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Spring 2010 Federal Perkins Loan Update


Spring 2010 Federal Perkins Loan Update Agenda Budget Update Legislative Update Regulatory Update Perkins Loan Issues Grassroots Current Federal Perkins Loan Program ... – PowerPoint PPT presentation

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Title: Spring 2010 Federal Perkins Loan Update

Spring 2010 Federal Perkins Loan Update

  • Budget Update
  • Legislative Update
  • Regulatory Update
  • Perkins Loan Issues
  • Grassroots

Current Federal Perkins Loan Program
  • Federal Perkins Loan Program
  • Provides long-term, low-interest loans to
    500,000 students from 1,700 institutions.
  • Total assets of over 8 billion represent over
    40 years of FCC, TCC, repayments on previous
    loans, and Federal reimbursement for loan

2010 Presidential Budget Request
  • FY2010 Presidential Budget Request
  • increase college access and success by expanding
    financial aid while making it simpler, more
    reliable, and more efficient.

2010 Presidents Budget Request
  • Increase Pell
  • Make Pell funding mandatory (not subject to
    appropriations funding)
  • Increase by 200 to 5,500 for 2010-11 award year
  • Then increase by consumer price index plus one

2010 Presidents Budget Request
  • End entitlement subsides to FFEL loan program.
  • On all new loans as of July 1, 2010
  • Consolidate federal student loans under William
    D. Ford Direct Loan Program
  • Increase efficiency
  • Less expensive
  • Savings to finance higher Pell Grants

2010 Presidents Budget Request Perkins
  • Modernize and expand Perkins Program
  • New Perkins program new unsub Direct Stafford
  • Receive 6 billion in mandatory funding
  • Expanded to all schools
  • From 1,800 to 4,400
  • 5 interest would accrue while in school and
  • Other terms and conditions would be same as
    unsubsidized Stafford
  • Federal Share of current loans sent to ED
  • Overhaul of the administration of the program
  • Fully originated and administrated by the Dept of

2010 Presidents Budget Request - Perkins
  • Administration says
  • 2.7 million more students will receive loans
  • Loans to be targeted to needy students and the
    schools they attend
  • Schools with many Pell recipients
  • Colleges encouraged to control tuition
  • New formula would encourage cost control and
    targeting of grants to prevent excessive
  • Budget rules require ED servicing
  • Arcane federal accounting/scoring rules

Congressional Action
  • Student Aid and Fiscal Responsibility Act of 2009
    (SAFRA) H.R. 3221
  • Implements Presidents 2010 budget requests
  • Introduced July 13, 2009
  • Full committee markup July 21, 2009
  • Passed the House on Sept. 17, 2009
  • Vote 253 to 171
  • Senate working on their version

What Passed
  • H.R. 4872 Health Care and Education
    Affordability Reconciliation Act
  • House passed on 3/21/10 vote 220-211
  • Senate passed with vote 56-43
  • H.R. 4872 consists of amendments to health care
    reform and a modified version of SAFRA.
  • DCL GEN-10-5 briefly addresses these changes

What Passed
  • As of 7/1/10, all Stafford, PLUS and
    Consolidation Loans will be made via the Direct
    Loan Program.
  • Additional mandatory funding is provided to
    augment funds appropriated each year.
  • increase the federal maximum Pell Grant each year
    by the change in the Consumer Price Index.
  • According to ED/Labor Committee the maximum Pell
    for 2010 is 5,500

What Passed
  • The legislation uses 13.6 billion of the savings
    to cover most of approximately 19 billion
    shortfall in current Pell Grant funding.
  • Bill does not include ongoing increases in Pell
    at the rate of inflation plus 1 as in the SAFRA
  • The annual appropriation process will fund the
    bulk of each years Pell grant.
  • No guarantee that there will be an annual
    increase in the total grant.

What Passed
  • 750 million is included for College Access
    Challenge Grants through 2014.
  • Rate of 150 million per year.
  • 50 million goes to assist school transition into
    Direct Loan program.
  • 2.55 billion goes to HBCU as well as Minority
    Serving Institutions

What Passed
  • Not-for Profit direct loan servicers receive
    funding if needed.
  • If meet minimum standards, they would be
    allocated a minimum 100,000 loan accounts
    annually, with the first 100,000 eligible for a
    special pricing tier.

