Summary: This letter provides information concerning the ASSIGNMENT of Federal Perkins Loans and National Direct (or Defense) Student Loans (NDSLs) in default to the U.S. Department of Education (ED) for collection.
FEDERAL PERKINS LOAN PROGRAM
(Formerly National Direct/Defense Student Loan Programs)
ASSIGNMENT SUBMISSION PROCEDURES
FOR SCHOOLS WITH COHORT DEFAULT RATES OF 20
PERCENT AND HIGHER AS OF JUNE 30, 1993
SUMMARY: This letter provides information concerning the
ASSIGNMENT of Federal Perkins Loans and
National Direct (or Defense) Student Loans
(NDSLs) in default to the U.S. Department of
Education (ED) for collection.
Enclosed are the procedures for submitting defaulted Federal
Perkins Loan, National Direct Student Loan, and National Defense
Student Loan notes to ED for assignment under Section 463(a)(5)
of the Higher Education Act of 1965, as amended (HEA).
Any note that your institution "assigns" to ED is assigned
without recompense, and all rights, authorities, and privileges
associated with that note are transferred to the U.S. Government.
All funds collected on these notes will become the property of
the U.S. Government.
NOTE: Assignment of such defaulted loans does not have any
bearing on the calculation of your cohort default rate.
An institution with a cohort default rate of 20 percent or
greater as of June 30, 1992, must submit documentation that it
has complied with all due diligence requirements for any loans it
proposes to assign.
PLEASE NOTE THAT THESE PROCEDURES HAVE BEEN
UPDATED TO INCORPORATE ALL THE REVISIONS THAT
ARE CURRENTLY PERTINENT TO THIS PROCESS AS THE
RESULT OF THE 1992 REAUTHORIZATION OF THE HIGHER
EDUCATION ACT. ED DOES NOT EXPECT TO REISSUE
THESE PROCEDURES UNTIL MAY 31, 1998. NOTIFICATION
OF ANY REVISION TO THE DUE DILIGENCE
REQUIREMENTS, OR ANY CLARIFICATION OF
PROCEDURES, WILL BE TRANSMITTED TO YOUR
INSTITUTION THROUGH BRIEF "DEAR COLLEAGUE"
THE FOLLOWING REVISIONS HAVE BEEN MADE TO THESE
1) The minimum outstanding balance on an account that may be
assigned has been reduced to $25. Correspondingly, any
defaulted account with an outstanding balance of less than
$25 may be written off.
2) All accounts will be accepted by ED for assignment at the
interest rate reflected in the promissory note, unless
superseded by a legal judgment. ED acceptance of any
promissory note bearing an interest rate that is not in
compliance with ED regulations for that timeframe will be
reported to the ED Campus-Based Financial Management
Section for reconciliation with the assigning school.
3) ED is now requesting that institutions identify and explain
the determination of all outstanding collection costs for
any account being submitted for assignment.
4) All institutions have been required to report all accounts
on which advances have been made on or since July 23, 1992,
to NATIONAL credit bureaus. Reporting of accounts to
regional credit bureaus is no longer sufficient for such
5) Any defaulted Federal Perkins Loan signed for by a minor on
or after July 23, 1992, being submitted for assignment,
cannot bear the signature of a cosigner.
6) Institutions must now submit accounts for assignment using
the enclosed ED Form 553 through its revised expiration date
of May 31, 1998. A copy of that form is included in this
package. All computer facsimile ED Form 553s must be
resubmitted for approval by ED following the revised
procedures contained herein. Accounts may be submitted for
assignment at any time of the program year.
IT IS ALWAYS TO THE BENEFIT OF YOUR INSTITUTION TO
READ AND FOLLOW THE ENCLOSED PROCEDURES VERY
CAREFULLY AS REFINEMENTS ARE CONTINUOUSLY MADE.
ANY ACCOUNT NOT STRICTLY ADHERING TO
THESE PROCEDURES WILL BE REJECTED..
Questions regarding assignment procedures should be directed to
the offices listed in Section VI, "Information Sources," of the
enclosed assignment procedures. INSTITUTIONS SHOULD NOT
CONTACT THE ED-CONTRACTED ASSIGNMENT CENTER,
SINCE THE CENTER DOES NOT HAVE THE AUTHORITY OR
PROGRAM KNOWLEDGE SUFFICIENT TO RESOLVE OR
ASSIST SCHOOLS TO CORRECT DEFICIENSCIES IN THEIR
ASSIGNMENT SUBMISSIONS, AND THE CENTER'S
CONTRACT DOES NOT REQUIRE THE PROVISION OF
SERVICES DIRECTLY TO SCHOOLS. Please note the
appropriate ED regional office numbers to ascertain payment status
of past assignments.
Senior Assistant to the Secretary