Participating in the Perkins Loan Program

The Federal Perkins Loan Program included Federal Perkins Loans, National Direct Student Loans (NDSLs), and National Defense Student Loans (Defense Loans). Perkins Loans were low-interest, long-term loans made through school financial aid offices to help students who had unmet need pay for postsecondary education.

The Federal Perkins Loan (Perkins) Program included Federal Perkins Loans, National Direct Student Loans (NDSLs), and National Defense Student Loans (Defense Loans). No new Defense Loans were made after July 1, 1972, but a few have not been fully retired.

The Federal Perkins Loan Extension Act of 2015 prohibits making new Federal Perkins Loans after September 30, 2017. No disbursements of Federal Perkins Loans are permitted after June 30, 2018. Schools are permitted to charge allowable collection costs to the Perkins Revolving Fund as allowed under the regulations.

No Perkins disbursements are permitted under any circumstances after June 30, 2018. If you awarded a Perkins Loan after September 30, 2017, or made a disbursement after June 30, 2018, the award or disbursement was made in error and must be corrected. In this case, the school must:

See the “Perkins Loans Awarded or Disbursed after the Expiration of the Perkins Loan Program” EA of December 20, 2018 for more in- formation on Perkins Loans awarded or disbursed after the expiration of the authority to award new Perkins Loans. For more information on processing Perkins portfolios, go to: the Campus-Based Processing Information page on the Knowledge Center website.

Schools that choose to continue servicing their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Perkins Loan Program regulations in 34 CFR part 674 and must also continue to report on their outstanding loan portfolio to the Department’s National Student Loan Database (NSLDS) monthly, as well as annually on the FISAP. Because schools may no longer advance funds to students, they may no longer claim an administrative cost allowance against their school’s Perkins Loan Revolving Fund.

Participation in Title IV HEA programs requires that the school account for the receipt and expenditure of federal Title IV funds. Schools that participate in the Perkins Loan Program must continue to maintain accurate Perkins Loan Program ledger accounts and financial records that reflect and identify each Perkins Loan Revolving Fund (fund) transaction. The school’s Perkins Loan Program accounting records must provide a clear audit trail that makes it possible to trace all program cash. Please refer to Appendix A of Volume 4 of the FSA Handbook for Title IV accounting system information, including a Perkins Loan Program chart of accounts.

Due to the expiration of the authority to award new Perkins Loans, the Department has not been collecting Excess Liquid Capital from a school’s Perkins Loan Revolving Fund since the 2017–2018 award year. With the wind-down of the Perkins Loan Program, this process has been replaced by a similar process, the Distribution of Assets process, which distributes the cash received through portfolio collections at year’s end. Please refer to the section below for additional information regarding returning the federal share to the Department and removing the institutional share from the fund and returning it to the school.

Each year, in accordance with the statutory requirement under Section 466(a) of the Higher Education Act of 1965, as amended, schools participating in the Perkins Loan Program are required to distribute the cash (assets) from the school’s Perkins Loan Revolving Fund (fund). The cash from the Perkins Fund is divided between the federal government and the school based on the proportion each has contributed over time – i.e. Federal Capital Contribution (FCC) previously returned to the Department and Institutional Capital Contribution (ICC) previously returned to the school is accounted for in the proportion calculation. (Schools can find this calculation, along with the resulting federal and institutional share percentages, in Part III, Section F of the FISAP.)

Each year, schools with reported cash in the Perkins Loan Revolving Fund will receive a Distribution of Assets Notification from the Department after the final date for FISAP corrections. The notification will provide instructions to the school regarding the removal of the cash from the school’s Perkins Loan Revolving Fund, and the distribution of that cash to the federal government (the federal share) and to the school (the institutional share). In years in which partial service cancellation reimbursement is authorized, notifications may also include instructions to the school regarding the amount of cash the school is to reimburse itself from the fund for service cancellations. (Calculation of service cancellation reimbursement uses cancellation data reported on the FISAP and takes into consideration any prior reimbursement for service cancellations.)

NOTE: Institutions should not remove and return any funds to the Department or the institution until the institution has been notified to do so.

