| AwardYear: 1996-1997 EnterChapterNo: 6 EnterChapterTitle: Federal Perkins Loan Program SectionNumber: 5 SectionTitle: Cancellation PageNumbers: 49-63 A borrower may have all or part of his or her loan (including interest) canceled for engaging in public service such as teaching, service in the education component of a Head Start program, service in the Peace Corps or ACTION, or service in the military. Cancellation is also granted in case of the borrowers death, total and permanent disability, or--in some cases--bankruptcy. Definitions that apply to cancellation provisions are discussed on pages 6-61 through 6-63. [["Dear Colleague" letters CB-93-9, July 1993 and CB-96-8, May 1996]] The promissory notes in "Dear Colleague" letter CB-93-9, dated July 1993, incorporate changes in loan cancellation provisions required by The Higher Education Amendments of 1992 for Federal Perkins Loans and National Direct Student Loans (NDSLs) made on or after July 23, 1992. The U.S. Department of Education (ED) issued reformatted promissory notes in "Dear Colleague" letter CB-96-8, dated May 1996. U.S. ARMY LOAN REPAYMENT PROGRAM It is useful to know that the U.S. Army offers a loan REPAYMENT program as an enlistment incentive. If the borrower of a Federal Perkins Loan or NDSL (or Stafford Loan) serves as an enlisted person in the U.S. Army, in the Army Reserves, or in the Army National Guard, the U.S. Department of Defense will repay a portion of the loan. For more information, the student should contact his or her local military recruiting office. This is a recruitment program and does not pertain to an individuals prior service. Common Cancellation Procedures Although cancellation provisions vary, depending on whether the borrower has a Federal Perkins Loan or NDSL, the following procedures apply to any loan: - The borrower must apply for cancellation of his or her loan by obtaining the appropriate cancellation form from the business or student loan office of the school that made the loan (or from the schools billing service if it uses one). ED does not approve or supply cancellation forms. The form must be submitted to the school by the deadline the school establishes. The borrower must provide any documentation the school requests to show that he or she qualifies for cancellation. For information on documentation, see the appropriate cancellation category in this section. - It is the schools responsibility to determine, based on the borrowers documentation, whether the borrower is entitled to have any portion of his or her loans canceled. This responsibility cannot be delegated. - No portion of any loan may be canceled for services the borrower performed either before the date the loan was disbursed or during the enrollment period covered by the loan. - Regardless of the repayment status of a loan, the school must cancel the loan upon receipt of proof of the borrowers death or upon the schools approval of a borrowers request for cancellation because of a permanent and total disability. - Periods of loan deferment for public service that is also qualifying service for cancellation benefits are considered to run concurrently with any period for which a loan cancellation for military, Peace Corps, or ACTION program service is granted. - Defaulted loan amounts are not eligible for cancellation unless the only reason for the default was the borrowers failure to file a cancellation request on a timely basis. However, if the school has accelerated the account by the time the borrower files the necessary cancellation request forms, only eligible service performed PRIOR to the date of acceleration can be considered for cancellation. A borrower is not entitled to cancellation for any eligible service performed AFTER the date of acceleration. - No repayment made by a borrower during a period for which the borrower qualified for a cancellation may be refunded unless the borrower made the payment because of the schools error. To reduce the chance of error, a school should keep the borrower informed of any new cancellation benefits. - No borrower who has received an education benefit under Subtitle D of Title I of the National and Community Service Act of 1990 may receive a cancellation of a Perkins Loan or NDSL. CANCELLATION PROVISIONS COMMON TO ALL LOANS MADE AFTER JULY 1, 1987 The borrower of a Perkins Loan or NDSL made after July 1, 1987 is eligible to have up to 100% of the loan canceled for qualifying service as [[Teaching in low-income schools]] - a full-time teacher in a public or nonprofit elementary or secondary school serving students from LOW-INCOME*1* families or [[Teaching handicapped children]] - a full-time teacher of HANDICAPPED STUDENTS in a public or nonprofit elementary or secondary school. The majority of the students the borrower teaches must be handicapped children.