Perkins Loan Billing, Collection, and Default

When a Perkins Loan enters repayment, your school must follow the due diligence requirements of Subpart C of the Perkins regulation (34 CFR 674.41-50). You must afford a borrower maximum opportunity to repay a Federal Perkins Loan. Specific steps the school must take include (but are not limited to) billing the borrower, sending overdue notices, and conducting address searches if the borrower cannot be located. If billing procedures fail, a school must take more aggressive collection steps such as hiring a collection firm and/or litigating. Default in the Federal Perkins Loan Program is defined as “the failure of a borrower to make an installment payment when due or to comply with other terms of the promissory note or written repayment agreement.”

Perkins billing and collection activities involve many steps. First, there are general requirements to which your school must always adhere: you must inform the borrower of all program changes that affect his or her rights and responsibilities and you must respond promptly to borrower inquiries. If a borrower disputes a loan and you cannot resolve the dispute, you must explain the services provided by the Department’s Federal Student Aid (FSA) Ombudsman Group. For information about maintaining billing and collection records, see Chapter 1 of this volume.

Keeping current information on a borrower makes it easier to know when repayment must begin and where to send billing notices. The various offices at the school—the admissions, business, alumni, placement, financial aid, and registrar’s offices, and others, as necessary—must provide any available information about the borrower that is relevant to loan repayment, including:

Contact with the borrower becomes even more important as the borrower’s last day of attendance approaches. As described in Chapter 3, your school must conduct exit interviews with borrowers shortly before borrowers graduate or drop below half-time enrollment (if this point is known in advance).

A school must contact the borrower during both initial and post-deferment grace periods to remind him or her when repayment will begin or resume. Your school must contact the borrower three times during the nine-month initial grace period. The school must also contact the borrower twice during any six-month post-deferment grace period. The chart on the next page shows the length of initial and post- deferment grace periods for Perkins Loans.

Billing refers to the series of actions the school routinely performs to notify borrowers of payments due, remind them of overdue payments, and demand payment of overdue amounts. The school may choose a coupon payment system as its method of billing. The school must send the coupons to the borrower at least 30 days before the first payment is due when using a coupon payment system.

If the school does not use a coupon system, it must, at least 30 days before the first payment is due, send the borrower a statement of account and a written notice giving the name and address of the party to which payments should be sent. The statement of account includes information such as the total amount borrowed, the interest rate on the loan, and the amount of the monthly payment. For subsequent payments, the school must send the borrower a statement of account at least 15 days before the due date of the payment.

If the borrower chooses to make payments through electronic funds transfer, the school doesn’t have to send the borrower a statement of account before each payment. However, the school must send the borrower an annual statement of account that lists the required amounts and dates of repayment, as well as any information tracking the status of any late charges.

If a payment is overdue and you have not received a request for forbearance, deferment, or cancellation, you must send the borrower:

In this notice, you must tell the borrower the amount of any late charge your school has assessed (see discussion under "Late Charges" later in this chapter), and whether your school has:

You may skip the first two letters and send just the final demand letter within 15 days after a payment is overdue if the borrower’s repayment history has been unsatisfactory or if you have reason to believe the borrower does not intend to repay the loan or to seek forbearance, deferment, or cancellation. A borrower is considered to have an unsatisfactory repayment history if he or she has failed to make payments when due; has failed to request deferment, forbearance, or cancellation on time; or has received a final demand letter.

The final demand letter must inform the borrower that unless the school receives a payment or a request for forbearance, deferment, or cancellation within 30 days of the date of the letter, the school will refer the account for collection or litigation and will report the default to a credit bureau as required by law.

If mail sent to a borrower is returned undelivered, or if the borrower fails to respond, you must take steps to locate the borrower. These steps must include:

If the borrower does not respond to the final demand letter within 30 days of the date the letter was sent, you must try to contact him or her by telephone before beginning collection procedures. As telephone contact is often very effective in getting the borrower to begin repayment, one call may avoid the more costly procedures of collection.

You should make at least two attempts to reach the borrower on different days and at different times. If the borrower has an unlisted telephone number, you must make reasonable attempts to obtain it by contacting sources such as the borrower’s employer or parents. If you are still unsuccessful, you should document the contact attempts in your files.

For loans made prior to July 23, 1992, the school must also try to collect the amount owed from any endorser of the loan. It may help to send the endorser a copy of the final demand letter that was sent to the borrower and copies of all subsequent notices, including demand/collection letters. Loans made on or after July 23, 1992 no longer required an endorser.

The school must take the following steps to locate the borrower if communications are returned undelivered (other than unclaimed mail):

If these methods are unsuccessful, you must continue efforts to locate the borrower, using either school personnel or a commercial skip-tracing firm. If you use school personnel, you must employ and document efforts comparable to commercial skip-tracing firms. If you still cannot locate the borrower after taking these steps, you must continue to make reasonable attempts at least twice a year until the loan is recovered through litigation, the account is assigned to the Department, or the account is written off.