The federal share of the cash from the school’s Perkins Loan Revolving Fund is remitted to the Department through G5. When returning the federal share of funds under the Distribution of Assets process, schools must follow the instructions for the “Perkins Excess Cash” refund type in G5 (https://g5.gov) to ensure accuracy in processing the payment made.

Institutions must return the federal share through the G5 miscellaneous refund functionality. Note that the Department no longer accepts checks. To initiate a refund in G5, the Payee user must have already entered refund banking information under Payments, Refund Bank Account Maintenance, even if there is already a bank account connected to the Payments functionality.

Please be advised that before submitting a refund via G5, the school should notify their bank that they will be doing so, as some banks will not release the funds unless notified in advance. The bank should be provided with the following ACH Company ID for the U.S. Department of Education: 910 200 0102. Schools must read and follow all instructions for Returning Federal Perkins Program Funds to the Department located on the Knowledge Center on the Campus-Based Processing Information Topics Page. The instructions are also available in the “Returning Federal Perkins Loan Program Funds to the Department” section in Volume 4.

Schools must properly record the removal and distribution of cash from the Perkins Loan Revolving Fund in the school’s Perkins Loan Program accounting records so that accurate information is available to the school for the next FISAP submission. Schools must make sure to credit the Perkins Fund cash account, and that the credit to the cash account is balanced by a debit to the Repayments to Federal Government account and a debit to the Repayments to Institution account. (See Appendix A of Volume 4 of the FSA Handbook for Perkins Loan Program chart of accounts and accounting system information.)

If you have questions about the Distribution of Assets process, please contact the FSA Partner and School Relations Center, at 1-800-848-0978. You may also email CODSupport@ed.gov.

The promissory note is the legally binding document that is evidence of a borrower’s indebtedness. The note includes information about the loan’s interest rate, repayment terms, and minimum rates of repayment; deferment, forbearance, and cancellation provisions; credit bureau reporting; and late charges, attorney fees, collections costs, and consequences of default. The school or servicer must ensure that each Perkins Loan is supported by the signed promissory note. If the school does not have a valid note or other written evidence that would be upheld in a court of law, it may be more difficult to collect the debt if a student defaults.

If a school does not have a valid promissory note or other written records (disbursement records or other proof the borrower received the loan), it may have to repay to its Perkins Loan Fund any amounts loaned, as well as any Administrative Cost Allowance (ACA) claimed on those amounts. The school can seek to recover the amount repaid from the borrower.

If an error is discovered in a promissory note, the school should obtain legal advice about what action it should take. The appropriate school official and the student should sign or initial all approved changes in the note. In a very limited number of specific circumstances, a Perkins promissory note may not be valid. These include: notes that have been changed after they were signed, and notes without proper signatures or dates.

When the borrower has fully repaid the Perkins Loan, your school must either notify the borrower in writing or mark the original note “paid in full” and return it to the borrower. After returning the original note, your school must keep a copy of the note for at least three years after the date the loan was paid in full. Remember, when a loan has been repaid, your school must update the loan’s status in NSLDS.

The MPN for the Perkins Loan Program is a promissory note under which the borrower received loans for either a single award year or multiple award years.

Because the MPN was used to award Federal Perkins Loans on a multiyear basis, there is no box for loan amount or loan period on the note. If you used the Federal Perkins MPN as a single award year promissory note, the borrower must have signed a new MPN each award year. When used as a multiyear note, the borrower should have signed the MPN only once—before the first disbursement of the borrower’s first Federal Perkins Loan.

While the Perkins Loan Extension Act of 2015 prohibits any new loans after September 30, 2017, you may have made Perkins Loans under an MPN for up to 10 years from the date the borrower signed the MPN. However, the first disbursement must have been made within 12 months of the date the borrower signed the MPN. If no disbursements were made within that 12-month period, the borrower must have signed another MPN before receiving a Perkins Loan. In addition, no further loans could have been made under an MPN after a school received written notice from the borrower requesting that the MPN no longer be used as the basis for additional loans, or after September 30, 2017.