*2* The cancellation rate per completed academic year of teaching is [[Cancellation rates]] - 15% of the original principal loan amount--plus the interest that accrued during the year--for each of the first and second years; - 20% of the original principal loan amount--plus the interest that accrued during the year--for each of the third and fourth years; and - 30% of the original principal loan amount--plus any interest that accrued during the year--for the fifth year. A Perkins Loan or NDSL borrower who received the loan on or after July 1, 1987 is entitled to cancellation of up to 100% of the loan for qualifying service as a full-time staff member in the educational part of a pre-school program carried out under the Head Start Act. The cancellation rate is 15% of the original principal loan amount--plus the interest that accrued during the year--for each complete school year. LAW ENFORCEMENT CANCELLATION PROVISION-- SPECIFIC TO LOANS MADE ON OR AFTER NOVEMBER 29, 1990 A borrower is entitled to cancellation of up to 100% of a Perkins Loan or NDSL made on or after November 29, 1990 for full-time service as a qualifying law enforcement or corrections officer. The rates of cancellation for each completed year of service are the same as those for teachers: - 15% of the principal--plus any interest that may have accrued during the year--for each of the first and second years; - 20% of the principal--plus any interest that may have accrued during the year--for each of the third and fourth years; and - 30% of the principal--plus any interest that may have accrued during the year--for the fifth year. CANCELLATION PROVISIONS SPECIFIC TO FEDERAL PERKINS LOANS AND NDSLS MADE ON OR AFTER JULY 23, 1992 In addition to being eligible for the previously mentioned cancellation provisions, a borrower of a Perkins Loan or NDSL made on or after July 23, 1992 is eligible to have up to 100% of the loan canceled for teaching or qualifying employment as [[Special education teacher]] - a full-time special-education teacher, including teachers of INFANTS, TODDLERS, CHILDREN, OR YOUTH WITH DISABILITIES*3* in a public or other nonprofit elementary or secondary school system; [[Teaching math, science, languages]] - a full-time teacher in a public or other nonprofit elementary or secondary school in the fields of mathematics, science, foreign languages, or bilingual education or in any other FIELD OF EXPERTISE*3* that is determined by a state education agency to have a shortage of qualified teachers in that state; - a full-time NURSE*3* or MEDICAL TECHNICIAN*3* providing health care services; - a full-time QUALIFIED PROFESSIONAL PROVIDER OF EARLY INTERVENTION SERVICES*3* in a public or other nonprofit program under public supervision; or - a full-time employee of an eligible public or private nonprofit child or family service agency who is providing or supervising the provision of services to both HIGH-RISK CHILDREN*3* who are from LOW-INCOME COMMUNITIES*3* and the families of such children. For these cancellation provisions, a borrowers loan is canceled at the rates shown below for each completed year of full-time employment or services or, in the case of teachers, for each full academic year of full-time teaching: - 15% of the original principal loan amount--plus any interest that may have accrued during the year--for each of the first and second years; - 20% of the original principal loan amount--plus any interest that may have accrued during the year--for each of the third and fourth years; and - 30% of the original principal loan amount--plus any interest that accrued during the year--for the fifth year. MILITARY SERVICE CANCELLATION--APPLIES TO ALL LOANS MADE ON OR AFTER JULY 1, 1972 A borrower is also entitled to cancellation of up to 50% of a Perkins Loan or NDSL for service in the U.S. Armed Forces in an AREA OF HOSTILITIES or an AREA OF IMMINENT DANGER that qualifies for special pay under Section 310 of Title 37 of the U.S. Code. The cancellation rate for every complete year of qualifying service is 121/2% of the original principal loan amount plus any interest that accrued during the year. CANCELLATION PROVISIONS SPECIFIC TO PERKINS LOANS For PERKINS LOANS ONLY, a borrower is entitled to cancel up to 70% of the loan for service as a Peace Corps volunteer or volunteer under the Domestic Volunteer Service Act (ACTION program); an authorized official of the Peace Corps or ACTION program must sign the borrowers cancellation form to certify the borrowers service. The cancellation rate per year of service is - 15% of the original principal loan amount--plus any interest that accrued during the year--for each of the first and second 12-month periods of service and - 20% of the original principal loan amount--plus any interest that accrued during the year--for each of the third and fourth 12-month periods of service. DEATH, TOTAL AND PERMANENT DISABILITY, AND BANKRUPTCY CANCELLATION PROVISIONS--APPLICABLE TO ALL LOANS Regardless of the repayment status of a loan, the school that was the lender must cancel the loan upon receipt of proof of the borrowers death or upon the schools approval of a borrowers request for cancellation because of a permanent and total disability. A determination of permanent and total disability must be based on medical evidence certified by a physician (a medical doctor or doctor of osteopathy, but not a doctor of naturopathic medicine). In some cases, a borrowers Perkins Loan or NDSL may be discharged in bankruptcy. For more information, see "Criteria for Receiving a Bankruptcy Cancellation" on page 6-60. CRITERIA FOR TEACHER CANCELLATION Eligibility for teacher cancellation is based on the duties presented in an official position description, not on the position title. To receive a cancellation, the borrower must be teaching full time in a