priority group for packaging purposes.  

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Grandfathering (GR)

GR-Q1: When do the grandfathering requirements begin?

GR-A1: October 1, 2015.  

This can be a sticking point for schools and students.  For example, Aaron receives a first disbursement of Perkins Loan funds on September 1, 2015. The school does not need to consider whether he is a grandfathered borrower because his loan was first disbursed before October 1. New and continuing borrowers are treated the same prior to October 1. Betty, on the other hand, did not request a Perkins Loan until October 15, 2015. The school must determine whether Betty meets all the grandfathering criteria, and whether she has remaining need after calculating subsidized Direct Loan eligibility, before making the loan because the first disbursement would be on or after October 1.

GR-Q2: Will a student receiving a Perkins Loan for the first time from 2015-16 award year funds be eligible for grandfathering?

GR-A2: No. Only students who received a Perkins Loan disbursement prior to June 30, 2015, and who meet all other established criteria, will be eligible for grandfathering.

NOTE:  NASFAA sent clarifying questions to ED regarding treatment of disbursements made after June 30 for crossover periods assigned to 2014-15. We will notify members of updates via Today’s News as we receive more information.  

GR-Q3: How long will grandfathering remain in place?

GR-A3: Until September 30, 2020. See additional information under “Funding Close Out.” However, ED will probably offer more information as we near this date and implications for the remainder of the 2020-21 award year.

GR-Q4: What last disbursement do I use for purposes of determining whether the grandfathering provisions are met?  

GR-A4: In verbal discussions, ED explained that because the law references students who received loans for 2014-15 or earlier as eligible for grandfathering, the criteria that must be met also apply to the 2014-15 or earlier award year. Thus, the last disbursement that must be examined to determine whether the student is still enrolled at the same institution and in the same academic program (including major) is the most recent disbursement that occurred during the 2014-15 or earlier award year.

Because the grandfathering provision did not become effective until October 1, 2015, schools were able to make loans to continuing students without regard to the grandfathering conditions between July 1 and September 30, as well as any subsequent disbursements of those loans for the remainder of the 2015-16 award year. However, loans for 2016-17 and following years will be conditioned on 2014-15 or earlier disbursements.

As a result, aid administrators may encounter some interesting scenarios when applying the grandfathering criteria in future award years. First disbursements of 2015-16 Perkins Loans that occur from July 1, 2015, to September 30, 2015, are not relevant for purposes of grandfathering, nor are the remaining disbursements of those 2015-16 loans. So, a student may have changed schools or programs of study during 2015-16, but in order to qualify for grandfathering after 2015-16, must meet the same school/same program criteria based on the last disbursement made in 2014-15 (or, if the student had no Perkins loan for 2014-15, the last disbursement prior to 2014-15). That timeframe for last disbursement would also apply to any student receiving the first disbursement of a 2015-16 Perkins Loan on or after October 1, 2015, when grandfathering kicks in for new loans.

See also AP-Q&A3 and AP-Q&A5.

NOTE: NASFAA sent questions to ED regarding the definition of “last Perkins Loan disbursement” to confirm in writing that the "last" disbursement is based on the last disbursement made in the 2014-15 award year or earlier, or is based on the last disbursement made prior to the 2016-17 award year. See the note following DEF-Q&A 3. We will update this article and notify members via Today’s News as we receive more information.  

GR-Q5: Where can I find whether a student received a Perkins (or NDSL or Defense) Loan on or before June 30, 2015?

GR-A5: The school may review its own records or use NSLDS.  Please remember that a student must have received a Perkins Loan at the same institution she attended when she received her last Perkins Loan disbursement in order to qualify for grandfathering.

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Direct Subsidized Loan Consideration (SUB)

SUB-Q1: Is my school required to award all Direct Subsidized Loan funds for which a student is eligible before awarding a 2015-16 Perkins Loan?

