The Department of Education has outlined Federal Perkins Loan Program administrative responsibilities and reporting requirements through eventual wind-down. While institutions have not been able to issue new Perkins Loans since 2017, some may still be servicing existing loans. These requirements include important guidelines for reporting, borrower notifications, collection procedures, and how to handle loans that have been in default for more than 2 years.
POSTED DATE: May 15, 2024
AUTHOR: Federal Student Aid
ELECTRONIC ANNOUNCEMENT ID: CB-24-10
SUBJECT: Federal Perkins Loan Program Administrative Responsibilities and Reporting Requirements Through Eventual Wind-Down
As a reminder to all schools that participate in the Federal Perkins Loan (Perkins Loan) Program, the Perkins Loan Program Extension Act of 2015 (Pub.L.114-105) marked the end of schools’ authority to issue new Perkins Loans beyond 2017. Despite the ongoing wind-down of the program, schools are permitted to continue to service their existing Perkins Loan portfolios if they so choose.
Schools that have elected to continue to service their Perkins Loan portfolio are required to assign to the U.S. Department of Education (the Department) any Perkins Loan that has been in default for more than two years. Procedures for assigning loans per the mandatory assignment policy can be found in Part I of the Federal Perkins Loan Assignment and Liquidation Guide.
Some schools may find that it is no longer feasible to continue to service their loan portfolio due to its size and the health of their collections weighed against ongoing servicing costs. Schools that no longer wish to service their Perkins Loan portfolio should begin the liquidation process to close out their program by following the steps outlined in Part II of the Federal Perkins Loan Assignment and Liquidation Guide.
All schools are required to report the status of their Perkins Loan portfolio and program Fund annually through the Fiscal Operations Report and Application to Participate (FISAP) in addition to reporting monthly on their outstanding loans to the National Student Loan Database System (NSLDS®).
This electronic announcement outlines and clarifies information concerning administrative responsibilities and reporting requirements for the Perkins Loan program. This information will help schools manage their Perkins Loan portfolio through the wind-down and assist schools in accurately reporting loans to NSLDS. Please be sure to take advantage of the many resources noted throughout this announcement by clicking on the links to explore additional information and details.
Perkins Loan Program Administrative Responsibilities
Record retention and examination (34 CFR 668.24(b)) Fiscal Records: Schools must account for the receipt and expenditure of Perkins Loan program funds in accordance with generally accepted accounting principles. Financial records that reflect each program transaction must be established and maintained. Schools must also establish and maintain general ledger control accounts and related subsidiary accounts that identify each program transaction and separate those transactions from all other institutional financial activity. Perkins Loan program accounting records must provide a clear audit trail that makes it possible to trace all program cash.
Fiscal Procedures and Records (34 CFR 674.19(d)): Under the records and reporting requirement, schools must establish and maintain program and fiscal records that are reconciled at least monthly. Each year, schools are required to submit a Fiscal Operations Report on which they must accurately account for Perkins Loan program funds.
Due Diligence (34 CFR 674.41(b)): Under the due diligence general requirements, schools are required to:
- Keep the borrower informed, of any and all changes that affect the borrower’s rights or responsibilities;
- Respond to all inquiries from the borrower;
- Ensure that information available is provided to those offices (admissions, business, alumni, placement, financial aid, and registrar’s offices) responsible for billing and collecting loans (including third-party servicers), as needed to determine the—
- Enrollment status of the borrower;
- Expected graduation or termination date of the borrower;
- Date the borrower withdraws, is expelled, or ceases enrollment on at least a half-time basis; and
- Borrower’s current name, address, telephone number, and social security number.
Use of contractors for billing and collection (34 CFR 674.48): Under § 674.48 of the program requirements, schools must ensure servicers and collection firms comply with the program rules in performing its duties as outlined by any contractual agreement with the school. Schools that contract with third-party servicers to perform billing, collection, or other program activities remain responsible for compliance with program requirements in performing these duties. This includes decisions regarding cancellation, postponement, or deferment of repayment, extension of the repayment period, other billing, and collection matters, as well as the safeguarding of all funds collected by its employees and contractors.
Servicers should provide:
Statements to the school detailing activity associated with each borrower account in the portfolio;
Changes in the borrower’s name, address, telephone number, or the borrower’s Social Security number; and
Amounts collected from the borrower.