The assessment of late charges on an overdue Perkins Loan borrower is optional. A school that adopts a policy of assessing late charges on an overdue Perkins Loan must impose them on all borrowers with overdue payments. A Perkins late charge is based either on the actual costs the school incurs in taking steps to obtain the overdue amount or on average costs incurred in similar attempts with other borrowers. A Perkins late charge may not exceed 20% of the installment payment most recently due.

If a school opts to charge late fees, the school may charge late fees only during the billing process; a school may not charge late fees once the school begins collections procedures.

You may add a late charge to the principal amount of the loan as of the first day the payment was overdue. Alternatively, you may include the charge with the next payment that is scheduled after the date you notify the borrower that the charge must be paid in full by the next payment due date. You must inform the borrower of the late charge, preferably in the first overdue payment notice. For a borrower who repays the full amount of past-due payments, the school may waive any late charges that were imposed.

You may accelerate a loan if the borrower misses a payment or does not file for deferment, forbearance, or cancellation on time. "Acceleration" means immediately making payable the entire outstanding balance, including interest and any applicable late charges or collection fees.

Because this marks a serious stage of default, the borrower should have one last chance to bring his or her account current. For that reason, if the school plans to accelerate the loan, it must send the borrower a written acceleration notice at least 30 days before accelerating the loan. The notice may be included in the final demand letter or in some other written notice sent to the borrower.

If the loan is accelerated, you must send the borrower another notice to inform him or her of the date the loan was accelerated and the total amount due. Remember that acceleration is an option, not a requirement. Once a loan has been accelerated, the borrower loses all rights to deferment and cancellation benefits for qualifying service performed after the date of acceleration.

The Default Reduction Assistance Program (DRAP) assists schools in contacting defaulted Perkins Loan borrowers. Schools can email, or print and send, letters on official Department letterhead to their defaulted Perkins loan borrowers. The letter explains the serious consequences of default including the inability to obtain other federally supported financial assistance; withholding of federal and state income tax refunds; salary garnishment; and damage to credit history. It also encourages borrowers to contact the school to initiate repayment arrangements.

Through DRAP, a school or its third-party servicer can:

Participation in the DRAP process is voluntary. There is no cost to the school.

The DRAP process is most effective when used during the 30- day period when the school is waiting for the defaulted borrower to respond to the finial demand letter. Do not request default reduction assistance if the account has already been referred to a collection agency.

All related functions of the DRAP process are accessed via the COD website. To access the DRAP section of the COD website, log in at https://cod.ed.gov, and from the School tab select “Campus-Based” and then “DRAP.”

To initiate the process, a school or its third-party servicer enters information about borrowers who have defaulted on their Perkins Loans. The information may be entered for each borrower or it may be uploaded from a file. Following submission of the information, a letter will be printed on the Department’s letterhead and emailed to each borrower. The email encourages borrowers to contact the school to initiate repayment arrangements. A PDF copy of the email may also be downloaded and printed for mailing by the school or third-party servicer.

If a school or a third-party servicer that submits DRAP data on behalf of a school does not also provide Fiscal Operations Report and Application to Participate (FISAP) services for the school, the servicer must be granted DRAP-only access to the COD system by the school’s Destination Point Administrator (DPA).

The Department will send only one DRAP email to each address provided by a school. Schools will need to log in periodically to review and print reports of undeliverable emails. Schools are encouraged to provide updated addresses. When an address is updated, a DRAP letter is sent to the new address.

For additional information about DRAP, contact the FSA Partner and School Relations Center at 1-800-848-0978. Customer service representatives are available Monday through Friday from 8 a.m. until 8 p.m. (EST). You may also email the center at: CODSupport@ed.gov.

If a borrower is unresponsive and required billing procedures have been exhausted, your school will normally need to institute more intensive collections procedures. You must make a first effort to collect using either your own personnel or hiring a collection firm. Before beginning collection procedures, you must attempt all of the required contact methods described previously. You must also report that the account is in default to at least one nationwide credit bureau. If the school’s personnel or the collection firm cannot convert the account to regular repayment status by the end of 12 months (or if the borrower does not qualify for forbearance, deferment, or cancellation), you have two options—either to litigate or to make a second effort to collect.

A second effort to collect requires one of the following procedures:

If you are unsuccessful in your effort to place the loan in repayment after a second collection effort, you must continue to make yearly attempts to collect from the borrower until:

Schools must assign defaulted loans to the Department once the loan has been in default for more than two years.

A school must report an account to credit bureaus as being in default when a borrower fails to respond to the final demand letter or the telephone contact. Reporting all credit history is essential to ensure that current and future creditors have complete information regarding the credit obligations of the borrower. You must report the default to any one national credit bureau or to an affiliated credit bureau that transmits credit information to one of the three national credit bureaus with which the Department has an agreement.

You must report any subsequent changes in the status of the borrower’s account to the same national credit bureau, using the procedures required by that credit bureau. You must respond within one month to any inquiry received from any credit bureau about reported loan information. Finally, you must notify all credit bureaus to which you reported the default when a borrower makes consecutive, on-time monthly payments.

