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

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

The Department of Education issued new questions and answers regarding the wind-down of the Perkins Loan Program shortly before Thanksgiving. The new guidance affects some of the information NASFAA published on October 30, 2015, in an article entitled “What We Do (and Don’t) Know About Perkins Loan Program Wind-down.” NASFAA has submitted follow-up questions for additional clarification, but we have revised some of our prior information here to reflect ED’s new Q&As.

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

Questions and Answers From NASFAA

Definitions (DEF)

DEF-Q1: Who is a new borrower?  

DEF-A1: A new borrower is a student who never received a Perkins Loan on or before June 30, 2015.

NOTE: ED revised the language to indicate a trigger date of June 30, 2015.  However, ED has yet to address whether the June 30 date applies only to funds assigned to the 2014-15 award year or before, or may encompass 2015-16 awards that were first disbursed prior to July 1, 2015, as well.  NASFAA continues to engage in discussions with ED on this issue.

DEF-Q2: Who is a continuing borrower?

DEF-A2: A continuing borrower (as this term is used by NASFAA in the Q&As below) is a student who received a Perkins Loan on or before June 30, 2015.  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 on or before  June 30, 2015, is a continuing borrower even if there is no longer an outstanding balance on the prior loan.  See also AWD-Q9 of the Department’s Perkins Q&As.

NOTE: Please refer to the note under DEF-A1 for additional information.

DEF-Q3: Who is a grandfathered borrower?

DEF-A3: According to Dear Colleague Letter GEN-15-03 and the updated Perkins Q&As from ED, 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 (e.g. during the 2014-15 award year or earlier); and
  • Is enrolled in the same academic program for which he or she received the most recent Perkins loan disbursement (e.g. during the 2014-15 award year or earlier).
  • Was awarded all Direct Subsidized Loan aid for which the student is eligible during the award year.  See also SUB-Q1.

See additional questions in the Grandfathering section of this article.

NOTE: ED stated during verbal discussions on grandfathering criteria that schools must revert back to the last Perkins Loan disbursement during the 2014-15 award year or earlier.  However, the revised guidance provides the 2014-15 award year as an example (by way of the use of “e.g.”) of what award year to use when looking at a student’s last disbursement.  The use of such language could be interpreted to mean that another, later award year could also be used, but this is not NASFAA’s understanding of the intent.  (That is to say, a student’s last 2015-16 Perkins Loan disbursement cannot be used to determine eligibility for grandfathering when making loans for 2016-17 or later.)  NASFAA continues to discuss with ED ways to clarify the effective trigger date and/or award year for grandfathering purposes.

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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? [No changes to this Q&A]

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.  Schools may also extend the end date of a Perkins Loan for these borrowers, provided the additional payment periods are within the 2015-16 award year.  See also AWD-Q10 in the Department’s Perkins Q&As.

Continuing borrowers: Yes, without any additional restrictions or requirements beyond the grandfathering criteria outlined.

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?  [No changes to this Q&A]

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? [No changes to this Q&A]

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.

CA-Q5: If I have to cancel a Perkins loan for a non-grandfathered student, can I re-award the loan after October 1, 2015?

CA-A5: Yes, provided the school make the first disbursement of the loan prior to October 1.  See also AWD-Q11 in the Department’s Perkins Q&As.

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Grandfathering (GR)

GR-Q1: When do the grandfathering requirements begin? [No changes to this Q&A]

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 on or before 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? [No changes to this Q&A]

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?  [Pending further clarification]

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: Please refer to the note under DEF-A3 for additional information.

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

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.

NOTE: Please refer to the note under DEF-A3 for additional information.

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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? [No changes to this Q&A except additional cross-references have been added]

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 and AWD-Q16, 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. ED provided some clarification in the revised Perkins Q&As (specifically AWD-Q16), but only addressed annual or aggregate subsidized loan limits.  Even though ED did not provide these additional details in the Q&A document, it did confirm that NASFAA’s interpretation regarding the 150% subsidy limit 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? [No changes to this Q&A]

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.  ED clarified that if a student enrolls in another program that has the same first four digits of the CIP code, the student may continue to qualify for grandfathering for the additional program, including subsequent certificate, degree, or graduate/professional programs.  

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.”  To reduce administrative burden, NASFAA advocated to the Department that schools only must look at the student’s academic program one time per academic year, either July 1 or before the first disbursement. However, ED clarified in the revised Q&As that schools must check a grandfathered student’s academic program prior to every disbursement of the Perkins Loan.

AP-Q3: Can a borrower change academic programs and qualify for grandfathering? [No changes to this Q&A]

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?  [No changes to this Q&A]

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? [No changes to this Q&A]

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? [No changes to this Q&A except additional cross-references have been added]

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.  See also AWD-Q17 in the Department’s Perkins Q&As.

AP-Q7: Can students attending another institution under consortium agreements qualify for grandfathering? [No changes to this Q&A]

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? [No changes to this Q&A]

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? [No changes to this Q&A]

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 during or before the 2014-15 award year (which we assume she did); and
  • Remain in the same program of study as when she received her last Perkins loan disbursement during or before the 2014-15 award year (which she did not).

See the questions in the Definitions section of this article for additional information.

NOTE: Please refer to the note under DEF-A3 for additional information.

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Funding Close Out (FUND)

FUND-Q1: When does my school need to return Perkins Loan funds to ED? [No changes to this Q&A]

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? [No changes to this Q&A]

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. 

FUND-Q3: Should schools expect to be able to make subsequent disbursements of Perkins loans beyond September 30, 2020? [No changes to this Q&A]

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? [No changes to this Q&A]

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.

FUND-Q5: If a school closes out its Perkins Loan fund, will ED return any institutional share of the collections?

FUND-A5: No.  When a school closes out (or assigns loans to the Department), it relinquishes any share in the collected loans.  See OTH-Q1 in the Department’s Perkins Q&As for additional information.

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Publication Date: 12/2/2015


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