Posted Date:May 29, 2009
Author: William Leith, Service Director, Program Management, Federal Student Aid
Subject: 2007-2008 Federal Perkins Loan Service Cancellation Reimbursement
Subpart D of the Federal Perkins Loan (Perkins Loan) Program regulations sets forth the conditions for service-based cancellation of a Perkins Loan. Under these conditions, a Perkins Loan borrower may have all or part of his or her loan cancelled for engaging in teaching, military service, law enforcement or corrections officer service, service as a nurse or medical technician, Head Start service, service to certain types of high-risk children, and voluntary service. Under 34 CFR 674.63, the Secretary reimburses a school its share of principal and interest cancelled during an award year. The questions and answers that follow explain the 2007-2008 reimbursement process.
Q1: How is a service cancellation reimbursement amount calculated?
A1: There are two categories of reimbursement under the Perkins Loan Program. Reimbursement under each category is calculated as follows:
Cancellations on loans made prior to July 1, 1972. The first category of loan cancellation reimbursement is a school's portion of principal and interest cancelled on loans made prior to July 1, 1972 for the National Defense Student Loan (Defense Loan) Program. This portion is calculated using the required matching percentage schools contributed for Defense Loans prior to 1972, which is approximately 10 percent for each school that cancelled loans in this category.
Cancellations on loans made on or after July 1, 1972. The second category of loan cancellation reimbursement is both the Federal and school portions of principal and interest cancelled on loans made on or after July 1, 1972 for the National Direct Student Loan (NDSL) and the Perkins Loan programs. Schools are entitled to reimbursement of the total amount cancelled.
Both reimbursement calculations are based on information contained in the 2007-2008 Fiscal Operations Report (Part III, Section A, field 28 for the Defense Loan Program and fields 29 through 35 for the NDSL and Perkins Loan programs).
Q2: Will a school receive the full reimbursement amount to which the school is entitled?
A2: A school will receive all of the Defense Loan payments to which it is entitled. However, due to insufficient funds in the Fiscal Year 2009 appropriation, schools will receive less than 100 percent of the reimbursement due this year for the NDSL and Perkins Loan programs. The Department of Education (the Department) will maintain a record of the amount owed to each school and will include it in the calculation for next year.
Q3: Will there be one or two payments to cover the two reimbursement categories?
A3: One payment will cover both categories of service cancellation reimbursement.
Q4: When will the service cancellation reimbursement payment be issued to the school?
A4: In June 2009, the service cancellation reimbursement payment will be made by electronic funds transfer (EFT) to the bank account established by a school in G5.
Q5: How will the school be notified of the service cancellation reimbursement payment?
A5: Approximately one week before we send a school's payment, we will notify a school by e-mail. We will send this e-mail to the school’s Financial Aid Administrator, as provided in the school's most recently submitted FISAP or as updated via the "Contact Info" page on the eCampus-Based (eCB) Web site.
In this e-mail, we will inform a school that its 2007-2008 Federal Perkins Loan Service Cancellation Worksheet Listing-Fiscal Data (worksheet) has been posted on the eCB Web site. The worksheet explains how the reimbursement amount was determined.
To access the worksheet following receipt of this e-mail, log in to the eCB Web site, select the "Self-Service" link from the top navigation bar, and scroll to the "Campus-Based Notifications for All Available Award Years" section. Then, scroll to the "Perkins Service Cancellation Awards" bullet and select the "2009-2010" link next to it.
Q6: How may the school use the funds?
A6: The portion of the reimbursement that represents cancellations of Defense Loans (Line 8 of the Worksheet) belongs to a school and may be used for any purpose. The portion of the reimbursement that represents NDSL and Perkins Loan cancellations (Line 19 of the Worksheet) must be deposited into the school's Perkins Loan Fund and can only be used for advances to borrowers and for other allowable uses set forth in 34 CFR 674.8(b).
Q7: What portion of the service cancellation reimbursement must the school report on the Fiscal Operations Report for the award year ending June 30, 2009?
A7: The portion of the reimbursement that represents principal and interest cancelled for Defense Loans (Line 8 of the Worksheet) should not be reported on the Fiscal Operations Report, unless a school decides to contribute it to the Perkins Loan Fund. If the school decides to contribute it to the Perkins Loan Fund, it should report the contribution as additional Institutional Capital Contribution in Part III, Section A, field 29.3 of its Fiscal Operations Report for the award year ending June 30, 2009.
Reimbursement for cancelled NDSL and Perkins loans (Line 19 of the Worksheet) must be included in Part III, Section A, field 33 of a school's Fiscal Operations Report for the award year ending June 30, 2009.
Q8: What must the school do if either of the amounts calculated is negative, but the net amount is positive?
A8: A negative amount in either of the reimbursement categories indicates that a prior-year reimbursement to a school was calculated incorrectly as a result of erroneous information contained in a previous Fiscal Operations Report. The amount of the overpayment has been deducted from the total 2007-2008 Federal Perkins Loan service cancellation reimbursement.
If the overpayment occurred under the first reimbursement category (Defense Loans), the school must now deposit into the Perkins Loan Fund from school funds an amount equal to the overpayment, so that the Perkins Loan Fund receives the full amount of its NDSL/Perkins Loan payment. This deposit must be shown as an increase in the cash on hand to be reported in Part III, Section A, field 1.1 and in the cumulative amount of NDSL and Perkins Loan reimbursements to be reported in field 33 of the Fiscal Operations Report for the award year ending June 30, 2009.
If the overpayment occurred under the second reimbursement category (NDSL and Perkins Loan), the school may withdraw from the Perkins Loan Fund an amount equal to the overpayment in order that the school may receive the full reimbursement due on its share of Defense Loan cancellations. This withdrawal will result in a decrease in the cash on hand to be reported in Part III, Section A, field 1.1 and in the cumulative amount of NDSL and Perkins Loan reimbursements to be reported in field 33 of the Fiscal Operations Report for the award year ending June 30, 2009.
If you have questions regarding the 2007-2008 Perkins Loan service cancellation reimbursement, contact the Campus-Based Call Center at 877/801-7168. Customer service representatives are available Monday through Friday from 8:00 A.M. until 8:00 P.M. (ET). You may also e-mail CBFOB@ed.gov.