Anita Olivencia, Training Officer US Department of Education Perkins Loan and Third-Party Servicer Updates

Agenda Perkins Loan Program Status Excess Liquid Capital Perkins Loan Assignment System Perkins Reminders Third-Party Servicer Functions Reporting Servicers to the Department Contract Requirements Servicing Reminders 2

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Perkins Loan Program History The statutory authority for schools to make Perkins Loans (HEA Section 461) ended on September 30, 2014, with an automatic one-year extension to September 30, 2015 Language (now outdated) in HEA Section 466 calls for schools to return Federal share funds from the Perkins Loan Program to the government after October 1, 2012 Department has interpreted HEA Section 461 to govern the duration of the Perkins program Dear Colleague Letter GEN

Current Program Status Since Congress did not ultimately act to extend the program, the authority to make Perkins Loans to new borrowers ended September 30, 2015 If school made the first disbursement of a Federal Perkins Loan for the award year prior to October 1, 2015, school may make any remaining disbursements − Loan may be increased in assuming the student is eligible and the first disbursement was made prior to October 1 Dear Colleague Letter GEN

Perkins Grandfathering Narrow “grandfathering” provision allows schools to make Perkins Loans to certain students through September 30, if: Student received at least one Perkins Loan disbursement on or before June 30, 2015 (for award year or earlier), and Student is enrolled at same institution where the last Perkins Loan disbursement was received, and Student is enrolled in same academic program for which student received his or her last Perkins Loan disbursement –first four digits of the program’s CIP code are identical 6

Perkins Grandfathering Grandfathered Perkins Loan can be awarded only after student is awarded all Direct Subsidized Loan aid for which s/he is eligible Full Direct Subsidized Loan eligibility must always be considered when determining Perkins eligibility Declining a Subsidized Loan does not mean a Perkins Loan may be added to a student’s aid package, or increased 7

Undeclared Majors For students whose program is “Undeclared” or “Undecided,” students may continue to receive Perkins under grandfathering provisions until and after they declare a major Once a major is declared, students must remain in that program to continue receiving Perkins Perkins Loan Wind-Down Q&A: ndAs.pdf 8

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Excess Liquid Capital Section 466(c) of the Higher Education Act requires institutions to return to ED the Federal share of any Excess Liquid Capital (ELC) in the institution’s Federal Perkins Loan Revolving Fund ELC is the amount of the Fund’s “Cash On Hand” that exceeds the institution’s estimated immediate needs. Dear Colleague Letter GEN

Excess Liquid Capital Federal share of Excess Liquid Capital must be returned by December 31, 2015 ELC is calculated using worksheet attached to Dear Colleague Letter GEN If funds must be returned, follow “Instructions for Returning Perkins Funds” on the IFAP website: InstructionsForReturningPerkinsFunds.pdf 11

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Perkins Loan Assignments For several years, the Department has encouraged schools to assign dormant loans Schools may choose to assign loans when: − A Perkins Loan remains in default after due diligence, or − An initial determination has been made for a total and permanent disability discharge, or − The school wishes to voluntarily liquidate its Perkins portfolio See August 5, 2011 EA 13

Perkins Loan Assignments The Department has developed an easier electronic Perkins Loan assignment process This new Perkins Loan Assignment System (PLAS) allows users to: − Electronically submit loan assignment requests, either for individual loans or for multiple loans as a batch file − Securely upload supporting documentation − Search, view, and edit submitted loan assignment information − View reports of accepted/rejected loans for assignment Electronic Announcements: April 22 and September 21,

Perkins Loan Assignments Those wishing to use the new PLAS must request access − Access request form and User Guide available at More information about Perkins Loan Assignment Procedures is available at the Campus Based Processing Information site: 15

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Default Reduction Assistance Program The Default Reduction Assistance Program (DRAP) is a voluntary program to assist schools in bringing defaulted Federal Perkins Loan borrowers back into repayment before their accounts are sent to collection − A letter is sent from the Department to defaulted Perkins borrowers, explaining the serious consequences of default − Accessed via eCampus-Based site at Electronic Announcement: September 16,

Service Cancellation Reimbursements Although Perkins Loan service cancellations are not currently funded by Congress, schools must still offer and apply applicable cancellations to borrowers − Reimbursement payments were not issued in (for cancellation requests) ED calculated the reimbursement payment a school would have been eligible to receive and will maintain a record of that amount Electronic Announcement: May 5,

Orange Book Federal Perkins Loan Program Status of Default as of June 30, 2014 (the Orange Book) updated April 15, 2015 Electronic Announcement: March 23,

