Summary: This letter provides updated fund liquidation procedures for an
institution that ends its participation in the Federal Perkins Loan Program
SUMMARY: This letter provides updated fund liquidation procedures for
an institution that ends its participation in the Federal
Perkins Loan Program
REFERENCE: Chapter 6 of the Federal Student Financial Aid Handbook.
In order to reduce confusion and provide clarity to an institution that ends its participation in the Federal Perkins Loan Program, we are updating the procedures an institution must follow when liquidating its Federal Perkins Loan Fund and loan portfolio. These updated procedures provide detailed, step-by-step directions designed to facilitate the process and include the names and telephone numbers of appropriate Department of Education personnel should an institution need assistance.
It is important to note that these procedures apply only to an on-going school that is ending its participation in the Federal Perkins Loan Program, not to a school that closes. Procedures for safeguarding the Federal Perkins Loan Fund and loan portfolio of an institution that closes are also being updated and will be announced separately.
An institution may voluntarily elect to end its participation in the Federal Perkins Loan Program or an institutions participation in the Program may end under any of the following circumstances:
the institution loses its eligibility under 34 CFR part 600;
the institutions participation is terminated under subpart
G of the Student Assistance General Provisions;
the institutions period of participation expires or the institutions provisional certification is revoked as specified under 34 CFR 668.13;
the institutions program participation agreement is terminated or expires under 34 CFR 668.14, or
the institutions participation ends under 34 CFR 668.17(c).
If an institution ends its participation under any of the five circumstances listed above, the Departments Institutional Participation and Oversight Service will forward the attached liquidation procedures to the institution.
When an institution liquidates its Federal Perkins Loan portfolio, it must assign the portfolio of loans to the Department. The Department has discontinued the use of other liquidation options, including the option that allowed an institution to retain and service its Federal Perkins Loan Portfolio and the option that allowed an institution to purchase and convert the Federal share of its outstanding Federal Perkins Loans and National Direct Student Loans into institutional loans.
An institution ending its Federal Perkins Loan program participation must comply with the requirements outlined in the attached, updated liquidation procedures. In summary, these requirements are that:
an institution that is voluntarily ending its participation in the Federal Perkins Loan Program must notify the Secretary of its intent to liquidate its Federal Perkins Loan Fund, either by written notification or by checkbox on the Fiscal Operations Report and Application to Participate (FISAP) beginning with the 1998-99 FISAP.
an institution must comply with audit requirements in accordance with 34 CFR 668.26 of the Student Assistance General Provisions.
an institution must complete National Student Loan Data System (NSLDS) reporting requirements on all outstanding Perkins loans.
an institution must assign all outstanding loans to the Secretary or reimburse the Secretary for the Federal share of outstanding loans that the Secretary determines are unassignable.
an institution must issue a final capital distribution reimbursement from its Federal Perkins Loan Fund to the Secretary.
These updated procedures for liquidation of an institutions Federal Perkins Loan Fund and loan portfolio will be available on the Departments "Information for Financial Aid Professionals" website at http://ifap.ed.gov. If you have any questions concerning these new procedures, please contact the Perkins Portfolio Management Team. The names and telephone numbers of the team members are provided on the enclosed list.
Diane E. Rogers
Acting Deputy Assistant Secretary
Student Financial Assistance Programs
PERKINS PORTFOLIO MANAGEMENT TEAM
INSTITUTIONAL FINANCIAL MANAGEMENT DIVISION
Lead on Systems Interface/Support
Lead on Reconciliation
C. J. Franklin
Lead on Liquidation
Lead on Excess Liquid Capital
Lead on Revolving Fund
FAX # 202/260-0522