PUBLIC OR OTHER NONPROFIT ELEMENTARY OR SECONDARY SCHOOL SYSTEM and must be DIRECTLY EMPLOYED by the school system. There is no provision for canceling Perkins Loans or NDSLs for teaching in postsecondary schools. [[Definition of teacher]] A teacher is a person who provides to students - direct classroom teaching; - classroom-type teaching in a non-classroom setting; or - educational services directly related to classroom teaching. Two examples of qualifying individuals for the third category are school librarians and school guidance counselors. A supervisor, administrator, researcher, or curriculum specialist is not a teacher unless he or she primarily provides direct and personal educational services to students. A person who provides one of the following services does not qualify as a teacher unless 1) that person is licensed, certified, or registered by the appropriate state education agency for that area in which he or she is providing related special educational services and 2) the services provided by the individual are part of the educational curriculum for handicapped children: - speech and language pathology and audiology; - physical therapy; - occupational therapy; - psychological and counseling services; or - recreational therapy. For a borrower to be considered as teaching in a field of expertise, the majority of classes taught must be in the borrowers field of expertise. A borrower who is teaching in science, mathematics, foreign language, or bilingual education qualifies for cancellation even if the state has not designated the subject area in which he or she is teaching as a shortage area. For a borrower to be considered as a full-time professional provider of early intervention services, the borrower must be employed in a public or nonprofit program under public supervision. If the borrower teaches both children and adults, the majority of students must be children for the borrower to qualify for cancellation. [[Teacher who is not certified or licensed]] It is not necessary for a teacher to be certified or licensed to receive cancellation benefits. However, the employing institution must consider the borrower to be a full-time professional for the purposes of salary, tenure, retirement benefits, and so on. In other words, to qualify, the borrower should accrue the same benefits as teachers who are licensed and/or certified. [[Teachers aide]] Under certain conditions, a teachers aide may be considered eligible for teacher cancellation. The teachers aide must meet the definition of a "full-time teacher." He or she must have a bachelors degree and be a professional recognized by the state as a full-time employee rendering direct and personal services in carrying out the instructional program of an elementary or secondary school. [[Volunteer teachers]] Volunteer teachers are not considered to be professionally employed on a full-time basis and, therefore, are not eligible for teacher cancellation benefits. [[Private academy]] A borrower may receive teacher cancellation for services performed in a private academy if the private academy has established its non- profit status with the Internal Revenue Service (IRS) and if the academy is providing elementary and/or secondary education according to state law. [[School accreditation]] A private elementary and/or secondary school does not necessarily need to be accredited for a borrower teaching there to qualify for teacher cancellation. However, the school must have established its non-profit status with the IRS and must be licensed by the state (that is, must be providing elementary and/or secondary education according to state law). [[Pre-school/pre-kindergarten programs]] A borrower may receive teacher cancellation for teaching service performed in a pre-school or pre-kindergarten program only if the state considers the program to be a part of its elementary education program. A low-income-school-directory designation that includes pre-kindergarten or kindergarten does not suffice for a state determination of program eligibility. The school must check with the state superintendant of public instruction to determine whether these programs are part of the STATE elementary education program. The cancellation form the borrower files must be signed by an official in the school system or agency to certify the borrowers service. The borrower must teach full time for a full academic year or its equivalent. There is no requirement that a teacher must teach a given number of hours a day in order to qualify as a full-time teacher; the employing school is responsible for determining whether or not the individual is considered to be a full-time teacher. An "academic year or its equivalent" for teacher cancellation purposes is defined as one complete school year or two half years that are - from different school years, excluding summer sessions, - complete, - consecutive, and - generally fall within a 12-month period. [[Incomplete academic year]] A borrower who cannot complete the academic year because of illness or pregnancy may still qualify for cancellation if he or she has completed the first half of the academic year and has begun teaching the second half, but the borrowers employer must consider the borrower to have fulfilled his or her contract for the academic year. [[Cancellation for a combination