Terminating the Perkins Loan Program
David A. DiIulis Principal, CPA, MBA, CGFM
27 March 2019
The Federal Perkins Loan Program was established more than fifty years ago. It was formed to serve those students with a financial need; offering lower interest rates as well as more favorable repayment terms than traditional financing. The program allowed for more generous deferral options and, in some cases, an opportunity for canceling the loans altogether for specified public service occupations. However, Congress did not renew the Perkins Program after September 30, 2017 and no disbursements were permitted after June 30, 2018. As a result, as loans are repaid, the federal portion of the repayment must be returned to the federal government. The Department of Education (DOE) will begin collecting the Federal Capital Contribution (FCC) effective with the Fiscal Operations Report and Application to Participate (FISAP) filing for 2019- 2020, due October 1, 2018.
As a result of these changes, many institutions are considering terminating their respective program altogether. Liquidating the program will eliminate or reduce the administrative burden associated with loan portfolio maintenance. It also reduces the cost relating to pursuing outstanding loans within the program. Once the liquidation process is completed, institutions are no longer required to file the Perkins section of the FISAP or update the National Student Loan Data System (NSLDS) for Perkins which will alleviate administrative time and potential compliance risk.
By liquidating the program, the loans within the portfolio are assigned to the Department of Education.
In order to liquidate the program, the following steps are required:
- Request access to the Perkins Loan Assignment System (PLAS). There is generally a waiting period to gain access, so, it’s important to make this request long before submitting the intent to liquidate with the DOE. Visit https://efpls.com to gain access to the system.
- Notify the DOE of the Institution’s intent to begin the liquidation process. The notification is made through logging onto the eCampus Based (
eCB) System to notify and begin the liquidation process.
- The Institution must notify borrowers that their respective loans are being assigned to the DOE. The notification must be at least 30 days before
assignmentof the loans.
- Assign all outstanding open loans to the DOE within 45 days following intent. The assignment forms and submission of the related documents can be performed either manually or electronically. All loans assigned must accompany an assignment form, assignment manifest, a copy of the promissory note and repayment history. Once the DOE reviews the paperwork, it notifies the institution whether the loans were accepted or rejected
- Those loans that cannot be assigned to the DOE as a result of
a rejectionwill have to be purchased by the Institution.
- The Institution subsequently updates NSLDS. Perkins liquidation requires that there not be any open loans in NSLDS.
- A Perkins Closeout Audit is then required. This closeout can either be a separate independent engagement or as part of the institution’s annual single audit.
- The federal share of the remaining cash must be remitted to the DOE. The federal share is remitted via G% at https://g5.gov using the miscellaneous refunds option.
- The final step requires the institution to log onto eCB and enter the final FISAP
data in Phase 4 of the Perkins Intent and Closeout Form.
O’Connor & Drew, P.C. has assisted a number of institutions in performing the final closeout audit/agreed upon procedures engagement. Please do not hesitate to contact us if you have any questions or if you are interested in performing the final closeout.