Under the Fair Credit Reporting Act (FCRA), a borrower may appeal the accuracy and validity of the information reported to the credit bureau and reflected in the credit report. You should be prepared to handle the appeal and make necessary corrections to the report as required by the provisions of the FCRA.

A school may cease collection activity on defaulted accounts with balances of less than $200 (including outstanding principal, accrued interest, collection costs, and late charges) if the school carried out the required due diligence and if the account has had no activity for four years (for accounts with balances of more than $200, see the “Non-Liquidating Schools” section below). Although interest will continue to accrue and may put the account over $200, you will not have to resume collection activity if you document that you ceased collection activity when the account was under $200. The borrower will remain responsible for repaying the account, including accrued interest. The borrower will still be in default and ineligible for FSA funds and the account will still be included in the school’s cohort default rate, if applicable.

To avoid litigation, a school may offer to waive collection costs as incentive for repayment. You may waive all collection costs on a loan if the borrower makes a lump-sum payment of the entire amount outstanding, including principal and interest; a written repayment agreement is not required. Alternately, you may waive a portion of the collection costs on a loan if the borrower agrees to pay a corresponding portion of the loan within 30 days of entering into a written repayment agreement with the school. For example, if the borrower repays half of the outstanding balance on a loan within 30 days of the agreement, the school may waive half of the collection costs incurred through the date of that payment. The amount of waived collection costs may be charged to the Perkins Loan fund.

You may compromise the repayment of a defaulted loan if you have fully complied with all due diligence requirements and the borrower pays, in a single lump-sum payment, at least 90% of the outstanding principal balance, plus all interest and collection fees. The federal share of the compromise repayment must bear the same relation to the school’s share as the Federal Capital Contribution (FCC) bears to the Institutional Capital Contribution (ICC).

A borrower may rehabilitate a defaulted Perkins Loan by making nine consecutive, on-time, monthly payments. A rehabilitated Perkins Loan is returned to regular repayment status. (See "Default Status and Perkins Eligibility" later in this chapter.)

A borrower may include his or her defaulted Perkins Loan in a Direct Consolidation Loan. The amount eligible for consolidation is the sum of the unpaid principal, accrued unpaid interest, late charges, and outstanding collection costs. A defaulted loan that is being repaid under a court order remains in default status until paid and is not eligible for consolidation.

To get information about obtaining a Direct Consolidation Loan contact the Loan Consolidation Call Center at 1-800-557-7394 or by visiting StudentAid.gov/consolidation.

You may write off a defaulted account with a balance of less than $25 (including outstanding principal, accrued interest, collection costs, and late charges). You may also write off a defaulted account with a balance of less than $50 (including outstanding principal, accrued interest, collection costs, and late charges) if, for a period of two years, you have billed the borrower as required.

If you write off an account, the borrower is relieved of all payment obligations, and you must account for the write off in your Federal Perkins Loan fund on the FISAP. If you receive a payment from a borrower after you have written off the loan, you must deposit that payment into the Fund.

Your school may use a contractor for billing or collection, but it is still responsible for complying with due diligence regulations regarding those activities. The school, not the billing or collection firm, is responsible for deciding whether to sue a borrower in default. The school is also responsible for decisions about cancelling or deferring repayment, granting forbearance, extending the repayment period, and safeguarding the funds collected.

If you use a billing service, you may not use a collection firm that owns or controls the billing service or is owned or controlled by the billing service. In addition, you may not use a collection firm if both the collection firm and billing service are owned or controlled by the same corporation, partnership, association, or individual.

At least once a year, the school must review the amount of repayments it expects to receive from billing or collection firms to ensure adequate bond or insurance coverage.

A school must ensure that its billing service and collection firm maintain a fidelity bond or comparable insurance to protect the accounts they service. A school using a law firm to collect must review the firm’s bond or its insurance policy to determine whether the firm is protected against employee misappropriation. If the firm’s malpractice insurance also covers misappropriation of funds, that policy is considered to provide coverage.

The Department has entered into an agreement with the three national credit bureaus listed below:

National credit bureaus charge fees for their services. These fees differ from credit bureau to credit bureau. Credit bureaus affiliated with the above credit bureaus may have different fees from those of the national credit bureaus. The Department does not keep a list of these affiliated bureaus and their fees.

The Privacy Act authorizes disclosure of a borrower’s account information to creditors without the borrower’s consent if the disclosure helps enforce the terms and conditions of the loan. You may also make such disclosures about loans that haven’t defaulted and/or are being disbursed.

If the collection procedures prescribed in the regulations do not result in the repayment of a loan, the school must review the account for litigation once every two years. If all the conditions are met, the school must litigate. The conditions are:

Even if all the above conditions are not met, your school may still choose to sue a defaulted borrower. If the borrower has a partial defense that may bar judgment for the school, you must weigh the costs of litigation against the costs of recovery based on the amount of the enforceable portion of the debt. No federal or state statute of limitation can apply to enforcement actions to collect Perkins Loans.