If the student completed an eMPN, your school must maintain the original electronic promissory note, plus a certification and other supporting information regarding the creation and maintenance of any electronically signed Perkins Loan promissory note or eMPN. Your school must provide this certification to the Department, upon request, should it be needed to enforce an assigned loan. Schools are required to maintain the electronic promissory note and supporting documentation for at least three years after all loan obligations evidenced by the note are satisfied.

When using an e-signed MPN, a school must not only meet the Department’s “Standards for Electronic Signatures in Electronic Student Loan Transactions” as specified in DCL GEN-01-06, but also adhere to the regulatory requirements for retaining information on loans that are e-signed. For additional information, please see “Assignment Under e-Sign or Perkins MPN” section in Chapter 5 of this volume.

The Department may require your school to reimburse its Perkins Loan fund for any outstanding balance on an overpayment or a defaulted loan for which your school failed to record or retain the promissory note, record disbursements, or exercise due diligence. If your school is required to reimburse its fund, your school must also reimburse the Perkins Loan fund for the administrative cost allowance claimed on any reimbursed portion of a loan, if applicable. You should not reimburse the Perkins Loan fund for loans on which your school obtains a judgment.

When a student ceases to be enrolled at least half time, they immediately enter either a grace period or repayment. To properly track borrowers’ status, your school must have a process for coordinating between the offices which monitor enrollment status, the financial aid office, and the office which manages your Federal Perkins Loan portfolio (and/or any third-party servicers which manage the portfolio).

You must have a coordinating official who is responsible for ensuring that such information is shared among the offices that need it. For example, the office that tracks enrollment status must alert the coordinating official when a student’s enrollment status drops below half time. The coordinating official then notifies the financial aid and business office. For a more detailed discussion of the coordinating official, see Volume 2.

Your school, or its servicer, should have reported each Federal Perkins Loan to at least one of the three national credit bureaus with which the Department has an agreement or to a local credit bureau that is affiliated with one of those three credit bureaus. You should have reported the following information:

You must continue to report changes to information previously reported to the same credit bureau(s) to which the information was originally reported until the loan is repaid, transferred, or otherwise satisfied. You must report those changes in the month that they occur.

NSLDS is the only system that contains loan-level data for school-held Perkins loans. This data is self-reported by schools and/or their third-party servicers. Schools with active Federal Perkins Loans (including National Direct Student Loans and National Defense Student Loans) are required to update loans on NSLDS monthly.

Data providers must meet all NSLDS reporting requirements as detailed in the NSLDS Federal Perkins Data Provider Instructions (DPI). It is ultimately the school’s responsibility to ensure that its required reporting to NSLDS (which includes Perkins loan account detail) is completed in a timely and accurate manner. Schools that use a third-party servicer must communicate the reporting requirements to its third-party servicer and ensure that its servicer complies with timely and accurate reporting. It is important for schools to understand that they will be responsible for any non-compliance by the servicer. Enrollment and loan status information must be reported according to the schedule published in the NSLDS Enrollment Reporting Guide. For NSLDS assistance, call 1-800-999-8219 or send an email to NSLDS@ed.gov.

Schools must ensure that NSLDS is accurate and consistent with school records and must reconcile any discrepancies and update NSLDS accordingly. This must be done at least quarterly (monthly is strongly recommended). There are several reports available to assist schools with reconciling and maintaining accurate NSLDS loan records. Reports can be ordered from the Reports tab on the NSLDS Professional Access website at: https://nsldsfap.ed.gov/. Please refer to the National Student Loan Data System (NSLDS) Reports for Schools Guide for detailed information on all NSLDS reports.

It is recommended that schools use the new Perkins Loan Portfolio Report (PRKPF1) to assist with reconciliation and analysis of Perkins loan data on NSLDS. This comprehensive report allows a school to review the entire portfolio of Perkins Loans for a requested 6-digit school group code. It supports analysis of the school’s open loans and helps schools identify duplicate loan records and other potential issues. The Perkins Loan Portfolio Report layout and instructions for using the report can be found at NSLDS Perkins Portfolio Report Extract File Layout for Schools (PRKPF1) Comma Separated Values and Fixed Width in PDF Format, 11 Pages, 460KB.

