Higher Education Accounting Advisor: Understanding Rules Related to the Federal Perkins Loan Program Extension

The Federal Perkins Loan Program lapsed on September 30, 2015, seemingly ending the program for all institutions across the country. However, the Federal Perkins Loan Program Extension Act of 2015 (H.R. 3594), signed into law in December 2015, grants an extension of the program through September 30, 2017. The bill provides that Perkins loans could be made to new undergraduate borrowers (that is, a student who has no outstanding balance on a Perkins loan from that institution) through September 30, 2017, only after awarding all subsidized and unsubsidized Direct Loans for which the borrower is eligible.

Continuing undergraduate Perkins borrowers could receive loans through September 30, 2017, though only subsidized direct loans would need to be considered. Graduate borrowers may be granted loans through September 30, 2016. However, as long as the first disbursement of the 2016-17 loan was made between June 30, 2016 and September 30, 2016, subsequent disbursements to those borrowers could continue to be paid through June 30, 2017. One of the most significant impacts of this bill is that it eliminates the previous law’s grandfathering of certain borrowers for up to five years. After September 30, 2017, no new loans will be made.

The Department of Education has issued a “Dear Colleague” letter with further details regarding the extension. It will also be revising the Perkins Loan Question and Answers document as soon as possible.  This letter is available on the department’s Federal Student Aid website. To access the letter, click here.

The Education Department previously released guidance on liquidating and closing out the Perkins loan program at the individual institution level. The Perkins Liquidation procedures instruct the school to engage an auditor within 45 days and submit the closeout audit report within 90 days of the end of the school’s participation in the program. A school’s participation in the program is considered to have ended once all outstanding loans in its portfolio have been fully retired, assigned and accepted by the department, or purchased.

Schools that qualify and report annually under the Single Audit Act are not subject to the 90-day deadline and can submit the closeout audit along with their Single Audit reports. There are no set deadlines yet for liquidating the portfolios, though general guidance on the IFAP website indicates the entire process from assigning loans, submitting the audit report and submitting a revised FISAP could take 180 to 240 days. The Perkins Loan Liquidation Procedures do lay out the significant requirements in a fair amount of detail, although these procedures could be impacted by new guidance issued by the department in the coming months.

We Can Help!

The Higher Education Practice of Elliott Davis Decosimo is committed to staying on top of the latest developments impacting our clients. If you would like further information on the Federal Perkins Loan Program or, if you have questions related to the latest extension of the program, please contact your Elliott Davis Decosimo representative.