This advisory report includes considerations for deciding whether to continue to service Perkins Loans or transfer them to the federal government and the steps required to execute either option. It now also includes information on circumstances that impact financial reporting. The updated report contains a dedicated appendix for independent and public institutions.
The Federal Perkins Loan Program began in 1957. It was funded with aid from the federal government and matched with institutional contributions. Over the years, the proportion of federal to institutional matching funds varied, from a 90/10 split to a 75/25 split. The two sources of funding are referred to as the Institutional Capital Contribution (ICC) and the Federal Capital Contribution (FCC). A brief description of these terms is below.
The Institutional Capital Contribution (ICC) is part of the net assets (wealth) of the institution and can be repurposed for other uses as loans are repaid and no new loans are issued.
The Federal Capital Contribution (FCC) is an institutional obligation to the federal government. It must be repaid as student loans are collected and no new loans are made by either assigning the loans or by refunding the excess cash. There has been no new funding from the federal government for this program since the early 1990s.
Congress did not renew the Perkins Program after September 30, 2017, and no disbursements were permitted after June 30, 2018. The lack of renewal also means that as loans are repaid, the federal portion of the repayment must be returned to the federal government. The Department of Education (ED) will begin collecting the FCC, effective with the FISAP report filing for 2019-2020, due October 1, 2018.
Institutions have the option to assign Perkins Loans to ED or liquidate their revolving fund. However, when loans are assigned, ED keeps all monies collected and does not reimburse the institutional share. On the other hand, if an institution keeps operating the program and remits excess cash annually, the institution can keep its share and repurpose the funds. Once a school notifies ED that it intends to liquidate its Perkins portfolio, the clock begins to tick and institutions will be required to meet deadlines for assigning all loans, notifying borrowers, and engaging in a close-out audit, so preparation and timing are particularly important.
NACUBO has worked extensively on Department of Education regulations related to the Perkins loan program and its closeout. See below for more content.
- An advisory guide to assist business officers with the Perkins program closeout process (November 21, 2018)
- An Excel workbook to help an institution quantify the costs and benefits of retaining its Perkins portfolio (July 20, 2018)
- NACUBO's archives on Department of Education regulations
ED Guidance on Liquidation & Timelines
Other Useful Resources
- FAQ on the Perkins loan program from IFAP
- Letter to House leaders from Rep. John Duncan (R-TN) and the late Rep. Louise Slaughter (D-NY) urging Congress to extend the Perkins loan program in the upcoming spending bill (March 13, 2018)
- "Dear Colleague Letter" (GEN-17-10) providing information on the wind-down of the Perkins loan program (October 6, 2017)
- "Dear Colleague Letter" (GEN-16-05) providing guidance to institutions on implementing the Extension Act (February 17, 2016)
To visit other pages with SFS content related to Department of Education regulations, click below:
SFS Regulations ED Regulations ED Archives