Maintained for Historical Purposes

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

Federal Perkins Loan Program - Program Funds

AwardYear: 1997-1998
EnterChapterNo: 6
EnterChapterTitle: Federal Perkins Loan Program
SectionNumber: 11
SectionTitle: Program Funds
PageNumbers: 107-111


As discussed in Chapters 3 and 5, a school that wants to participate
in any Student Financial Assistance (SFA) Program must sign a
Program Participation Agreement with the Secretary. The agreement
must be signed by the school official legally authorized to assume,
on the school's behalf, the agreement's obligations.

For all of the SFA Programs, the agreement provides that the school
must use the funds it receives solely for the purposes specified in the
regulations for each program and requires the school to administer
each program in accordance with the Higher Education Act of 1965
(HEA), as amended, and the Student Assistance General Provisions
regulations. The agreement also requires the school to submit
annually to the U.S. Department of Education a report containing
information that will enable the Department to determine the school's
cohort default rate (discussed in Section 8 of this chapter).

As discussed in the introduction to this chapter, the agreement for the
Federal Perkins Loan Program also requires the school to establish
and maintain a Perkins Loan fund (the fund) and to deposit into the
fund --

- the federal capital contribution (FCC) the school receives as its
federal allocation for the program for each award year (see the
next page);

- the school's matching share--the institution's capital contribution
(ICC), discussed on the next page;

- payments the school receives for repayment of loan principal,
interest, collection charges, and penalty or late charges on loans
from the fund;

- payments the school receives from the federal government for
cancellations (such as teacher cancellations) of Perkins Loans and
National Direct Student Loans (NDSLs) (see Section 5 of this
chapter);

- any other earnings on fund assets, including net interest earnings
on funds deposited in an interest-bearing account (total interest
minus bank charges incurred on the account); and

- proceeds of any short-term no-interest loans the school makes to
the fund in anticipation of receipt of its FCC or of loan collections.

As discussed in the introduction to this chapter, a school applies for
program funds annually through the electronic Fiscal Operations
Report and Application to Participate (FISAP). The Department
allocates funds directly to schools. The allocation (FCC) for the
Perkins Loan Program is the amount of funding the school is
authorized to receive from the Department for an award year. This
amount is based on the funds appropriated by Congress for the
program, as well as the allocation formulas, which were established
by law and which do not provide for appeals.

The provisions of the HEA and the Perkins Loan Program
regulations that affect the amount of a school's allocation are also
discussed in the introduction to this chapter.

FISCAL PROCEDURES

[[Cash Management--34 CFR 668.163]]
Requirements for maintaining and accounting for SFA program
funds are included in 34 CFR 668.163 of the cash management
regulations published in the Federal Register November 29, 1996,
effective July 1, 1997. The cash management requirements that apply
in general to SFA programs (those in the General Provisions) are
discussed in Chapter 3, Section 3. The cash management
requirements specific to the campus-based programs (those in the
Federal Work-Study [FWS], Federal Supplemental Educational
Opportunity Grant [FSEOG], and Perkins Loan regulations) are
discussed in Chapter 5, Section 3. The cash management provisions
that apply specifically to the Perkins Loan Program are discussed
here.

The new cash management requirements that apply specifically to
the Perkins Loan Program follow. (Section 11 of this chapter
provides additional information on fiscal procedures and records.)

[[Late disbursement--34 CFR 668.164(g)]]
- Regulations regarding the late disbursement of a Perkins Loan
were removed from 34 CFR 674.16 (g), and revised regulations
are now in 34 CFR 668.164(g), discussed in Section 2 of this
chapter.

[[Maintaining funds]]
- Under the provisions of 34 CFR 668.163(c), a school must
maintain the Perkins Loan Program Fund in an interest-bearing
bank account or investment account consisting predominately of
low-risk, income-producing securities, such as obligations issued
or guaranteed by the United States; interest or income earned on
fund proceeds are retained by the school as part of the Perkins
Loan Fund.

[[Notification of disbursement]]
- If a school credits a student's account at the school with Perkins
Loan funds, the school must notify the student of the date and
amount of the disbursement, the student's right to cancel all or a
portion of that loan and his or her right to have the funds returned
to the school's Perkins fund; a detailed discussion of these
provisions is in Chapter 5, Section 3.

Schools must continue to follow the previously established fiscal
procedures:

[[Cash management requirements specific to the Perkins Loan
Program 34 CFR 674.19]]
- A school must establish and maintain an internal control system of
checks and balances that ensures that no office can both authorize
payments and disburse Perkins Loan funds to students.