SUB-A1: The answer depends on when the school makes the first disbursement of the Perkins award.  Any students who received their first disbursement of 2015-16 Perkins Loan funds prior to October 1, 2015, do not need to be awarded subsidized Direct Loans ahead of Perkins Loans (if it is not the institution’s packaging policy to do so), or have any declined subsidized loan eligibility taken into consideration.  Students who receive their first disbursement of 2015-16 Perkins Loan funds on or after October 1, 2015 (i.e., grandfathered borrowers), must have their subsidized loan eligibility taken into account when determining their Perkins Loan eligibility. Grandfathering criteria take effect for loans first disbursed on or after October 1, 2015. One of the conditions for receiving Perkins Loans as a grandfathered borrower under ED’s interpretation of the law is that Subsidized Direct Loans must be used to satisfy the student’s financial need before Perkins Loans.  Students who do not have subsidized loan eligibility (e.g. a graduate or professional student) are exempt from this requirement. See Dear Colleague Letter GEN-15-03 and ED’s Perkins Q&As on IFAP, specifically AWD-Q3, for additional information.  

SUB-Q2: What does “awarded all Direct Subsidized Loan aid for which the student is eligible” actually mean?

SUB-A2: ED initially stated that an awarded subsidized loan meant the loan must be disbursed before a school may award a Perkins Loan.  Based on questions from NASFAA, ED replaced this guidance with instructions that schools must award subsidized loan funds, and if a student declines those funds, the school still must consider the amount of the subsidized loan when awarding the Perkins Loan.  

NOTE: NASFAA read this statement to indicate that if a student no longer has subsidized loan eligibility (for example, the student exhausted his or her 150% subsidy limit), the school may still award a Perkins Loan to an otherwise eligible student. Further, if a student does not have any subsidized loan eligibility, there would be no subsidized loan to consider in the awarding of the Perkins Loan funds. Even though ED did not provide these additional details in the Q&A document, it did confirm that NASFAA’s interpretation is accurate.

SUB-Q3: Can you please clarify the criteria about being awarded a Subsidized Direct Loan? What if a student is offered a Subsidized Direct Loan and Perkins but only accepts the Perkins?

SUB-A3: In cases where the first disbursement of a Perkins Loan is paid on or after October 1, 2015, the school still must count the amount of the student’s subsidized loan eligibility toward Perkins Loan eligibility, even if he or she declines the Direct Loan and only accepts the Perkins Loan. See ED’s AWD-Q3, for additional information. Note that this interpretation by ED of a grandfathered student’s eligibility for the Perkins Loan supersedes the institution’s normal packaging policy.

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Academic Program (AP)

AP-Q1: Does same academic program mean same major or degree program?

AP-A1: Dear Colleague Letter GEN-15-03 states, “We consider an academic program to be the same program only if the first four digits of the program’s Classification of Instructional Program (CIP) code are identical to the first four digits of the CIP code for the program for which the student received his or her last Perkins Loan disbursement.” CIP codes reflect the student’s major.

NOTE: NASFAA submitted clarifying questions to ED regarding credential level (which is not reflected in the CIP code) and the definition of “last Perkins Loan disbursement.”  See the note following DEF-Q&A3 under Definitions. We will update this article and notify members via Today’s News as we receive more information.  

AP-Q2: For the purposes of grandfathering, when do schools look at the student’s academic program?  July 1 for the upcoming award year?  At the time of the first disbursements?  For subsequent disbursements? 

AP-A2: Dear Colleague Letter GEN-15-03 uses the language “…the same academic program for which the student received his or her last Perkins Loan disbursement.”  However, NASFAA sent some clarifying questions regarding the definitions of “same academic program” and “last Perkins Loan disbursement.”

To reduce administrative burden, we advocated that schools only must look at the student’s academic program one time per academic year, either July 1 or before the first disbursement. We will update this article and notify members via Today’s News as we receive more information.

AP-Q3: Can a borrower change academic programs and qualify for grandfathering?

AP-A3: Generally, no. However, as we addressed in GR-Q&A4, there is a window of time during which a student may receive Perkins Loan disbursements before grandfathering takes effect, but those disbursements are not relevant in the determination of his or her future eligibility as a grandfathered borrower.  For example, a student could have received a disbursement in January 2015 (i.e., for the 2014-15 award year), changed majors on September 15, 2015, and received a disbursement on September 20, 2015 (before the grandfathering criteria took effect). When this student is considered for a Perkins Loan for 2016-17 under the grandfathering provision, the change in major will disqualify him because his current major is not the same as when he received his last Perkins Loan disbursement for the 2014-15 award year or earlier. If the student, however, changes his program of study back to the program when he received the last disbursement of the 2014-15 Perkins Loan, then he would meet the grandfathering criteria.