FISAP Fiscal Operations Report for and Application to Participate for (FISAP) Electronic FISAP and signature page must have been submitted electronically by October 1, 2015 − Can be signed electronically or via paper signature page − Edit corrections and Cash On Hand update due December 15 ED’s online interactive FISAP training available at Electronic Announcement: April 23,

Additional Resources Information for Financial Aid Professionals (IFAP) website Campus-Based Processing Resources: Electronic Announcement: April 23, 2015 − FISAP Form, Instructions and References 21

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What is a Third-Party Servicer? The regulations at 34 C.F.R. § define a third-party servicer as follows: An individual or a state or a private, profit or nonprofit organization that enters into a contract with an eligible school to administer, through manual or automated processing, any aspect of the school’s participation in any Title IV, HEA program. 23

Examples of Servicer Functions Processing of student financial aid applications Collecting, reviewing, or maintaining supporting documentation required to process Title IV funds Awarding, certifying, originating, and/or disbursing Title IV funds, and delivering credit balances Providing entrance and exit counseling Providing Perkins Loan servicing Completing enrollment, Gainful Employment or other required reporting 24

Servicer Functions Not Considered Title IV-Related Publishing, providing, and administering ability-to-benefit tests Financial and compliance auditing, including preparation of financial statements Mailing of documents prepared by the institution Warehousing of records Providing computer services or software as long as the provider is not responsible for using the software for the institution’s student aid purposes Participating in a written arrangement with other eligible schools to make eligibility determinations and FSA awards for certain students (e.g., consortium agreements) 25

Reporting Servicers to the Department Schools must inform the Department via the e-App ( within 10 calendar days of any of the following events: Entering into a contract with a new servicer Making changes to the functions performed by a servicer Terminating a contract with a servicer Servicer ceases to provide contracted services, goes out of business, or files for bankruptcy 26

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Servicer Contract Requirements Upon entering a contract with a school, the servicer must agree to do all of the following: Comply with all Title IV provisions (including those that refer solely to schools as well as those specific to servicers) Be jointly and severally liable with the school for a violation by the servicer of any Title IV provisions Use any Title IV funds (and interest or earnings on them) in accordance with the regulations Confirm student eligibility when disbursing funds 28

Servicer Contract Requirements Make required Returns to Title IV funds (R2T4) when a student withdraws Refer to the Office of the Inspector General (OIG) any suspicion of crime relating to Title IV program administration (including any information that there is reasonable cause to believe the school may have engaged in fraud or criminal misconduct) Return to the school all unexpended FSA funds and any records related to the servicer’s administration of the school’s Title IV participation if the contract is terminated or the servicer files for bankruptcy or otherwise ceases to perform their functions under the contract 29

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Third-Party Servicer Data Form An Electronic Announcement on February 12, 2015 directed servicers to submit a Third Party Servicer Data Form to the Department − Contains information about the servicer’s officials, contact information, ownership structure, services, and clients Form was due within 30 days of the Announcement, and servicers must update their information if: − Changes its name − Changes the address or contact information − Adds or terminates a contract − Buys, sells, or merges with another third-party servicer 31

FERPA and Third-Party Servicers Under certain circumstances a servicer may be considered a “school official” for FERPA purposes. A servicer may receive and use Personally Identifiable Information (PII) without a student’s consent if: Performs a service or function for which the school would otherwise use employees, and Operates under control of the school with respect to the use and maintenance of education records, and Complies with the FERPA requirements governing the use and re-disclosure of PII from education records (34 C.F.R. § 99.31(a)(1)(i)(B)) 32

Servicer Compliance Audits Servicers are required to submit annual servicer compliance audits to the Department − These are separate and distinct from a school’s annual Title IV compliance audit and financial statement Some servicers have failed to submit required audits − These servicers must submit a compliance audit to the Department no later than one fiscal year subsequent to the date of Dear Colleague Letter GEN (January 9, 2015) 33

School Considerations Periodically review your ECAR Ensure that servicer information is accurate − If any information is inaccurate or out of date, notify the Department by submitting updating the E-App at Review servicer contracts School can be liable for mistakes made by a servicer Carefully review each servicer contract to ensure that both the school and the servicer clearly understand the function(s) the servicer will perform 34

Additional Resources Federal Student Aid Handbook − Volume 2, Chapters 3 and 5 Dear Colleague Letter GEN − Third-Party Servicer Institutional Requirements and Responsibilities FSA E-Training Website − Institutional Eligibility Training at 35

Thank you! Boston Regional Office (617)

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Department of Education Contacts 38 Research and Customer Care Center Reach FSA 855.FSA.4FAA -- 1 number to reach 10 contact centers! Campus Based Call Center eZ-Audit COD School Eligibility Service Group CPS/SAIG Foreign Schools Participation Division NSLDS Research and Customer Care Center G5 Nelnet Total & Permanent Disability Team

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