Your school must attempt to recover from the borrower all litigation costs, including attorneys’ fees, court costs, and other related costs, to the extent permitted by applicable state law. You are also required to try to recover all costs previously incurred in the collection of overdue payments if the borrower has not paid these collection costs; a percentage of these unrecovered costs may be charged to the fund as explained later in this chapter under "Billing and Collection Costs".

When a school has filed suit to collect a defaulted Perkins Loan and a judgment has been rendered on the loan, the borrower is obligated to repay only the amount of the judgment obtained on the loan. A defaulted loan that is being repaid under court order remains in default status until paid and is not eligible for consolidation. After a judgment is satisfied on the defaulted loan, the student is again eligible for future awards under these programs if all other eligibility criteria are met.

Schools in the Perkins Loan Program are not subject to a defense raised by a borrower based on a claim of infancy under state law. See General Provisions relating to student assistance. For more detail, see HEA Section 484A(b)(3).

A deceased student, a deceased student’s estate, or the estate of such student’s family does not have to repay any federal student aid, including interest, collection costs, or other charges. For more detail, see HEA section 484A(d).

A borrower who is in default on an FSA loan is not eligible for any further FSA loans unless they have regained eligibility.

To the extent that they are otherwise eligible, a borrower who is in default on a Perkins Loan may regain eligibility for federal student aid by making satisfactory repayment arrangements on his or her defaulted loan. (See also Volume 1.) For purposes of regaining eligibility for federal student aid, a borrower who is in default on a Perkins Loan can normally regain eligibility for the remaining Title IV programs by making six on-time, consecutive, monthly payments on the defaulted loan (see note below on the waiver of part of these requirements for certain individuals). A borrower may regain eligibility only once in this way. After a borrower has made six on-time, consecutive, monthly payments on the defaulted loan the school must appropriately update the borrower’s loan status code in the NSLDS. Note that a borrower who makes six payments while rehabilitating a defaulted loan but does not seek additional Title IV aid will not be considered to have used the one-time opportunity to regain eligibility. A borrower whose Perkins Loan is in default also can regain eligibility for federal student aid by consolidating his or her Perkins Loan.

As part of the Fresh Start Initiative, the Secretary waived the Title IV eligibility requirements of § 668.32(g)(1) for a borrower who is in default on a federal student loan and waived 20 U.S.C. 1091(a)(3), which makes defaulted borrowers ineligible for any Title IV aid. The Secretary also waived the conditions needed to regain Title IV eligibility in § 668.35(a) for a student who is in default on a Title IV loan.

Borrowers who qualify under the Fresh Start Initiative regained eligibility for Title IV aid. The Fresh Start Initiative was available to qualifying borrowers for one full year following the end of the payment pause, which was instituted during the COVID-19 pandemic and ended in September, 2023. The waivers provided as part of the Fresh Start Initiative expired on September 30, 2024, and may no longer be used to restore lost Title IV eligibility for the 2025-26 award year.

For more details, see Electronic Announcement GEN-22–58, and Dear Colleague Letter GEN–22–13.

Your school must establish a rehabilitation program and notify all borrowers with defaulted loans of the option to rehabilitate and the advantages of rehabilitation. A borrower may normally rehabilitate a defaulted Perkins Loan by making full monthly payments, as determined by the school, each month for nine consecutive months and requesting rehabilitation. A rehabilitation payment is on time if it is a full monthly payment, as determined by the school, and made within 20 days of the due date.

Borrowers may not rehabilitate loans on which the holder has obtained a judgment. However, your school may enter into an agreement with the borrower that provides the borrower with some of the benefits of rehabilitation. For example, your school could promise to vacate the current judgment and request the removal of the default from the borrower’s credit report after the borrower makes nine consecutive payments and signs a new promissory note.

The rehabilitation payments should be sufficient to satisfy the outstanding balance on the loan within a 10-year repayment period. A school may not establish a loan rehabilitation policy that requires defaulted Perkins Loan borrowers to pay the full outstanding balance of the loan within the nine-month rehabilitation period if such payments would create a hardship for the borrower. In most cases, such a policy would require a borrower to make excessively high monthly payments, and would, in effect, deny the borrower access to a statutorily mandated benefit of the Perkins Loan Program.

Within 30 days of receiving the borrower’s last on-time consecutive monthly payment, you must:

After rehabilitating a defaulted loan and returning to regular repayment status, a borrower regains the benefits and privileges of the promissory note, including deferment and cancellation.

If a borrower chooses to rehabilitate a defaulted loan and then fails to make nine consecutive on-time payments, the rehabilitation is unsuccessful, but the borrower may still make further attempts to rehabilitate the defaulted loan. Also, if a borrower successfully rehabilitates a defaulted loan and maintains good standing on the loan, the borrower may continue to attempt to rehabilitate other defaulted Perkins Loans. If a borrower successfully rehabilitates a defaulted loan, but they later default on the same loan, that borrower is not allowed to rehabilitate the previously rehabilitated loan (or any other defaulted Perkins Loan) again.