Users can set up a schedule for the Perkins Loan Portfolio Report after moving the report into the “My Content” Folder. The report can be delivered via the Student Aid Internet Gateway (SAIG). The report will be delivered using message class “SCHPOROP” to the SAIG mailbox (TG Number) associated with the FSA User ID who requested the report. To Generate an Excel file download of the Portfolio Report, leave SAIG Options set to “No” under Send Report to SAIG.

The Perkins Extract by Parameters Report (REC001) provides a school with a list of school-held open Perkins loans. The message class is SCHRECOP. To get a complete report of all open loans, the results from the REC001 report with “Open” loan statuses must be combined with the results of the REC001 report with “Open-Pending Transfers Only” loan statuses. Ordering only the “Open” status loans report will not necessarily return a report with the school’s complete open loan portfolio. The “Open-Pending Transfers Only” loan status means that a loan has been coded by the school or its servicer to be accepted for assignment to the Department. It does not mean that the loan has been accepted for assignment. Until the Department officially accepts a loan for assignment and is able to successfully report on the loan in NSLDS, the loan is still an open school-held loan.

A school must maintain its Perkins Loan records in accordance with the regulations. These records may include, but are not limited to the following:

You must maintain the original promissory note signed by the student until the loan is paid in full or otherwise satisfied. If the original promissory note is released for the purpose of enforcing repayment, the school must keep a certified true copy. To qualify as a certified true copy, a photocopy (front and back) of the original promissory note must bear a certification statement signed by the appropriate school official.

A school must keep original paper promissory notes or original paper MPNs and repayment schedules in a locked, fireproof container. If your school uses an electronic Perkins Loan promissory note, it must maintain an affidavit or certification regarding creation and maintenance of the electronic note, including its authentication and signature processes. If a promissory note was signed electronically, the school must store it electronically and the promissory note must be retrievable in a coherent format.

When the borrower has fully repaid a Perkins Loan, your school must either return the original or a true and exact copy of the note marked “paid in full” to the borrower or otherwise notify the borrower in writing that the loan is paid in full. Your school must keep the original or a copy of the promissory note for at least three years after the date the loan was paid in full. An original electronically signed MPN must also be retained by the school for three years after all the loans made on the MPN are satisfied.

A school must maintain records pertaining to cancellations of Defense, NDSL, and Federal Perkins Loans separately from its other Perkins records.

Schools who made Perkins Loans are required to conduct exit counseling. Your school should conduct exit interviews with borrowers either in person, by audiovisual presentation, or by interactive electronic means. If you conduct exit interviews through interactive electronic means, you should take reasonable steps to ensure that each student borrower receives the materials and participates in and completes the exit interview.

Schools should conduct this interview shortly before the point when the borrower graduates or drops below half-time enrollment (if known in advance). If individual interviews are not possible, group interviews are acceptable. Your school may employ third-party servicers to provide Perkins Loan borrowers with exit interviews. In the case of correspondence study, distance education, and students in the study-abroad portion of a program, you may provide written interview materials by mail within 30 days after the borrower completes the program.

If you elect to conduct exit counseling through interactive electronic means, you must take reasonable steps to ensure that each student borrower receives the required materials and participates in and completes the exit counseling. Some of the material presented at the entrance counseling session will again be presented during exit counseling. The suggested emphasis for exit counseling shifts, however, to more specific information about loan repayment and debt-management strategies.

The financial aid or business office professional must emphasize the seriousness and importance of the repayment obligation the borrower is assuming, describing the likely consequences of default, including adverse credit reports, litigation, and referral to a collection agency. The counselor must further emphasize that the borrower is obligated to repay the full amount of the loan even if the borrower has not completed the program, is unable to obtain employment upon completion, or is otherwise dissatisfied with the school’s educational or other services.

If a borrower withdraws from school without the school’s prior knowledge or fails to complete an exit counseling session, the school must provide exit counseling through either interactive electronic means or by mailing counseling material to the borrower at the borrower’s last known address within 30 days after learning that the borrower has withdrawn from school or failed to complete exit counseling.

