Spring 2010 Federal Perkins
Loan Update
Agenda
 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 cancellation
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 President’s 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 percent
2010 President’s 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 President’s Budget Request –
Perkins

Modernize and expand Perkins Program



New Perkins program = new unsub Direct Stafford
Program
Receive 6 billion in “mandatory” funding
Expanded to all schools
• From 1,800 to 4,400




5% interest would accrue while in school and grace
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 ED
2010 President’s 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
indebtedness

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 President’s 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 bill.


The annual appropriation process will fund the bulk of
each year’s 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 categories;



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.
What’s Next
 COHEAO
will turn it’s attention to extend
and expand the current Perkins Program.

Most important matter (because of timing) is
appropriations.
• President’s FY2011 budget request was written in
the expectation of the “Direct Perkins”
• No FCC or Cancellation funding is currently
requested.
What’s 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.
• COHEAO’s 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 Veteran’s 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 serviceconnected disability (or disabilities), that are 100%
disabling; or
• A determination that the veteran is totally disabled
based on an individual unemployability
determination.
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
TPD
• Instead borrower submits documentation from the
VA showing the determination of unemployability
or 100% disabled

Schools review TPD for completion and
attached VA documentation.
• Make preliminary determination of eligibility
Perkins Loan Issues

If eligible for TPD based on VA
documentation, submit TPD form and VA
documentation to the Department.
• DO NOT assign loan

The Department will review submitted
paperwork and determine final eligibility.
• Department will instruct school to discharge the
loan
• 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 questions.
Perkins Loan Issues
 Dear
Colleague Letter CB-09-06 and CB09-05




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
Questions?
Lori Hartung
Todd, Bremer & Lawson, Inc.
lori.hartung@TBandL.com
1-800-849-6669
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