When a school has filed suit to collect a defaulted Perkins Loan and a judgment has been rendered on the loan, the borrower is obligated to repay only the amount of the judgment obtained on the loan. If the judgment is for less than the outstanding balance on the loan, the school may write off the portion of the loan not covered by the judgment. After a judgment is satisfied on the defaulted loan, the student is again eligible for aid from FSA programs if all other eligibility criteria are met. However, if a borrower has previously satisfied a defaulted student loan involuntarily (for instance, through wage garnishment), you should consider this as evidence of unwillingness to repay and should not approve further loan assistance to the borrower. The term “involuntarily” includes payments obtained by income tax offset, garnishment, income asset execution, or pursuant to a judgment.

Your school’s cohort default rate is calculated for a particular year based on information you report in Part 3, Sections D and E, of the FISAP. For detailed information on how your school’s cohort default rate is determined, see Part III of the https://fsapartners.ed.gov/knowledge-center/library/resource-type/FISAP Form and Instructions">FISAP Instructions.

For any award year in which 30 or more borrowers enter repayment, the cohort default rate is the percentage of those current and former students who enter repayment in that award year on loans received for attendance at that school and who default before the end of the following award year. For any award year in which fewer than 30 current and former students at the school enter repayment on a loan received at the school, the cohort default rate is the percentage of those current and former students who entered repayment on loans received for attendance at that school in any of the three most recent award years and who defaulted on those loans before the end of the award year immediately following the year in which they entered repayment.

For purposes of the cohort default rate, a loan enters repayment only once in its life. This repayment begins the day after the end of the initial grace period or the day that the borrower waives his or her initial grace period.

A borrower is included in determining the school’s cohort default rate if the borrower’s default has persisted for at least 240 consecutive days for a loan repayable monthly or 270 consecutive days for a loan repayable quarterly.

The following loans are not treated as a defaulted loan when reporting borrower status on Part III of the FISAP:

For purposes of reporting on Part III of the FISAP, a school should use the following rules to calculate the number of days a loan has been in default:

If the school’s cohort default rate is 50% or higher for the three most recent years, the school is ineligible to participate in the Federal Perkins Loan Program and must liquidate its loan portfolio.

A school may appeal a determination of ineligibility if the appeal is based on an inaccurate calculation of its cohort default rate or a low number of borrowers entering repayment. A school appeals a determination of ineligibility based on an inaccurate calculation by adjusting the cohort default rate data on the FISAP.

If a school has a branch or branches or has an additional location or locations, the school’s cohort default rate applies to all branches and locations of the school as they exist on the first day of the award year for which the rate is calculated. The cohort default rate applies to all branches/locations of the school from the date the Department notifies the school of the rate until the Department notifies the school that the rate no longer applies.

For more information about the effect of changes of ownership and the treatment of multiple locations in the Perkins rate calculation, see 34 CFR 674.5(d).

Your school must assess charges against the borrower, for the cost of actions taken regarding past-due payments on the loan (not routine billing costs).

If your school cannot recover billing and collection costs from the borrower, you may charge the costs to the fund, provided the costs fall within the specifications described in the following paragraphs and corresponding regulations. Schools are no longer able to claim the Administrative Cost Allowance (ACA) due to the expiration of the Perkins Loan Program. You must report the collection costs permitted in the regulations in the collections cost category on the FISAP. The only billing costs a school may charge the fund are the costs of telephone calls made to demand payment of overdue amounts not paid by the borrower. Even if the amount recovered from the borrower does not suffice to pay the amount of the past-due payments and the penalty or late charges, the school may charge the fund only for the unpaid portion of the actual cost of the calls.

A school may waive a percentage of the collection costs past due on a loan if a borrower agrees to a written repayment arrangement. The percentage of collection costs that may be waived is equal to the percentage of the past-due balance paid by the borrower within 30 days of the date on which the borrower and the school enter into the written repayment agreement. A school may waive 100% of the collection coasts due on a loan in return for a lump-sum payment of the full amount of principal and interest outstanding.

The following collection costs may be charged to the Perkins Loan Fund if the costs are waived or not paid by the borrower:

Collection costs waived. If your school waives collection costs as incentive for repayment, the amount waived may be charged to the Fund.

Cost of a successful address search. You may charge to the Fund a reasonable amount for the cost of a successful address search if you used a commercial skip-tracing service or employed your school’s personnel to locate the borrower using comparable methods. (Defining a reasonable amount is left to the school.)

Cost of reporting defaulted loans to credit bureaus. You may charge to the Fund the cost of reporting a defaulted loan to a credit bureau, reporting any change in the status of a defaulted account to the bureau to which the school had previously reported the account, and responding to any inquiry from a credit bureau about the status of a loan.