In the case of students enrolled in a correspondence program or a study-abroad program that your school approves for credit, you may provide written counseling materials by mail within 30 days after the borrower completes the program.

Consolidation offers a Perkins borrower benefits they are not otherwise entitled to receive. During exit counseling, a school must also include information on the consequences of consolidating a Perkins Loan, including:

If a student with an outstanding Federal Perkins Loan from your school applies to have that loan consolidated, the Direct Loan Consolidation System (DLCS) will send you a Loan Verification Certificate (LVC). You have 10 days from the date of receipt to complete the LVC and return it to DLCS. Loans that have been subject to a judgement may not be consolidated. If DLCS makes the consolidation loan, you will receive the amount you indicated on the LVC plus interest. You must deposit the funds in the account holding your Federal Perkins Revolving Fund, record the deposit in the appropriate ledgers (and contra accounts), and report the payment on your next scheduled FISAP. You must also be sure to update the status of the loan in NSLDS to show that it has been consolidated.

Either shortly before the borrower ceases at least half-time study or during the exit interview, schools must disclose critical repayment information to the borrower in a written statement. Most of the repayment terms that the school must disclose to the borrower already appear in the promissory note. The school must also provide the borrower with the information listed under “Required Elements of Exit Counseling” earlier in this chapter.

If your school exercises the minimum monthly payment option, you must inform the borrower that if he or she wants your school to coordinate payments with another school, he or she must request such coordination. If a borrower enters the repayment period without the school’s knowledge, the school must provide the required disclosures to the borrower in writing immediately upon discovering that the borrower has entered the repayment period.

You have the right to receive a statement of your account upon request.

You have the right to repay all or part of your loan without any penalty.

If you graduate or leave school, or if your enrollment drops below half time, you have the right to a nine-month grace period before beginning repayment of your Federal Perkins Loan.

You have the right to defer payments on your Federal Perkins Loan if you are attending an eligible postsecondary school at least a half-time student, and in some cases if you are:

If your Federal Perkins Loan is placed in deferment, you will not have to make payments, and interest will not accrue while the loan is in deferment.

You have the right to forbearance—a temporary cessation of payments, an extension of the time for making payments, or temporarily making smaller payments than were previously scheduled—under certain health-related or financial circumstances. You also have the right to have part, or all of your loan cancelled for:

You are responsible for using the proceeds of your Federal Perkins Loan only to pay authorized educational expenses.

You are responsible for repaying the full amount of your Federal Perkins Loan even if you:

Repayment begins the day after your grace period ends.

You are responsible for notifying the financial aid office if you:

You are also responsible for notifying the financial aid office if you:

You are responsible for obtaining, completing, and returning to the school for processing any forms required to apply for forbearance, deferment, or cancellation benefits.

You are responsible for notifying the school before the due date of any payment that you cannot remit. You are responsible for making payments on time even if you do not receive a billing statement.

You may contact the school by writing to us at:

by calling us at:

Or by sending an email to:

^*This is only a summary of borrower rights and responsibilities. For more detailed information, consult the Federal Perkins Loan promissory note or the holder of your loan.

You should continue to examine your Federal Perkins Loan program and fiscal records, at the start of the year and monthly, until all loans have been retired; otherwise fully satisfied; or assigned to and accepted by the Department. Proper examination and oversight ensures that all funds paid directly by students, collected by third-party servicers, received for loans cancelled, and received as interest flow into your Federal Perkins Loan bank account, and are accurately reflected in your Asset Account, Cash–Federal Perkins Loan records.

Under the Perkins due diligence general requirements, schools are required to:

Though the Federal Perkins Loan Program has officially ended, and no new Perkins Loans can be made to students, schools that have not liquidated their Perkins portfolio must continue to properly maintain all Perkins-related general ledger accounts, and accurately record and classify all program transactions. Refer to Appendix A of Volume 4 of the FSA Handbook for Title IV accounting system information, including a Perkins Loan Program chart of accounts.