What Passed
  • 2 billion is set aside for community colleges
    via Trade Adjustment Act funding under the Dept
    of Labor.
  • The larger American Graduation Initiative was
    dropped from bill due to budget issues.

What Passed
  • Income-based Repayment was modified for new
    borrowers beginning 2014.
  • Borrower payments are limited to 10 of
    discretionary income. (reduced from 15)
  • Unpaid balance would be forgiven after 20 years.
    (reduced from 25)

What Passed
  • 25 million is provided in fiscal year 2010 and
    2011 for Direct Loan servicers to retain jobs at
    locations where such servicers were servicing
    FFEL loans on 1/1/10.

What Passed
  • For one year beginning 7/1/10, borrowers who are
    not in repayment on all there loans can
    consolidate into the Direct Loan Program if they
    have loans in at lease two of the following
  • FFELP Loans,
  • FFELP loans that have been sold to the Department
  • Direct Loans

What Passed
  • The Current Perkins Loan Program is not touched!
  • The administration's proposal (and passed by the
    House in Sept) to create a new Direct Perkins
    Loan Program was deleted in its entirety.

Whats Next
  • COHEAO will turn its attention to extend and
    expand the current Perkins Program.
  • Most important matter (because of timing) is
  • Presidents FY2011 budget request was written in
    the expectation of the Direct Perkins
  • No FCC or Cancellation funding is currently

Whats Next
  • Need to address the 2012 sunset for Perkins.
  • It requires the federal share of the Perkins Loan
    revolving fund to be sent to the Department or ED
  • This date has been extended several times, last
    in 2007.
  • COHEAOs high priority to eliminate or extend
    this clause.

Perkins Loan Issues
  • Economic Hardship Deferment
  • College Cost Reduction and Access Act (CCRAA,
    P.L. 110-84).
  • Definition changes effective 7/1/09
  • Eliminates the 20/220 qualification for Econ HD.

Perkins Loan Issues
  • FISAP Perkins Loan Changes
  • New Lines
  • New cancellations authorized by HEOA plus
    corresponding instructions
  • Short-term loans to the Fund and reimbursement to
    the institution of short-term loans to the Fund
    plus instructions
  • Transfer of FWS to Perkins Loan Fund

Perkins Loan Issues
  • Total and permanent disability discharge for
    borrowers designated as unemployable due to a
    service-related condition by Veterans Affairs
  • New TPD form posted
  • DCL GEN-09-02
  • Two DCLs on Veterans TPD discharge
  • Process
  • Policy

Perkins Loan Issues
  • DCL 09-07
  • Procedures for discharging Title IV loans by
    determination by the Dept of Veterans Affairs
  • VA determines discharge on one of two standards
  • A determination that the veteran has a
    service-connected disability (or disabilities),
    that are 100 disabling or
  • A determination that the veteran is totally
    disabled based on an individual unemployability

Perkins Loan Issues
  • Following procedures must be followed
  • Borrower must apply to loan holder for TPD
  • Completes section 1 and 3 of TPD
  • Physician is not required to sign Section 4 of
  • Instead borrower submits documentation from the
    VA showing the determination of unemployability
    or 100 disabled
  • Schools review TPD for completion and attached VA
  • Make preliminary determination of eligibility

Perkins Loan Issues
  • If eligible for TPD based on VA documentation,
    submit TPD form and VA documentation to the
  • DO NOT assign loan
  • The Department will review submitted paperwork
    and determine final eligibility.
  • Department will instruct school to discharge the
  • No three year conditional waiting period
  • School cancels the loan
  • And refunds any payments made on or after
    effective date

Perkins Loan Issues
  • If TPD was denied by school or Department
  • School must notify borrower and borrower must
    resume payments
  • Loan is deemed in forbearance from date of
    collection activity was suspended
  • During discharge process, schools must provide
    borrower with phone number to call if they have

Perkins Loan Issues
  • Dear Colleague Letter CB-09-06 and CB-09-05
  • Published 9/28/09
  • Approval of the revised Perkins MPN and Addendum
    to Perkins MPN
  • MPN contains changes to cancellation,
    rehabilitation, forbearance and deferment
  • Must begin using by 12/31/09

  • Lori Hartung
  • Todd, Bremer Lawson, Inc.
  • lori.hartung_at_TBandL.com
  • 1-800-849-6669
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