NOTE: NASFAA has asked for clarification in writing from ED on this question. We will update this article and notify members via Today’s News as we receive more information.  

AP-Q4: Why must a borrower remain in the same academic program to be eligible for grandfathering?

AP-A4: The law states that Perkins Loan funding is only authorized “to continue or complete courses of study,” which the Department of Education then interpreted to mean the student’s academic program (including major) in Dear Colleague Letter GEN-15-03.

AP-Q5: Can a transfer student qualify for grandfathering?

AP-A5: Generally, no. However, as we addressed in GR-Q&A4, there is a window of time during which a student may receive Perkins Loan disbursements before grandfathering takes effect, but those disbursements are not relevant in the determination of his or her future eligibility as a grandfathered borrower.  For example, a student could have received a disbursement in February 2015 (for the 2014-15 award year) at Institution A, transferred to Institution B and received a Perkins Loan in September 2015 (for the 2015-16 award year). When this student is considered for a Perkins Loan for 2016-17 at Institution B, she is not eligible under the grandfathering rules because she is not attending the same institution as when she received the last disbursement of her 2014-15 Perkins Loan. If she transferred back to Institution A, she could once again receive Perkins Loans as a grandfathered borrower.

NOTE: NASFAA has asked for clarification from ED in writing on this question. We will update this article and notify members via Today’s News as we receive more information.  

AP-Q6: Do grandfathered borrowers need to be continuously enrolled between the last Perkins Loan disbursement and the new loan to qualify for the award?  For example, if a student withdrew or stopped out, would she lose her grandfathering status?

AP-A6: A student can still qualify as a grandfathered borrower, even if he or she was not continuously enrolled, as long as the student returns to the same academic program at the same school.  

AP-Q7: Can students attending another institution under consortium agreements qualify for grandfathering?

AP-A7: NASFAA asked for clarification from the Department of Education on this question. We will update this article and notify members via Today’s News as we receive more information.

AP-Q8: Can a student previously in an undeclared major still qualify for grandfathering?

AP-A8: Yes, but once the student declares a major, he or she must remain in the same program to qualify for continued grandfathering from that point forward.  See ED’s Perkins Loan Q&As on IFAP, specifically AWD-Q2, for additional information.  

AP-Q9: If I have a student who is a Junior in 2015-16, received a Perkins Loan in 2013-14 and 2014-15, and did not change major, can we disburse the first Perkins disbursement for 2015-16 after September 30, 2015?

AP-A9: Yes, provided the student meets all other grandfathering criteria outlined in Dear Colleague Letter GEN-15-03 and the associated Q&A.

AP-Q10: The student’s last disbursement was during the 2014-15 award year. She changed her major in September 2015 but didn't receive a Perkins disbursement for the 2015-16 award year. Is she eligible for future Perkins?

AP-A10: No because she does not meet the grandfathering criteria.  As outlined in Dear Colleague Letter GEN-15-03, in order to qualify for a new Perkins Loan on or after October 1, 2015, a student must:

  • Have received a Perkins Loan disbursement prior to July 1, 2015 (which she did);
  • Remain at the same school as when she received her last Perkins loan (which we assume she did); and
  • Remain in the same program of study as when she received her last Perkins loan disbursement (which she did not).

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Funding Close Out (FUND)

FUND-Q1: When does my school need to return Perkins Loan funds to ED?

FUND-A1: We have not yet received guidance from ED regarding the liquidation of a school’s Perkins Loan Fund. Presumably, the Fund will need to continue in order to make loans to grandfathered students. However, we do not know at this point how/whether ED will control the amount in the school’s Fund, or when ED will demand a return of the federal investment in the school’s Fund.

FUND-Q2: If my school already closed out its Perkins Loan fund, can we re-establish it to make awards for grandfathered students?

FUND-A2: No. At this point, once a school closes out its Perkins Loan funds, it exits the program and ED will not accept applications for a school to re-enter the program. See also FUT-Q&A2.

FUND-Q3: Should schools expect to be able to make subsequent disbursements of Perkins loans beyond September 30, 2020?

FUND-A3: ED will issue additional guidance about how to award and disburse Perkins Loan funds for the 2020-21 award year as the grandfathering sunset date approaches.

FUND-Q4: Do you anticipate any changes to schools’ ability to service existing Perkins Loans? Any plans for the Department to require schools to relinquish servicing responsibilities?