Collection procedures (34 CFR 674.45): When borrowers do not respond to routine billing methods, more intensive collection procedures are required, potentially including litigation with the borrower.
If the school, or the firm it engages, pursues collection activity for up to 12 months and does not succeed in converting the account to regular repayment status, or the borrower does not qualify for deferment, postponement, or cancellation on the loan, the school shall –
- Litigate in accordance with the procedures in § 674.46;
- Make a second effort to collect the account as follows:
- If the school first attempted to collect the account using its own personnel, it shall refer the account to a collection firm.
- If the school first attempted to collect the account by using a collection firm, it shall either attempt to collect the account using school personnel, or place the account with a different collection firm; or
- Submit the account for assignment to the Secretary in accordance with the procedures set forth in § 674.50.
After twelve months of collection efforts, if the collection firm retained by the school is unsuccessful in placing an account into a successful repayment status, the school must require the collection firm to return the account to the school for one of the actions described above.
Schools should evaluate their portfolio each reporting period, assess the older defaulted loans nearing the 24-month mark, and ensure that collection procedures under 34 CFR 674.45 are being followed.
Loans in default for more than 2 years: Accounts that have been determined to have exceeded two years in default without any payment must be assigned to the Department by the end of the subsequent FISAP reporting period. For example, a Perkins loan reaches 24 months in default status without any collections activity in December 2024. The school will have until June 30, 2026, to assign or purchase the loan. If between the time the loan reached the 24-month default status and reaching the deadline to assign, the school is able to collect payments on the loan, they may continue collecting on the loan in lieu of assigning or purchasing it.
Please refer to the May 26, 2023 (EA ID: CB-23-09) and Aug. 27, 2021 (EA ID: General 21-53) Electronic Announcements for complete information and conditions.
Reporting Requirements
Reporting to NSLDS (34 CFR 674.16(j)): Schools are required to report enrollment and loan status information on all Perkins loans to NSLDS.
Schools may elect to employ a third-party servicer to report enrollment and loan information to NSLDS; however, it is the school’s responsibility to ensure that the required reporting to NSLDS, including Perkins Loan account detail, is completed timely and accurately. Schools that use a third-party servicer must communicate the reporting requirements to their third-party servicer and ensure that the servicer complies with timely and accurate reporting. It is important for schools to understand that they are responsible for any non-compliance by the servicer.
If your school identifies an NSLDS reporting error(s), work with your third-party servicer to correct the error(s) and update NSLDS. If you are a self-reporting school and do not use a third-party servicer, make the corrections in NSLDS with your next monthly batch submittal, or by using the Perkins spreadsheet submittal tool on the NSLDS Professional Access website.
The total amount of loans and number of borrowers on NSLDS should reconcile with the school’s records, its third-party servicer records, and what is reported on its FISAP.
Schools should utilize the reports from the NSLDS Professional Access website to reconcile its records with those of NSLDS, rectify any inconsistencies, and update NSLDS as needed. It is recommended that schools carry out this reconciliation process with NSLDS on a quarterly basis at the very least.
Note: Refer to the Reconciliation and Reminders for NSLDS Reporting sections of the Federal Perkins Loan Assignment and Liquidation Guide for further details on reconciliation reports and NSLDS reporting.
Reference Information
- Federal Perkins Loan Program Regulations under 34 CFR Section 674 Perkins Loan Program.
- Information about how to manage your Perkins Loan Program portfolio is documented in Volume 6 of the Federal Student Aid Handbook, available on the Knowledge Center.
- Perkins information on the wind-down, Distribution of Assets process, and Liquidation and Assignment is available on the Campus-Based Processing Information page on the Knowledge Center.
- Detailed information on requesting reports, record layouts and information can be found on the NSLDS User Resources page on the Knowledge Center. Resources such as the Federal Perkins Data Provider Instructions (DPI), Instructions for Using the new all-Perkins Portfolio Report, and NSLDS Reports for Schools Guide can be found in this electronic library on the Knowledge Center.
Contact Information
If you have questions about the information provided in this announcement, contact the FSA Partner and School Relations Center at 1-800-848-0978. You may also email CODSupport@ed.gov.
If you have questions specific to NSLDS data entry, access, use, or reports, contact NSLDS Customer Support Center at 1-800-999-8219 or email NSLDS@ed.gov.