Costs of first and second collection efforts. You may charge to the Fund collection costs not paid by the borrower if they do not exceed—for first collection efforts—30% of the total principal, interest, and late charges collected and—for second collection efforts—40% of the principal, interest, and late charges collected. The school must reimburse the Fund for collection costs initially charged to the Fund but subsequently paid by the borrower.

Collection costs resulting from rehabilitation. Collection costs charged to the borrower on a rehabilitated loan may not exceed 24% of the unpaid principal and accrued interest as of the date following application of the ninth payment. Collection costs are not restricted to 24% if the borrower defaults on the rehabilitated loan.

Costs of a firm performing both collection and litigation services. If a collection firm agrees to perform or obtain the performance of both collection and litigation services on a loan, the amount for both functions that may be charged to the Fund may not exceed the sum of 40% of the amount of principal, interest, and late charges collected on the loan, plus court costs specified in 28 U.S.C. 1920.

Collection costs resulting from litigation, including attorney’s fees. Collection costs resulting from litigation, including attorney’s fees, may be charged to the Fund if not paid by the borrower but must not exceed the sum of:

Due diligence activities involving fixed costs (telephone contacts, credit bureau reporting, and bankruptcy procedures) may be charged to the Fund whether or not the actions are successful. Other activities, such as address searches, collection, and litigation (other than bankruptcy), are typically performed on a contingent-fee basis. If these activities are unsuccessful, there are no costs charged to the school and therefore no costs may be charged to the Fund. If these activities are successful, you may charge the associated allowable costs to the Fund.

You may charge either actual costs incurred in collecting the borrower’s loan or average costs incurred for similar actions taken to collect loans in similar stages of delinquency. Your school must assess all reasonable collection costs against the borrower despite any provisions of state law that would conflict with the above provisions. You must document the basis for the costs assessed. For audit purposes, a school must keep documentation supporting costs, including telephone bills and receipts from collection firms.

For loans referred to a collection agency on or after July 1, 2008, collection costs charged the borrower may not exceed:

All loans a school assigns to the Department are assigned without recompense. The school is relieved of incurring additional expenses in attempting to collect on the loan. All rights, authorities and privileges associated with the loan are transferred to the Department, and the Department will not reimburse the school’s Perkins Fund for any collections made on the assigned loans.

Perkins loans may not be assigned to the Department if:

A school that is not liquidating its Perkins portfolio may assign any of its Perkins loans (in repayment, in-school, defaulted, or non- defaulted) to the Department at any time during the program year.

As part of the wind down of the Perkins Loan Program, all Perkins Loans that have been in default for more than two years must be assigned by the school to the Department if there are no current collections or collection records for the loans. Schools are required to assess their Perkins Loan portfolio each year to determine if accounts have exceeded two years in default status. The school will then have until the end of the subsequent FISAP reporting period to assign the defaulted accounts.

The Department will monitor school Perkins Loan assignment activity to ensure continued compliance with this requirement. Assignment of defaulted loans does not affect the calculation of the school’s Perkins Loan cohort default rate.

A school that is liquidating its Perkins portfolio must assign all Perkins loans with outstanding balances (defaulted and non-defaulted) to the Department.

Schools, including non-liquidating schools, participating in the Federal Perkins Loan Program may submit any defaulted or non-defaulted Perkins Loan (including National Direct/Defense Loans) for assignment to the Department at any time during the processing year. For more details, see the Perkins Assignment and Liquidation Guide section, below.

The Department recognizes that a school may have exhausted all available collection options on some of its defaulted Perkins Loans and encourages schools to assign these loans to the Department so additional steps can be taken to recover the loan funds. The Department has collection tools that are not available to schools, such as administrative wage garnishment, Treasury offset, and litigation by the U.S. Department of Justice.

Schools are required to assign all Perkins loans to the Department when the eligibility to participate has been lost; the Perkins cohort default rate is over 50% for three years; or the school is closing or liquidating. Proof of due diligence is no longer required when assigning loans.

Schools are required to assign Perkins loans that have been in default for more than 2 years unless the school has documentation that shows that the borrowers are making payments toward the loans. The annual deadline for assigning a loan that surpasses a two-year default status in any given year is June 30th of the year the loan entered that category. See Electronic Announcement CB-23-09 for more details. Schools assigning loans should keep in mind that:

The Federal Perkins Loan Assignment and Liquidation Guide “Perkins Liquidation and Assignment” and all forms, instructions, etc., can be found under the Section titled “Perkins Liquidation and Assignment” found (in the right-hand column) on the Campus-Based Processing and Resources page of the Knowledge Center.

The Assignment and Liquidation Guide includes information about the assignment process and information about the required processes for the liquidation of a school’s Federal Perkins Loan (Perkins Loan) portfolio and Perkins Loan Revolving Fund (Fund).

(Schools must follow all instructions for assigning Perkins loans as detailed in the Federal Perkins Loan Assignment and Liquidation Guide. The information presented here is not meant to take the place of the Guide.) Schools can complete and submit the Perkins Loan Assignment Form manually or online using the PLAS. The Perkins Loan Assignment System allows authenticated users to:

Since original promissory notes with a borrower’s signature are required, even if a school utilizes PLAS, promissory notes must be mailed to the Federal Perkins Loan Servicer.