FUND-A4: NASFAA is aware of some discussions regarding Perkins Loan servicing, but as of right now, schools that wish to continue servicing their own Perkins Loans may continue to do so. NASFAA continues to advocate to retain  maximum amount of flexibility and available options for schools.

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Future of the Program (FUT)

FUT-Q1: Why did the Senate allow the Perkins Loan Program to expire?

FUT-A1: Sen. Alexander contended that extending the Perkins program would simply perpetuate an overly-complex federal student aid system and that an extension would be in direct conflict with the tenets of his bipartisan Financial Aid Simplification and Transparency (FAST) Act. As a reminder, in addition to simplifying the Federal Student Aid application process, the FAST Act also called for a system with only one grant and one loan.

FUT-Q2: Will Congress add the Perkins Loan program back to Title IV through reauthorization?

FUT-A2: Even though a one-year extension was blocked on the Senate floor, there is still an active group of Senators who continue to push for a one-year extension. It is possible that Perkins could be considered again during the reauthorization of the Higher Education Act (HEA); however, the failure to pass a short-term extension to keep the program does not bode well for its future.

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Publication Date: 10/30/2015


Erin T | 11/2/2015 6:20:54 PM

Hi Larry,

We have confirmed with the Department of Education that the last disbursement that is used to determine same school/same major for grandfathering purposes must have occurred during 2014-15 or earlier. Disbursements made for the 2015-16 award year do not affect the determination of eligibility for grandfathering. This seeming anomaly is due to language in the law based on the original October 1, 2014, expiration date. Perkins program operation during 2015-16 is due to a one-year extension of the Higher Education Act (HEA) that automatically went into effect in 2014 under general statutory rules triggered when reauthorization of the Act does not occur on schedule. That automatic extension did not, however, change the Perkins grandfathering provision in the law, which allows continued loans “to enable students who have received loans for academic years ending prior to October 1, 2015, to continue or complete courses of study.” The most recent academic year ending prior to October 1, 2015, translates to the 2014-15 award year. Further extensions of the HEA must be specifically enacted by Congress. During the recent action to do so, the Perkins Loan Program was excluded, and so was not extended beyond 2015-16, nor was the language related to grandfathering altered. The upshot is that grandfathering remains tied to last disbursements made based on the original expiration date of the Perkins Loan Program in 2014, not on the extended period that enabled loans to be made between the end of the 2014-15 award year and October 1, 2015, for the 2015-16 award year.

-NASFAA Staff

Joseph S | 10/30/2015 2:48:31 PM

And a darn shame that this program will end, for it assisted in special ways friends of mine even from 1958 who benefitted at St. John's University as they were going into teaching and needed financial support. years later and during 986-90, a niece of mine had the benefit of the Perkins Loan and is now happily so a teacher, and enjoyed the reduction in payment over the years and is now an Assistant Principal in Kissimmee, FL. One of the many success stories over a period of almost three generations to date. No, I know that the congress just does not understand the benefit of the financial aid programs, especially the Perkins Loans. And these comments are from a NASFAA Past Chair who helped hundreds at his institution with NDSL and then Perkins Loans.

Larry C | 10/30/2015 9:4:22 AM

Thank you for providing this. However for your response to GR-A4 conflicts with information I received directly from a DOE training officer that I posed for a prior perkins loan recipient.

Q: First disbursement in 2015-2016 prior to October 1, 2015 – then changes major on November 1, 2015. Does he lose Perkins loan eligibility (assuming he meets all other requirements). Or is he allowed to keep it for 2015-2016? If allowed to keep it, in subsequent academic years does he have to stay in the same major in order to continue to receive Perkins?

A: The grandfathering provisions only apply to any new Perkins Loans made after September 30, 2015 – so if a loan was made to a continuing student by this date, then the 2015-2016 loan can be fully disbursed regardless of a change of major. Then, based on the guidance in Dear Colleague Letter GEN-15-03, any subsequent loans made after September 30, 2015 (which in this case would be for 2016-2017) must reflect the course of study at the time of the last disbursement of a Perkins Loan (in this case, for 2015-2016). This means the student could change majors on November 1 and still receive Perkins Loans after 2015-2016; however, if s/he changed majors again, then s/he may become ineligible.

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