of teaching]] A borrower who is simultaneously teaching part time in two or more schools may request a cancellation based on teaching full time if he or she can obtain appropriate certification that he or she is teaching full time. The postsecondary school that made the loan may grant the cancellation if an official at one of the schools where the borrower taught certifies that the borrower taught full time for a full academic year. For example - under a consortium agreement, a borrower may be employed by the consortium and teach at member schools;*4* - two or more schools, by mutual agreement, could arrange to have one school employ the borrower on a full-time basis and then hire out his or her services to the other school(s) involved in the agreement;*5* or - a borrower can be considered to have been a full-time teacher for an academic year if he or she can obtain appropriate certifications that he or she has taught in two half-time teaching positions for a complete academic year in two elementary or secondary schools or in two secondary schools. A school may refuse cancellation for simultaneous teaching in two or more schools if it cannot easily be determined that the teaching was full time. A cancellation based on teaching in a school serving students from LOW-INCOME families may be granted only if the borrower taught in an eligible school that is listed in the Directory of Designated Low-Income Schools for Teacher Cancellation Benefits published each year by ED, which compiles this list of low-income schools after consulting with each states educational agency. ED sends a copy of the list to all schools that participate in the Federal Perkins Loan Program. ED considers a school to be a low-income school only if 1) it is in a school district that qualifies for federal funding based on the large number of low-income families in the district and 2) more than 30% of the schools enrollment is made up of children from low-income families. The official 1995-96 Directory was issued to schools with "Dear Colleague" letter CB-95-24, October 1995. [[Cancellation if school is removed from list]] If a borrower is teaching at a school that is on the list one year but not in subsequent years, the borrower may continue to teach in that school and remain eligible to receive a cancellation for service in that school. If a list is not available before May 1 of any year, ED may use the previous years list to make the service determination for that year. Information about specific schools listed in the directory may be obtained from Patricia Reese Systems Administration Branch Campus-Based Programs Systems Division Office of Postsecondary Education U.S. Department of Education 600 Independence Avenue, SW, (ROB-3, Room 4621) Washington, DC 20202-5447 Telephone: (202) 708-6726 [[Teaching at BIA schools]] All elementary and secondary schools operated by the Bureau of Indian Affairs (BIA) are considered to qualify as schools serving low-income families for the purpose of teacher cancellations of Perkins Loans and NDSLs. Elementary and secondary schools operated on reservations by Indian tribal groups under contract with the BIA are also considered to qualify for this purpose. For Perkins Loans or NDSLs made ON OR AFTER July 23, 1992, a borrower may receive a cancellation as a full-time special education teacher (including teachers of infants, toddlers, children, or youth with disabilities) in a public or other nonprofit elementary or secondary school system. For Perkins Loans or NDSLs made BEFORE July 23, 1992, a borrower may receive a cancellation for full-time teaching of handicapped children for a full academic year or its equivalent. The borrower qualifies for this cancellation only if a majority of the students whom the borrower teaches are handicapped children. Handicapped children include those who are mentally retarded, hard of hearing, deaf, speech and language impaired, visually disabled, seriously emotionally disturbed, orthopedically impaired, autistic, have traumatic brain injury or specific learning disabilities, or are otherwise health-impaired children who require special education and related services because of their disabilities. The ONLY cancellation provisions for service in elementary or secondary schools are: - teaching in schools serving low-income families; - teaching mathematics, science, foreign languages, or bilingual education; - teaching in a field of expertise that is determined by a state education agency to have a shortage of qualified teachers in that state; - teaching as a special education teacher; and - providing early intervention services. CRITERIA BORROWER MUST MEET FOR MILITARY CANCELLATION To qualify for military cancellation, the borrower must be serving a period of full-time active duty in the armed forces (that is, the U.S. Army, Navy, Air Force, Marine Corps, or Coast Guard). A member of the National Guard or the Reserves serving a period of full-time active duty in the armed forces is also eligible to receive a military deferment. For a Perkins Loan or NDSL cancellation, the service in the armed forces must be in an AREA OF HOSTILITIES or an AREA OF IMMINENT DANGER that qualifies for special pay under Section 310 of Title 37 of the U.S. Code. For Defense Loan cancellation, the service does not have to be in an area of hostilities