A school must notify borrowers of the pending assignment of their loan(s) to the Department at least 30 days prior to assignment of the loan. This notification may result in payments from borrowers who have been unwilling to make payments in the past. If a payment is received, the school or its servicer should deposit the funds immediately into its Perkins Program Fund and await official notification that the loan has been accepted for assignment.

Questions about the status of assignment submissions or the correction of pending assignments should be directed to ECSI Federal Perkins Loan Services, at:

All emails about accounts submitted for assignment must be encrypted and must include your school’s name and OPEID. In addition, for each account about which you are inquiring you must include the student’s name and Social Security number.

A school must ensure that the loan data it has reported to NSLDS for a Perkins loan matches the loan data that is being submitted for assignment. If, for example, the school is submitting one loan for assignment but has each disbursement of that loan reported to NSLDS as separate loans, the school must correct NSLDS before submitting the loan for assignment. The school must confirm that loan data in NSLDS (including but not limited to disbursement dates, loan and disbursement amounts, borrower identifying information, etc.) matches the loan being submitted for assignment, and must correct NSLDS prior to loan submission if it does not. Schools can order or run the Perkins Loan Portfolio Report (PRKPF1) and the Perkins Extract by Parameters Report (REC001) which can assist in the management of Perkins loan records in NSLDS. Refer to Perkins NSLDS Reporting in Chapter 3 of this Volume for more details regarding these NSLDS reports.

A school may be required to submit the following documents to the Department for any Perkins loan it proposes to assign:

If you assign loans made under the Perkins MPN, you must include copies of the disbursement records that document the principal amount when assigning the loan. The school should retain the original disbursement records until the loan is paid off or otherwise satisfied. Schools must refer to the Federal Perkins Loan Program Assignment and Liquidation Guide available on the Knowledge Center for complete Perkins Loan assignment instructions.

If the Department accepts the assignment of a Perkins loan, it will give the school written notice to that effect. By accepting the assignment, the Department acquires all rights, title, and interest in the loan. You must endorse and forward to the Department any subsequent payment(s) the borrower makes, as soon as possible.

If the Department later determines an assigned loan to be unenforceable because of an act or omission on the part of your school or its agent, your school may have to compensate the Perkins Loan Fund in the amount of the unenforceable portion of the outstanding balance.

A borrower whose loan has been assigned to the Department for collection continues to be in default on the loan and is ineligible for FSA funds until the borrower provides confirmation from the Department that he or she has made satisfactory arrangements to repay the loan.

For Perkins Loans rejected for assignment, the Department will provide the school with the reason(s) for rejection; if the school can resolve the issue(s) it may resubmit the loan for assignment. For most problems, this process may enable a school to correct the deficiencies and resubmit the rejected loans. The Department will work with the school to assist in resolving issues if possible. If it is not possible to resolve an issue, the loan may have to be purchased by the school.

There may be loans you have submitted for assignment that the Department is unable to accept. Common reasons that loans are rejected include the following:

Except for death & total and permanent disability, once these errors are fixed/addressed, the files may be accepted for assignment.

Schools receive a document identified as a “Perkins Load Database Report” (Acceptance Report) via email identifying loans that have been accepted for assignment. The Acceptance Report is sent securely as an attachment from the federal Perkins loan servicer. The subject line of the email is “Acceptance Report” and the body states that the attached is the acceptance report for date of batch submission.

A password is sent from the same email address separately to open the report. This report provides borrower identification information, school identification information, and outstanding principal, interest and fees accepted for assignment by the Department. This is the official Acceptance Report notice and should be retained in the school’s records. Schools that utilize a third-party servicer to complete NSLDS monthly reporting must ensure that the Acceptance reports are provided to those servicers, and that the servicers update the loan status of accepted loans in NSLDS.

Hard copies of the acceptance notices (Perkins Load Database Reports) may be sent to the address provided in the school’s program participation agreement. The school should ensure that its mail distribution staff becomes familiar with these notices and the offices to which they should be distributed.

Note: Schools that use the Perkins Loan Assignment System (PLAS) for electronic submission can access information about accepted and rejected assignments through PLAS. These reports can be viewed online or printed from PLAS.

If a loan has been submitted but has not yet been accepted for assignment by the Department and the school or its servicer receives a payment, the school should deposit the funds immediately into its Perkins Program Fund and await official notification of acceptance. Upon acceptance of the account, the school must issue a check to the Department’s Federal Perkins Loan servicer. (See below for mailing information.)

Any payment the school or its servicer receives from a borrower after the borrower’s account has been accepted for assignment by the Department, should be forwarded as soon as possible to the Department’s Federal Perkins Servicer. (See below for mailing information.)

