Maintained for Historical Purposes

This resource is being maintained for historical purposes only and is not currently applicable.

Federal Perkins Loan Program - Contents

AwardYear: 1997-1998
EnterChapterNo: 6
EnterChapterTitle: Federal Perkins Loan Program
SectionNumber:
SectionTitle: Contents
PageNumbers:


INTRODUCTION . . . . . 1
Recent Changes to the Federal Perkins Loan Program . . . . . 1
Participation Agreement and Federal Perkins Loan Fund . . . . . 3
Allocation of Funds--Federal Capital Contribution . . . . . 4

SECTION 1: STUDENT ELIGIBILITY . . . . . 7
Eligibility Factors . . . . . 8
Loan Availability . . . . . 9
Eligibility of Student Who Drops Out . . . . . 10

SECTION 2: MAKING & DISBURSING LOANS . . . . . 11
Loan Maximums . . . . . 11
Counseling Students . . . . . 13
The Promissory Note . . . . . 15
Comparison of July 1993 Notes with May 1996 Notes . . . . . 16
Changes in Loan Amount--May 1996 Notes . . . . . 17
School-Designed Note . . . . . 17
Minimum Monthly Payment Option . . . . . 18
Closed-end and Open-ended Promissory Notes . . . . . 18
General Disbursement requirements . . . . . 19
Frequency of Disbursements . . . . . 21
Uneven Costs/Unequal Disbursements . . . . . 21
Late Disbursements . . . . . 22

SECTION 3: REPAYMENT . . . . . 23
Grace Periods . . . . . 23
Grace Period for Borrower attending Less Than Half Time . . . . . 24
Prepayment . . . . . 26
Repayment Plan . . . . . 26
Exit Interview and Repayment Schedule . . . . . 27
Developing a Repayment Schedule . . . . . 27
Minimum Monthly Repayment Amounts . . . . . 28
Establishing Repayment Dates . . . . . 31
Interest Rates . . . . . 32
Length of Repayment Period . . . . . 32
Disposition of Promissory Note and Repayment Schedule . . . . . 34

SECTION 4: FORBEARANCE & DEFERMENT . . . . . 37
Forbearance . . . . . 37
Deferment . . . . . 38
In-School Deferment--Common to All Program Loans . . . . . 39
Deferment of Loans Made on or After July 1, 1993 . . . . . 39
Deferment of Perkins Loans Made Before July 1, 1993 . . . . . 43
Deferment of NDSLs Made Between
October 1, 1980 and July 1, 1993 . . . . . 46
Deferment vs. Postponement for Service That
Will Qualify for Loan Cancellation . . . . . 48
The Concurrent Deferment Period . . . . . 49
Deferment and Default . . . . . 49
Deferment vs. In-School Enrollment Status . . . . . 50

SECTION 5: CANCELLATION . . . . . 51
U.S. Army Loan Repayment Program . . . . . 51
Common Cancellation Procedures . . . . . 51
Cancellation Provisions Common to All
Loans Made After July 1, 1987 . . . . . 53
Law Enforcement Cancellation Provision--Specific
to Loans Made on or After November 29, 1990 . . . . . 53
Cancellation Provisions Specific to Federal Perkins
Loans and NDSLs Made on or After July 23, 1992 . . . . . 54
Military Service Cancellation--Applies to All
Loans Made on or After July 1, 1972 . . . . . 55
Cancellation Provisions Specific to Perkins Loans . . . . . 55
Death, Total and Permanent Disability, and Bankruptcy
Cancellation Provisions--Applicable to All Loans . . . . . 56
Criteria for Teacher Cancellation . . . . . 56
Criteria Borrower Must Meet for Military Cancellation . . . . . 61
Criteria for Head Start Cancellation . . . . . 61
Criteria for Employee of a Child or Family
Services Agency . . . . . 61
Criteria for Law Enforcement or Corrections
Officer Cancellation . . . . . 62
Criteria for Disability Cancellation . . . . . 62
Criteria for Receiving a Bankruptcy Cancellation . . . . . 63
Reimbursing Amounts Canceled . . . . . 63
Definitions . . . . . 64

SECTION 6: DUE DILIGENCE--BILLING &
ADDRESS SEARCHES . . . . . 67
Exit Interview . . . . . 67
Contact During Grace Periods . . . . . 70
Billing Procedures . . . . . 71
Address Searches . . . . . 74

SECTION 7: DUE DILIGENCE--LOAN COLLECTION . . . . . 77
Collection Procedures . . . . . 77
Actions a School May Take to Avoid Litigation . . . . . 79
Litigation . . . . . 81
Deposit of Funds Collected . . . . . 82
Costs Chargeable to the Federal Perkins Loan Fund . . . . . 82
Using Billing and Collection Firms . . . . . 84

SECTION 8: DEFAULT . . . . . 87
Compromise of Repayment of Defaulted Loan . . . . . 88
Penalty for Schools With High Cohort Default Rates . . . . . 89
Calculating a School's Cohort Default Rate . . . . . 89
Defaulted Loans Included in a School's Cohort Default Rate . . . . 90
Rules for Calculating the Number of Days in Default . . . . . 92
Cohort Default Rate for a School With
More Than One Location . . . . . 93
Default Reduction Plan . . . . . 94
Assignment . . . . . 97
Default Prevention Software . . . . . 99
Default and Student Eligibility . . . . . 99

SECTION 9: BANKRUPTCY . . . . . 101
When Borrower Requests Discharge Based
on Undue Hardship . . . . . 101
Procedures When Borrower Requests
Adjustment in Repayment . . . . . 102

SECTION 10: CREDIT BUREAU REPORTING . . . . . 105

SECTION 11: PROGRAM FUNDS . . . . . 107
Fiscal Procedures . . . . . 108
Recordkeeping Requirements . . . . . 110

Last Modified: 03/01/1998