or area of imminent danger. The borrowers Commanding Officer must certify the borrowers service dates. The cancellation rate of 121/2% of the loan is for each COMPLETE year of service; service for less than a complete year or any fraction of a year beyond a complete year does not qualify. CRITERIA FOR HEAD START CANCELLATION A full-time staff member is someone who is regularly employed in a full-time professional capacity to carry out the educational part of a Head Start program. The program must operate for a full academic year, or its equivalent, and the borrowers salary may not be more than that of a comparable employee working in the local educational agency. An authorized official of the Head Start Program must sign the borrowers cancellation form to certify the borrowers service. CRITERIA FOR EMPLOYEE OF A CHILD OR FAMILY SERVICES AGENCY To receive loan cancellation for being employed at a child or family services agency, a borrower must be providing services ONLY to high-risk children who are from low-income communities. The borrower may also be providing services to adults, but these adults must be members of the families of the children for whom services are provided. The services provided to adults must be secondary to the services provided to the high-risk children. ED has determined that an elementary or secondary school system or a hospital is not an eligible employing agency. CRITERIA FOR LAW ENFORCEMENT OR CORRECTIONS OFFICER CANCELLATION To establish the eligibility of a borrower for the law enforcement or corrections officer cancellation provision, the school must determine that 1) the borrowers employing agency is eligible and that 2) the borrowers position is essential to the agencys primary mission. 1. A local, state, or federal agency is an eligible employing agency if it is publicly funded and its activities pertain to crime prevention, control, or reduction or to the enforcement of the criminal law. Such activities include, but are not limited to, police efforts to prevent, control, or reduce crime or to apprehend criminals; activities of courts and related agencies having criminal jurisdiction; activities of corrections, probation, or parole authorities; and problems relating to the prevention, control, or reduction of juvenile delinquency or narcotic addiction. Agencies that are primarily responsible for enforcement of civil, regulatory, or administrative laws are ineligible. 2. For the borrowers position to be considered essential to the agencys primary mission, he or she must be a full-time employee of an eligible agency and a sworn officer or person whose principal responsibilities are unique to the criminal justice system and are essential in the performance of the agencys primary mission. The agency must be able to document the employees functions. Individuals whose official responsibilities are supportive, such as those that involve typing, filing, accounting, office procedures, purchasing, stock control, food service, transportation, or building, equipment or grounds maintenance are not eligible for the law enforcement or correction officer loan cancellation regardless of where these functions are performed. Also, a borrower employed as a public defender does not qualify for cancellation benefits under this provision. CRITERIA FOR DISABILITY CANCELLATION Any Perkins Loan, NDSL, or Defense Loan will be canceled if the borrower dies or becomes permanently and totally disabled after receiving the loan. Permanent and total disability is the inability to work and earn money or to attend school because of an impairment that is expected to continue indefinitely or to result in death. Even a 95% disability does not qualify the borrower for disability cancellation. Receiving Social Security disability benefits does not automatically qualify a borrower for permanent and total disability cancellation. If a borrower becomes permanently and totally disabled, the school must decide whether to cancel the loan based on medical evidence (certified by a physician) that the borrower or his or her representative must furnish. This evidence must include statements from all physicians, hospitals, or agencies concerned with the case and should include certification that the criteria for permanent and total disability have been met. ED does not approve or supply cancellation forms. In the case of a borrowers death, the school must receive a death certificate or other proof as required under state law. CRITERIA FOR RECEIVING A BANKRUPTCY CANCELLATION A Perkins Loan, NDSL, or Defense Loan will be written off for bankruptcy if the school receives an official notice of discharge from a bankruptcy court unless the school is required to oppose the discharge. For more information, see "Bankruptcy" in Section 9 of this chapter. Note that a borrower is no longer required to reaffirm a loan discharged in bankruptcy before he or she is eligible to apply for additional student aid including loans. This is a provision of the Bankruptcy Amendments Act of 1994, effective October 22, 1994. REIMBURSING AMOUNTS CANCELED For Perkins Loans and NDSLs, ED will reimburse each school every award year for the principal and interest canceled from its Perkins Loan Fund for all of the cancellation provisions except for death, total and permanent disability, and