US DEPARTMENT OF EDUCATION AND PERKINS LOAN UPDATE
FALL 2015 SESSIONS
The Department will provide an update on regulations affecting the Federal Student Aid Programs, including regulations establishing the REPAYE repayment plan, and preparations for the upcoming “Borrower Defenses” negotiated rulemaking sessions. The presentation will also cover issues related to the wind-down of the Perkins Loan Program.
Perkins Loan Update
Department of Education Update
Perkins Expired September 30, 2015
Grandfather Provisions kicked in October 1, 2015
First time borrowers can onlyreceive disbursements for the 2015/2016 academic and no more after that (1stDisbursement prior to October 1st)
Existing borrowers can receive additional disbursement for up to five years (2020) if they fall within the narrow provisions of the grandfathering (can’t change majors or schools, etc and 1st disbursement must have been made prior to July 1, 2015)
Many will lose eligibility due to the narrow and restrictive provisions.
Many of already lost eligibility due to the sunset and not getting their paperwork done on time (the eliminations of STAN caused major issues for these folks)
Majority of schools are willing to continue to service their loans for the interim since it is not feasible to liquidate and lose their ICC
The process for closing and liquidatingis the same as always prior to the sunset of the program, no new guidance or wind down procedure has been established
ECSI does now have a electronic process to assign loans called PLAS (Perkins Loan Assignment System) this new electronic process was coming even prior to the wind down of the program
Schools are encouraged to continue to service and will continue to receive ACA and can use this money across all campus based programs. However this money is based on expenditures so as the portfolio shrinks so will the allowance
Because some schools opted not to lend to incoming borrowers and the harm of not getting paperwork done prior to October 1st, there are many who know are faced with the excess cash issue
Schools who have excess cash after their calculations provided by the FSA Worksheet, are encouraged to submit a justification letter and increase their loan limits to keep them within the tolerance
Congress created a bill HR 3594 which would extend Perkins for one year, new expiration date September 30, 2016. The CBO put a 250 million price tag so it would have been tough to pass without a pay forward. They created that by scaling back the grandfather provision to March 31, 2018. This made the bill budget neutral which was imperative for passage.
Congress introduced HR 3594 Perkins One Year Extension on September 28th by Congressman Pocan and Congressman Messer and it passed through an Suspended Calendar with no opposition. Senator Baldwin picked up the bill and introduced it in the Senate the next day through Unanimous Consent, Senator Lamar Alexander (TN) blocked it. The program does not fit into his ultimate agenda: One Loan, One Grant, One Work Study. The argument is still to extend the program for one year and discuss its ultimate future in the full HEA process which is expected to be introduced and hopefully passed nextyear. Although there is speculation of whether HEA will get that far since it is an election year.
The program has had unprecedented bipartisan support. More than we ever have experienced in the history of the program. There are many champions. We have seen several DCL letters and Higher Ed Letters circulating as well as unprecedented media coverage in support of the program. The latest is the ACE Letter which had over 50 organizations and over 500 schools signatures.
There are four options for passage of this legislation:
The Senate picks up HR 3594 and passes it (not likely since Alexander has dug in his heels)
HR3594to be attached as an amendment to the Omnibus Bill (the 12 spending bills that will be merged into one bill that is a must passed bill to avoid government shutdown) There is a bit of an issue with this because of the scoring since it is only a one year spending bill and the pay forward would not kick until the second year.
HR 3594 to be attached as an amendment to the Transportation Bill (also a must passed bill for 2015)
HR 3594 to be attached to the Tax Extender Bill which could go well into January before its passed
So far these are the facts and we are continuing to work with colleges and universities to spread the word to contact their congressional members and have provided the latest “ask” below:
Last week, over 500 colleges and universities and over 50 Higher Ed organizations including COHEAO signed a letter to the congressional leadership, asking forsupport to extend the Perkins Loan Program for an additional year. This is an additional attempt to revive the program by attaching it to the upcoming final fiscal year (FY) 2016 budget bill after an extension failed in the Senate in September. On October 1, 2015, authorization of the federal Perkins Loan program expired. The House of Representatives unanimously approved a one-year, no-cost extension of the program through the Higher Education Extension Act (H.R. 3594); however, the Senate has yet to advance that measure. As a result, thousands of current and future students face uncertainty as this critical program has not been extended. Hundreds of institutions across the country are struggling to find another way to help their students afford their education.
We are asking you to support the Perkins Loan Program and request that the Senate take up and pass the Higher Education Extension Act (H.R. 3594) as soon as possible.
Since its inception in 1958, the Perkins Loan program has played an important part of providing need-based financial aid for our students. The program distributes low-interest, subsidized loans to students with demonstrated financial need and priority is given to those with exceptional need. When students graduate, they repay their loans directly to their postsecondary institution and repayments are used to make new loans to students by way of a revolving fund. Until 2005, Congress appropriated funding for capital contributions that schools matched with institutional funds.
Perkins loans are an integral part of the financial aid packages made up of grants, work study and loans available to students with the greatest need.
Therefore, we urge you to ask your administration or government affairs office to immediately contact your congressional member and asked them to pass H.R. 3594 and extend this program until Congress has the opportunity to completely consider all existing student financial aid programs through the next reauthorization of the Higher Education Act. We also encourage you to reach out as either a constituents of your state or employee of your institution.