- A separate bank account for federal funds is not required, unless
the school fails to comply with the requirements in the cash
management regulations and program participation standards
discussed in Chapter 3, Section 3.

- A school must notify any bank that federal funds are deposited in
an account by ensuring that the name of the account clearly shows
that federal funds are deposited in the account or notify the bank
in writing of the name of the account and keep a copy of this
notice in its files.

- The school must maintain sufficient liquidity in the Perkins Loan
Fund to make required disbursements to students.

- A school must deposit its ICC into its fund prior to or at the same
time it deposits any FCC

- A school must establish and maintain program and fiscal records
that are reconciled at least monthly.

- Each year a school must submit a Fiscal Operations Report plus
other information required by the Department; the school must
ensure that the information reported is accurate and must submit it
on the form and at the time the Department specifies.

RECORDKEEPING REQUIREMENTS

New recordkeeping requirements for all SFA programs were
published in the Federal Register (Part IX) November 27, 1996 and
become effective July 1, 1997. Revised was 34 CFR 668.24, and
amended was 34 CFR 674.19, which now states that a school must
follow the recordkeeping requirements in the General Provisions
and those in the Perkins Loan regulations. The recordkeeping
requirements that apply in general to SFA programs (those in the
General Provisions) are discussed in Chapter 3, Section 7. The
recordkeeping requirements specific to the campus-based programs
(those in the FWS, FSEOG, and Perkins Loan regulations) are
discussed in Chapter 5, Section 3. Information on FWS payroll
records is provided in Section 3 of this chapter.

A list of records a school must maintain for all SFA programs is
provided in 34 CFR 668.24(c) and discussed in detail in Chapter 3,
Section 7. Perkins Loan records a school must maintain include but
are not limited to

- the Student Aid Report (SAR) or Institutional Student Information
Record (ISIR) used to determine a student's eligibility for a
Perkins Loan;

- the student's application data and data submitted to the
Department or the school on behalf of the student;

- documentation of each student's eligibility for a Perkins Loan;

- documentation of the amount of a Perkins Loan, its payment
period, and the calculations used to determine the amount of the
loan;

- documentation of the date and amount of each disbursement of
Perkins Loan funds;

- documentation of the school's calculation of any refunds or
overpayments due to or on behalf of the student and the amount,
date, and basis of the school's calculation;

- documentation of the payment of any refund or overpayment to
the SFA program fund or the Department;

- information collected at initial and exit loan counseling required
by Perkins Loan regulations; and

- reports and forms used by the school in its participation in a
campus-based program, and any records needed to verify data that
appear in those reports and forms.

In addition to following the recordkeeping requirements mentioned
in Chapters 3 and 5, a school must continue to follow the procedures
previously established in 34 CFR 674.19 for documentation of a
student's Perkins Loan repayment history. The school must maintain
a repayment history for each borrower that shows

- the date and amount of each repayment during the life of the loan;

- the amount of each repayment credited to principal, interest,
collection costs, and either penalty or late charges;

- the date, nature, and result of each contact with the borrower (or
endorser for loans made prior to July 23, 1992) in the collection of
an overdue loan; and

- copies of all correspondence to or from the borrower (and
endorser for loans made prior to July 23, 1992), except for bills,
routine overdue notices, and routine form letters (demand letters,
notices of intent to accelerate, and the like are not considered to be
routine form letters).

[[Records readily available for review--34 CFR 668.24(d)]
A school must make its records readily available for review by the
Department or its authorized representative at an institutional
location designated by the Department or its representative.

Generally, a school must keep records relating to the school's
administration of a campus-based program or the Federal Pell Grant
Program for three years after the end of an award year for which the
aid was awarded and disbursed under those programs. There are
some exceptions to this requirement:

[[34 CFR 668.24(e)(1)(i)]]
- The school must keep the Fiscal Operations Report and
Application to Participate (FISAP) in the Perkins Loan, FSEOG,
and FWS Programs, and any records necessary to support the data
contained in the FISAP, including "income grid information," for
three years after the end of the award year in which the FISAP is
submitted.

[[34 CFR 674.19(e)(1)(ii)]]
- The school must keep repayment records for Perkins Loans,
including records relating to cancellation and deferment requests
for at least three years from the date a loan is assigned to the
Department, canceled, or repaid.

[[34 CFR 668.24(e)(3)]]
- Records questioned in an audit or program review must be kept
until the questions are resolved or until the end of the retention
period applicable to the records, whichever is later.

For information on the formats in which a school must keep its
campus-based program records, see Chapter 5, Section 3.

Last Modified: 07/28/1998