Schools must have a system in place that, on at least a monthly basis, reconciles and accounts for any discrepancies in: cash on hand in the Perkins fund at the start of the period; payments of principal, interest, late charges, and collection charges received during the period; expenses paid from the fund during the period (permissible collection costs not paid by the borrower); repayments of fund capital to the federal government paid from the fund; repayments of fund capital to the institution paid from the fund; accounts on which incorrect information is recorded in NSLDS; and cash on hand in the fund at the end of the period. For more information on Reconciliation and the Federal Perkins Loan Program, please see Chapter 5 of Volume 4.

Schools must also reconcile the school’s internal Perkins loan records with NSLDS records and ensure that NSLDS accurately reflects the school’s Perkins loan portfolio. This should be done at least quarterly. Refer to Perkins NSLDS Reporting in this chapter above for more information.

If a loan holder receives a payoff from the Direct Loan Consolidation Program that is more than the amount needed to fully retire a borrower’s underlying loan(s) and that overpayment is less than $10.00, the loan holder may retain the overpayment. The Direct Loan Consolidation Center will not expect payment from the loan holder. As noted for underpayments, the $10.00 overpayment tolerance applies to the total of all of the borrower’s loans by loan program type that were consolidated by the borrower.

If a loan holder receives a payoff from the Direct Loan Consolidation Program that is more than the amount needed to fully retire a borrower’s underlying loan(s) and that overpayment is $10.00 or more, the loan holder must promptly return the full overpayment amount to the Direct Loan Consolidation Center. All returns of funds to the Direct Loan Consolidation Center must include identifiers for each borrower and the specific loan type or types for which funds are being returned. You may not bill the student.

A school must liquidate its Perkins Loan portfolio and Perkins Loan Revolving Fund when the school:

If your school is closing, please see procedures and guidance provided by the Department’s School Participation Section.

The wind-down of the Perkins Loan Program does not require schools to assign non-defaulted Perkins Loans to the Department or to liquidate their Perkins Loan Revolving Funds. However, schools may choose to assign any Perkins Loan to the Department or liquidate their Perkins Loan Revolving Fund at any time.

Assigning loans to the Department is just one of several steps in the process a school must complete to liquidate its Perkins Loan portfolio and complete the closeout of the program. A school’s Perkins Loan portfolio is not considered liquidated unless it has received an official letter of completion from the Department.

Please note: The following information is not a substitute for the complete instructions found in the Perkins Loan Assignment and Liquidation Guide on the Knowledge Center. Schools must follow the liquidation and closeout process as detailed in the Guide.

Schools must use the Campus-Based Programs System in COD to initiate the process for Perkins liquidation and follow it through to completion. The Campus-Based System in COD guides schools through the liquidation and closeout process. Once a school has satisfactorily completed the liquidation and closeout process, the Department will post a Liquidation Completion Letter on the school’s self-service page. The Department will also notify the school’s financial aid office electronically that a school has satisfactorily completed the liquidation and closeout process. Before beginning the liquidation process, a school must:

If a third-party servicer is assisting a school with liquidation of its Perkins Loan portfolio, the servicer must adhere to the assignment and liquidation process procedures as outlined in the Assignment and Liquidation Guide as posted on the Knowledge Center. It is important that a school and/or its servicer check the Knowledge Center to ensure it is referencing the latest Guide and materials on the Perkins Liquidation process. See additional information about third-party servicers in Step 2 below.

A school must notify the Department that it intends to liquidate and closeout its Perkins Loan portfolio and Fund. A school may begin the liquidation and closeout process at any point.

A school must submit its intent to liquidate electronically using the Common Origination and Disbursement (COD) System. To access the Perkins Liquidation page in COD, a school logs in to the COD website (https://cod.ed.gov/cod/LoginPage). From the School tab, click on Campus-Based at the bottom of the left navigation pane. Once directed to Campus-Based, click on Perkins on the left navigation pane, then click Perkins Liquidation Click on “Begin Liquidation Process” and follow the on-screen instructions. For further data entry instructions, please refer to Appendix B, Quick Reference Guide to Liquidation Process and Data Entry Details for COD.