Borrower payments are not to be sent to the Department through G5. Borrower payments must be forwarded to the Department’s Federal Perkins Loan Servicer at the following address:

NOTE: Schools should refer to the most recently published Perkins Loan Assignment and Liquidation Guide for the most up-to-date Perkins assignment instructions and mailing addresses.

Courier services do not deliver to P.O. boxes. Therefore, we recommend using United States Postal Service registered mail. Each payment submission must clearly identify the borrower’s full name, Social Security number, and the type of loan to which the payment is to be applied. The school’s name and OPEID should also be included and easily identifiable.

A school should not contact the Department to request the return of a submission because a borrower has made a payment to the school. Once a loan is submitted and accepted for assignment, it becomes the property of the Department. If the Department refuses to accept the loan for assignment, the school should correct any deficiencies and resubmit the complete loan package including the additional information for assignment.

If a collection agency has deducted fees from borrower payments after the account has been submitted and accepted by the Department, the institution may not charge these fees to the Perkins Loan Fund. The entire amount of the borrower payment must be forwarded to the Department.

Once a Perkins Loan has been accepted for assignment by the Department, a school or servicer that has previously reported a borrower’s loan to a credit reporting agency MUST report to that agency that the loan has been transferred.

In Field 17A the school or servicer should report the two digit code 05 (Transferred) AND enter the Special Comment Code AL (Student Loan — Permanently Assigned to Government). In addition, when a school or servicer reports code 05, the school or servicer MUST also report, Field 21 (Current Balance), Field 22 (Amount Past Due), and Field 17B (Payment Rating).

Field 21 and Field 22 must always be reported as 0. The acceptable values for the Payment Rating a school or servicer must enter in Field 17B are:

If you assign loans that were made under an electronically signed promissory note, you must cooperate with the Department in all activities necessary to enforce the loan.

You may be asked to provide an affidavit or certification regarding the creation and maintenance of electronic records of the loan. This affidavit or certification must establish that the records are created and maintained in a form appropriate to ensure admissibility of the loan records in a legal proceeding.

The affidavit or certification must:

The affidavit or certification may be executed in a single record for multiple loans provided that this record is reliably associated with the specific loans to which it pertains. An authorized official or employee of the school may have to testify to ensure admission of the electronic records of the loan or loans in the litigation or legal proceeding to enforce the loan or loans.

Your school’s most recent audit must assess how well your school’s e-sign authentication process meets the Department’s “Standards for Electronic Signatures in Electronic Student Loan Transactions”.

Additional information on the procedures for assigning Perkins Loans to the Department is provided in the Federal Perkins Loan Program Assignment and Liquidation Guide available on the Knowledge Center.

Additional information on the procedures for assigning Perkins Loans to the Department is provided in the Federal Perkins Loan Program Assignment and Liquidation Guide available on the Knowledge Center.

Borrowers may receive waivers of certain regulatory or statutory requirements under the HEROES Act if the borrower is an “affected individual.” For purposes of these waivers, an affected individual is an individual who:

These waivers are effective as of January 24, 2024 and will expire on January 24, 2029. For more detail on the types and conditions of the HEROES Act waivers, see the Federal Register of January 24, 2024.

Questions pertaining to the status of your assignment submissions, or the correction of pending submissions, may be directed to:

ECSI can also be contacted at:

For verification of assignments submitted more than 60 days previously, please email productionprocessing@efpls.ed.gov. To verify the submission, the email must include the student’s name(s) and Social Security number(s) in an encrypted file. The file must be password protected, and the password must be provided in a separate email. All inquiries must include the school’s Name and OPEID.

Payments from a borrower received by a school or its servicer after the borrower’s account has been submitted to the Department for assignment and accepted by the Department should be forwarded, as soon as possible, to

Each payment submission must clearly identify the borrower’s full name, Social Security number, and the type of loan to which the payment is to be applied.

Contact information for the unified School Participation Division is available online. See also Electronic Announcement GEN-25-14 for more on the unified School Participation Division.

Questions concerning closed school procedures should be directed to the unified School Participation division.

Schools should contact ECSI, the Federal Perkins Loan Servicer, to resolve any discrepancies between institutional records and those of the Department pertaining to accounts that have already been assigned to the Department and accepted. This includes corrections to acceptance notices, bankruptcy notices, and any other general information on accepted accounts that an institution wishes to forward.

For questions about the FISAP form, contact the FSA Partner and School Relations Center at 1-800-848-0978 or by email at CODSupport@ed.gov.

For questions about Perkins Loan Program Liquidation, contact the Perkins Loan Portfolio and Liquidation Team at perkinsliquid@ed.gov

Borrower Payments should be mailed to:

The Borrower Customer Service telephone number is 866-313-3797.

Borrower Correspondence should be mailed to:

As of the date of publication in 2025, Perkins Loan Total and Permanent Disability assignments are temporarily on hold until a new loan servicer is announced. Schools should continue to hold them until the new servicer is ready to accept transfers. More information will be published in the near future. For more information, see Electronic Announcement LOANS-25-04.

The phone number for the Department’s TPD Servicer is 888-303-7818.