Department of Education Issues Perkins Q&As
By Joan Berkes, Policy & Federal Relations Staff
On May 2, the Department of Education (ED) posted answers to questions relating to the wind-down of the Federal Perkins Loan Program, elaborating on information provided in Dear Colleague Letter GEN-16-05. That letter should still be referenced for basic eligibility information.
Congress has set September 30, 2017, as the expiration date for the Perkins Loan Program. Among other issues, the Q&A provides information on last awarding dates for undergraduates (September 30, 2017) and graduate students (September 30, 2016), and on allowable subsequent disbursements.
For undergraduates, a loan may be made for the 2017-18 award year as long as it is awarded and the first disbursement made prior to October 1, 2017. In that case, all additional disbursements for the award year may be made. The loan may later be increased and the loan period extended for any summer terms subsequently attended if they are attributable to the 2017-18 award year.
The Q&As also reiterate and clarify some of the student eligibility criteria. For an undergraduate student who has no outstanding balance on a Perkins Loan borrowed at his or her current institution ("new borrower"), both subsidized and unsubsidized Direct Loan (DL) eligibility must be determined and taken into account before awarding a Perkins Loan. However, the institution may use some or all of the unsubsidized DL to replace expected-family contribution (EFC), which could then allow the student to borrow Perkins.
For example, a first-year dependent undergraduate student with no previous Perkins Loan has a cost of attendance (COA) of $10,200 and an EFC of $5,200. If the student has no other aid, need is $5,000. The student is eligible for $3,500 in a subsidized DL, and can borrow the full $2,000 allowable in an unsubsidized loan, $500 of which would have to be used to replace part of the EFC to avoid the appearance of an overaward. The school could then use the remaining $1,500 of the unsubsidized DL to replace more of the EFC. That leaves the student with a need gap of $1,500, which can be awarded in a Perkins Loan.
Another first-year new student has a COA of $20,000, a zero EFC, and aid other than loans totaling $14,500. Remaining need is $5,500, which is met by a $3,500 subsidized DL and a $2,000 unsubsidized DL. This student has no need gap and no EFC to be replaced by the unsubsidized DL. Since all of the unsubsidized DL must be counted as financial assistance, this student has no eligibility for a Perkins Loan.
A student who has a Perkins Loan made for attendance at a prior institution but no loans made at the current institution is regarded as a "new" borrower. Only loans made by the student’s current school affect the student's status.
A student who does have an outstanding Perkins Loan balance made by the school the student is attending is a "current undergraduate student" and only the student’s subsidized DL eligibility must be considered before awarding Perkins Loan. However, the school may elect to award unsubsidized DL also ahead of Perkins Loans in its packaging order for these students.
Note that a student may decline to borrow any or all of his or her maximum DL eligibility, but the maximum eligibility must still be used to calculate the student’s Perkins Loan eligibility.
If a student receives additional outside aid, the school may resolve the overaward by adjusting any of the loans that were used to meet the student’s need, in whatever order the school determines.
The Q&As also address new annual counseling requirements, which is the institution’s responsibility to conduct. ED will not provide template language, nor is a new master promissory note needed. There are no changes to administrative cost allowance provisions, or to the procedures and consequences of assigning loans to ED for collection (the school relinquishes all rights to any portion of collections).
More information about the liquidation of the school’s Perkins Loan Fund is forthcoming in future ED communications. NASFAA will continue to provide any other Perkins wind-down information as received.
Publication Date: 5/4/2016
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