At the beginning of the liquidation process, it is important that schools communicate with any third-party servicer the school employs for servicing its portfolio. A school’s third-party servicer may be obligated or contracted to assist with the process of assignment, e.g., initial notification to borrowers, loan data for completion of assignment forms. It is also important that any outstanding loans be recalled from any outside collection or litigation firms.

Note: When schools rely on third-party servicers to handle the liquidation of their loan portfolio, it is crucial that they do not defer entirely to the servicer. Instead, schools must actively follow the outlined instructions in Part II of the Assignment and Liquidation Guide. Schools must electronically notify the Department of its intent to liquidate and close out the program through the COD system prior to transferring its loan portfolio to the Department (as prescribed in Step 1 of these instructions, above).

If a third-party servicer is assisting a school with liquidation of its portfolio, the servicer must adhere to the assignment and liquidation process procedures as outlined in this Guide. Also note the Department has posted guidance pertaining to responsibilities and requirements for institutions of higher education that enter into contracts with third-party servicers under the Third Party Servicer Topics Page on the Knowledge Center.

A school must notify borrowers of the pending assignment of their Perkins Loan(s) to the Department. Borrowers should be given at least 30 days notice. Loans should be submitted to the Department no later than 45 days from the date the school submitted its intent to liquidate.

Dear Federal Perkins/Direct/Defense Loan Borrower: We are writing to inform you that [school name] intends to cease participating in the Federal Perkins Loan Program. As part of this process, your Federal Perkins (or NDSL or Defense) loan(s) will be assigned to and transferred to the Department of Education.

Once the assignment of your Federal Perkins Loan(s) to the Department has been completed, the Federal Perkins Loan Servicer will provide you with information on where to send your payments and how to contact them if you need assistance. Please continue to make your payments to [school name or servicer name] until you receive the notification from the Federal Perkins Loan Servicer.

Important: This information pertains ONLY to Federal Perkins Loans, National Direct Student Loans and National Defense Student Loans.

Third-party servicers must continue to bill and process loans that are in repayment. When a loan is submitted for assignment to the Department, the servicer should continue to bill and collect from the borrower until the loan is officially accepted for assignment. Third-party servicers should not prematurely stop collecting on loans in repayment and instead must wait until loans have been officially accepted for assignment. Third-party servicers must also continue to report changes to credit reporting agencies monthly until a loan is repaid, transferred, or otherwise satisfied. It is important that schools ensure their servicers receive copies of all official Acceptance Reports.

If a loan has been submitted for assignment but not yet accepted, funds collected on a loan should be deposited immediately into the school’s Perkins Loan Revolving Fund to await official notification of acceptance. Upon notification that the loan has been accepted for assignment, the school must issue a check to the Department’s Federal Perkins Loan Servicer, ECSI, including the borrower and loan information so that the borrower’s records can be updated to reflect payment.

A school/servicer should have reported every Perkins Loan to at least one of the three national credit bureaus with which the Department has an agreement or to a local credit bureau that is affiliated with one of those three credit bureaus.

The Department expects schools to begin assigning all outstanding Perkins Loans to the Department within 45 days following the submission of Intent to Liquidate.

A school must ensure that its loans are properly accounted for and updated in NSLDS. The school should run the Perkins Loan Portfolio Report in NSLDS when it begins the assignment process and reconcile its records against the open school-held loans on the report to ensure its portfolio has been accurately reported to NSLDS. Schools can request Perkins loan NSLDS reports online at NSLDSfap.ed.gov. The school must make any corrections or updates needed to its loan records in NSLDS so that NSLDS accurately reflects the school’s open Perkins Loan portfolio. Once the school has completed the assignment of its open loans, purchased loans that cannot be assigned, and NSLDS has been properly updated, NSLDS should show that no open loans remain at the school.

Schools can complete and submit assignments either manually by paper, or electronically, by using the Department’s Perkins Loan Assignment System (PLAS). Liquidating schools must follow the official instructions for assigning loans that are provided in Part II of the Perkins Loan Assignment and Liquidation Guide.

For the purposes of Perkins liquidation and closeout, schools must ensure that all outstanding Perkins Loans are properly accounted for and updated in NSLDS. NSLDS must reflect that all borrower loan accounts for a liquidating school are retired, accepted for assignment by the Department, or purchased by the school.

