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Posted by Chrissy Hammond on Thu, Feb 18, 2016 @ 01:30 PM

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As part of our commitment to keep you informed with the latest regulatory developments, we recently attended the Department of Education’s (DOE) 2016 Federal Student Aid (FSA) Training Conference in Las Vegas.  A major focus of the FSA conference was related to the Federal Perkins Loan Program (Perkins Program). Subsequent to the FSA conference, the Federal Perkins Loan Program Extension Act of 2015 (the Extension Act) was enacted on December 18, 2015. The Extension Act extends the Perkins Program through September 30, 2017 as noted in the DOE Dear Colleague Letter GEN 16-05.

Extension Act Highlights

Per the Extension Act, institutions may make Perkins Loans for undergraduate and graduate students as noted below:

Undergraduate Students

An institution may make Perkins Loans through:

To:

Who, on the date of disbursement:

If the institution has awarded the student:

September 30, 2017

Eligible current undergraduate student

Has an outstanding balance on a Perkins Loan made by the institution

All Direct Subsidized Stafford Loan aid for which the student is eligible

September 30, 2017

Eligible new undergraduate student

Does not have an outstanding balance on a Perkins Loan made by the institution

All Direct Subsidized and Unsubsidized Stafford Loan aid for which the student is eligible

 

Graduate Students

An institution may make Perkins Loans through:

To:

If the graduate student:

And the new Perkins Loan will:

September 30, 2016

Eligible graduate student who has received a Perkins Loan before October 1, 2015

Received his or her most recent Perkins Loan from the school, for enrollment in an academic program at the school

Enable the graduate student to continue or complete the academic program for which the student received his or her most recent Perkins Loan

Therefore institutions have another 17 months to continue to disburse Perkins Program awards to undergraduate students. Effectively this means the entire 2016/2017 academic year and the 2017/2018 academic year as long as the funds are disbursed by September 30, 2017. Institutions may want to review their Perkins Program award packaging process to determine if it would be advantageous to ensure students in these academic years are disbursed Perkins awards which will allow them to continue to participate in the Perkins Program throughout their years at the institution.

The Extension Act also provides guidance on how to treat students who have had a Perkins Loan consolidated in the past as well as treatment of subsequent disbursements. In addition, there are certain restrictions regarding academic programs and the Classification of Instructional Program (CIP) code. We recommend if a program’s CIP code has changed, but is relatively the same, your institution contact the DOE for an eligibility ruling, as they may be able to be considered the same and therefore not interrupt the disbursement of Perkins Loans to the affected students. 

Excess Liquid Capital Calculation

The Excess Liquid Capital Calculation requires institutions to calculate whether there was an excess liquid capital in their Perkins Program and to have returned such funds by December 31, 2015.

If your institution has not yet completed this calculation to determine if excess funds need to be returned, we suggest this be done as soon as possible. Calculations should take into account the funding needs of the Perkins Program considering the new extension for undergraduate students through September 30, 2017. The DOE may be able to make accommodations on the collection of Excess Liquid Capital. Institutions should contact the DOE at the contact information provided in the DOE’s Dear Colleague Letter GEN 15-19 for accommodations on the collection of Excess Liquid Capital.

If your institution has already returned funds from performing the Excess Liquid Capital Calculation, and estimates that additional funds may now be needed due to the Extension Act, your institution should petition the DOE for additional Perkins Loan funds to accommodate these needs.

Additionally, the following should be considered with regards to Excess Liquid Capital:

  • The institutional share of Excess Liquid Capital must be removed from the Perkins Program; however, these funds may be used at the discretion of the institution, including funding or creating institutional aid programs.
  • When loans are assigned to the DOE, the institution loses all rights to Institutional Capital Contributions.
  • If the institution is not actively disbursing Perkins Program funds, their Excess Liquid Capital calculation will yield large returns to the DOE, therefore liquidating at a faster pace.

Next Steps

The Extension Act prohibits any further extensions of the Perkins Program under section 422(a) of the General Education Provisions Act (GEPA). Therefore, institutions should put a plan in place for how they plan to wind down and eventually liquidate the Perkins Program.

The following should be considered when putting a plan in place:

  • How reliant is your institution on Perkins Loans?
  • What are the cost/benefit implications of running the program?
  • Identify all outstanding Perkins Loans and ensure all are properly accounted for in the National Student Loan Data System (NSLDS).
  • Should you choose to liquidate, your institution will be required to purchase any loans that are not eligible for assignment to the DOE.
  • Once an institution notifies the DOE of their intent to liquidate there are a number of deadlines that must be met as per the Perkins Liquidation Procedures.

Our firm has experience with the Perkins Liquidation process and can help your institution when the time comes. For more information about how we can help or to discuss these and other topics discussed at the conference, please contact us.

 

 

 

 

Copyright © 2016 CBIZ & Mayer Hoffman McCann P.C. All rights reserved. CBIZ and Mayer Hoffman McCann P.C.  are separate and independent legal entities that work together to serve clients. CBIZ is a leading provider of tax and consulting services. Mayer Hoffman McCann P.C. is an independent CPA firm providing audit and other attest services. This article is protected by U.S. and international copyright laws and treaties. Use of the material contained herein without the express written consent of the firms is prohibited by law. Material contained in this alert is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their business.

Tags: Non-profits, Not-for-Profits, NFP, Department of Education, FSA, DOE, HE Act

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