bankruptcy. The school must deposit in its fund the amount reimbursed. DEFINITIONS For Federal Perkins Loans or NDSLs made ON OR AFTER July 23, 1992, new cancellation provisions include several new terms that have not been defined previously in the regulations. Definitions of these terms are as follows: CHILDREN AND YOUTH WITH DISABILITIES. Children and youth from ages 3 through 21, inclusive, who require special education and related services because they have disabilities as defined in section 602(a)(1) of the Individuals with Disabilities Education Act; Section 602(a)(1) defines "handicapped children" as children who are mentally retarded, hard of hearing, deaf, speech or language impaired, visually handicapped, seriously emotionally disturbed, orthopedically impaired, or other health impaired children or children with specific learning disabilities who by reason thereof require special education and related services. EARLY INTERVENTION SERVICES. Those services defined in section 672(2) of the Individuals with Disabilities Education Act that are provided to infants and toddlers with disabilities; HIGH-RISK CHILDREN. Individuals under the age of 21 who are low-income or at risk of abuse or neglect, have been abused or neglected, have serious emotional, mental, or behavioral disturbances, reside in placements outside their homes, or are involved in the juvenile justice system; INFANTS AND TODDLERS WITH DISABILITIES. Infants and toddlers from birth to age two, inclusive, who need early intervention services for specified reasons, as defined in section 672(1) of the Individuals with Disabilities Education Act; Section 672(1) of the Act defines infants and toddlers with disabilities as those who - have a diagnosed physical or mental condition which has a high probability of resulting in developmental delay or - are experiencing developmental delays, as measured by appropriate diagnostic instruments and procedures in one or more of the following areas: cognitive development, physical development, language and speech development, psychosocial development, or self-help skills. The term INFANTS AND TODDLERS WITH DISABILITIES may also include, at a states discretion, individuals from birth to age two, inclusive, who are at risk of having substantial developmental delays if early intervention services are not provided; LOW-INCOME COMMUNITIES. Communities in which there is a high concentration of children eligible to be counted under Title I of the Elementary and Secondary Education Act of 1965, as amended; MEDICAL TECHNICIAN. An allied health professional (working in fields such as therapy, dental hygiene, medical technology, or nutrition) who is certified, registered, or licensed by the appropriate state agency in the state in which he or she provides health care services; an allied health professional is someone who assists, facilitates, or complements the work of physicians and other specialists in the health care system; NURSE. A licensed practical nurse, a registered nurse, or other individual who is licensed by the appropriate state agency to provide nursing services; QUALIFIED PROFESSIONAL PROVIDER OF EARLY INTERVENTION SERVICES. A provider of services, as defined in section 672(2) of the Individuals with Disabilities Education Act; Section 672(2) of that Act defines developmental services as those services that - are provided under public supervision; - are provided at no cost except where federal or state law provides for a system of payments by families, including a schedule of sliding fees; - are designed to meet a handicapped infantss or toddlers developmental needs in any one or more of the following areas: - physical development; - cognitive development; - language and speech development; - psychosocial development; or - self-help skills; - meet the standards of the state, including the requirements of this part; - include: - family training, counseling, and home visits; - special instruction; - speech pathology and audiology; - occupational therapy; - physical therapy; - psychological services; - case management services; - medical services only for diagnostic or evaluation purposes; - early identification, screening, and assessment services; and - health services necessary to enable the infant or toddler to benefit from the other early intervention services; - are provided by qualified personnel, including - special educators; - speech and language pathologists and audiologists; - occupational therapists; - physical therapists; - psychologists; - social workers; - nurses; and - nutritionists; and - are provided in conformity with an individualized family service plan adopted in accordance with Section 677 of the Individuals with Disabilities Education Act. TEACHING IN A FIELD OF EXPERTISE. The majority of classes taught are in the borrowers field of expertise. *1* See the definition of this term at the end of this section. An official Directory of designated low-income schools is published annually by ED. *2* For loans made on or after July 23, 1992, this provision has been replaced by the "special education teacher" cancellation provision. *3* See the definitions of these terms at the end of this section. *4* The consortium provides the certification of full-time teaching. *5* The employing school certifies the borrowers full-time teaching status. |