It is a school’s responsibility to ensure the required reporting to NSLDS (which includes Perkins Loan account detail) is completed on time and accurately. A school must complete its NSLDS reporting requirements in accordance with the instructions in the NSLDS Enrollment Reporting Guide and the Perkins Data Provider Instructions. Schools that utilize a third-party servicer for billing, collecting, and reporting should communicate these requirements to its servicer.

After all assignments have been accepted and updates to NSLDS are complete, the Department records the total outstanding principal balance (OPB) plus any calculated interest required to purchase loans not assigned or rejected for assignment (if applicable). If there are no loans to be considered as a liability or the school has already accounted for purchasing any loans by adding cash to its Perkins Fund, the Department must first enter $0 allowing the school to proceed in entering and submitting the Current Cash on Hand balance of its Perkins Fund to the Department through Phase 3 in COD.

A school will be required to purchase loans that the Department will not accept for assignment, or those that are unassignable to the Department due to lack of required documentation. Whether your school has loans that it must purchase or not, it must log into COD and navigate to Phase 3 of the Perkins Intent and Closeout Form to enter and submit its final cash balance of its Perkins Fund.

Please note: Schools do NOT send funds to the Department to purchase loans. A school purchases a loan by depositing into its Perkins Loan Revolving Fund the total due (principal + interest) on the loan.

If your school is required to repay a Federal share of its Perkins Loan Revolving Fund, the amount required and the instructions for repayment are provided in an official automated Federal Share Owed letter. The Federal Share Owed letter will be emailed to the school and posted on the school's Perkins Liquidation page on COD once the school enters and submits its current cash on hand balance into Phase 3 of the Intent and Closeout Form.

The U.S. Department of Treasury (Treasury) has mandated that all federal government agencies convert to using electronic payments. As a result, the Department no longer accept checks. Any federal share of remaining capital should be refunded electronically via the G5-Portal, using the Miscellaneous Refunds option. For specific guidance or for other options for returning Perkins Loan funds to the Department, refer to the “Returning Perkins Funds” instructions on the Campus-Based Processing Information Topics Page on the Knowledge Center. It is imperative that schools read and follow these instructions so that funds remitted are properly applied.

Schools can now refer to their latest submitted FISAP for the calculation of the federal and institutional shares that make up a school’s Perkins Fund as each school’s capital contribution shares are different. See Part III, Section F Contributions to the Perkins Fund to find the federal share percentage of total net capital contributions from the most recent submitted FISAP for calculated ratios.

A school may estimate its federal share amount due by multiplying the federal share percentage of total net capital contributions by the estimated total final cash asset. The total cash asset is the cash balance in the Perkins Revolving Fund account plus, if applicable, the total outstanding principal balance plus interest on loans that were not able to be assigned successfully to the Department.

A school must continue to file its FISAP annually until it can report all final activity. Final activity consists of assigning any remaining loans with outstanding balances to the Department or reimbursing the Fund for the purpose of purchasing any loans that are not accepted by the Department and confirming that the distribution of the final Fund capital (current cash) has been made.

Schools that have yet to receive an Official Liquidation Completion letter from the Department at the time that annual FISAPs are due to be submitted must report Perkins data on their annual FISAP.

Schools may be directed to report final FISAP data using Phase 4 of the Perkins online closeout form through the Campus-Based Processing COD system. Schools can find the current FISAP form, instructions, and desk references on the Knowledge Center.

The school must schedule the Perkins closeout audit and provide a copy of the audit to Department when completed. A Perkins closeout audit is required as part of the liquidation process. Please refer to the Perkins Loan Assignment and Liquidation Guide for details regarding the Perkins closeout audit requirement and for all liquidation and closeout instructions.

Schools can find Perkins Loan Program information, guides, forms, and communications related to the Perkins Loan Program Wind-Down, Perkins Distribution of Assets, and Perkins Loan Assignment and Liquidation on the right side of the Campus-Based Processing Information Page of FSA’s Knowledge Center website.