What's New With Perkins
On November 1, 2013 the Department of Education issued final rules updating its regulations for the Federal Direct Loan, the Federal Family Educational Loan (FFEL), and the Federal Perkins Loan programs. The majority of the changes are technical in nature and strive to ensure consistency across the three programs, to the extent supported by statutory requirements.
The new rules will take effect on July 1, 2014; however, ED has provided some flexibility to loan holders, including institutions participating in the Perkins Loan program, to adopt a number of the provisions earlier. Following is a summary of the amended rules that will affect Perkins Loans.
PERKINS LOAN PROGRAM
34 CFR 674.2. The new regulations clarify the definition of Satisfactory Payment Arrangement. The purpose of the new regulations is to provide consistency across the three federal loan programs. A borrower with a defaulted federal loan may regain eligibility for additional Title IV assistance if he or she has made satisfactory arrangements to repay the loan. Under current rules, satisfactory arrangements are defined as making six consecutive, on-time, monthly payments. The FFEL and Direct Loan rules set more specific requirements for satisfactory repayment arrangements than the Perkins Loan rules. Satisfactory Payment Arrangement must be:
• Six on-time, consecutive, voluntary, full monthly payments on a defaulted loan.
o ‘‘On-time’’ means a payment made within 20 days of the scheduled due date.
o Voluntary payments are payments made directly by the borrower and do not include payments obtained by
income tax offset, garnishment, or income or asset execution.
In addition, the rules now clarify that a student who makes six on-time, voluntary, full monthly payments while rehabilitating a defaulted Perkins loan, but does not apply for additional Title IV aid at that time, will not be considered to have used his or her one-time opportunity to regain eligibility.
34 CFR 674.9. The amendment to the regulations are technical in nature for the purpose of correcting obsolete or incorrect references .
34 CFR 674.19. The new rules update requirements for reporting borrowers' enrollment status to reflect current practices for FFEL and Direct loans. Reporting will now be extended to cover Perkins Loan borrowers. ED began including Perkins borrowers in the National Student Loan Data System (NSLDS) enrollment reporting file sent to schools in June 2012. Institutions participating in Perkins and their servicers are invited to enroll with NSLDS to access information on their borrowers.
34 CFR 674.34. The final rules will bring the current law for Perkins in line with FFEL and Direct Loans. The amendment eliminates the debt-to-income hardship category for deferments which was inadvertently left in the Perkins regulations after being removed from the other programs rules in 2008. Additional deferment rules extend the eligibility requirements for graduate fellowship deferments for Perkins Loans that are currently used for FFEL and Direct Loans. The new rules are more detailed and only require certification from the borrower that he or she is engaged in full-time study in a graduate fellowship program. The borrower must provide a statement from an authorized official of the program certifying that the borrower holds a baccalaureate degree, has been accepted or recommended for acceptance in an eligible fellowship program on a full time basis, and includes his or her anticipated completion date. Eligible fellowship programs as also defined as part of the new rules.
34 CFR 674.39. The new rules amend the definition of a rehabilitated loan if the borrower request rehabilitation and makes a full monthly payment, as determined by the institution, within 20 days of each due date, each month for 9 consecutive months. The rules have been amended to create consistency across the three loan programs.
34 CFR 674.50. Current rules did not allow for schools to assign a loan to the Secretary of Education without the borrower’s Social Security Number. The new rules will allow assignment of a loan without a Social Security number if the loan was made before September 13, 1982.
34 CDR 674.52. In addition to removing obsolete references or re-designating paragraphs, this amendment provides new leniency for borrowers working toward loan cancellation for teaching or public service. The new rules permit a borrower who is unable to complete the second half of an academic year of teaching due to a condition covered under the Family and Medical Leave Act (FMLA) to still count that year as eligible teaching service for loan cancellation purposes if the borrower’s employer considers that borrower to have fulfilled the teach contract requirements for that academic year. In addition, a borrower who is unable to complete a full year of eligible public service due to a condition that is covered under FMLA will be able to count that year as a full year of public service for loan cancellation purposes if the borrower completes at least six months of consecutive eligible service.
A new paragraph has been added that provides instructions on how to manage the progression of cancellation percentages when borrowers move between various categories of occupation eligible for cancellation. A borrower who is performing service that qualifies the borrower for loan cancellation at a cancellation rate progression of 15% for the first and second years of qualifying service, 20% for the third and fourth years of qualifying service, and 30% for the fifth year of qualifying service, takes a job in a different field that qualifies the borrower under a different cancellation category that provides loan cancellation at the same cancellation rate progression as the prior category, the cancellation rate under the new cancellation category would continue from the last year the borrower received a cancellation under the former cancellation category, rather than starting over at the first-year cancellation rate.
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