After delaying the deadline by a year, the Department of Education recently confirmed that June 30, 2023 will remain the final date to assign all Perkins Loans more than two years delinquent back to the government.
With this June 30 deadline just days away, ECSI wants to help you understand your obligations and what to do if you still have unassigned delinquent Perkins Loans in your portfolio.
Why are schools required to assign Perkins Loans?
Besides the Department of Education’s mandate to do so, assigning past-due Perkins Loans can be good for your university. Assigning a loan means you’re transferring all rights and responsibilities for servicing and collecting them to the government. The government wants these loans assigned because they have collections options that can prove more successful.
What documentation do I need to complete the assignments process?
To complete the process, you’ll need the loan’s promissory note. If you cannot locate the loan’s promissory note, you can present alternative documentation, including:
- Signed Exit Interview
- Truth In Lending Statement
- Entitlement Forms
- Proof of prior payments on Perkins Loans
Our experts recommend explaining the reason the school is missing promissory note (e.g., natural disaster such as a flood, a fire, or otherwise lost or destroyed, etc.) and also affirm that the school searched all its records and the promissory note does not exist. The explanation must detail the alternate documentation that is being submitted and should be on a separate sheet of paper that is included with the alternate documents.
If no acceptable documentation exists to assign the loan, your school may be required to purchase it. Because the loan continues to accrue interest until its purchased, it’s in your school’s best interest to locate documentation as quickly as possible.
Are there exceptions to the rule?
Yes. Institutions with “an acceptable collection record on defaulted Perkins loans” are exempted from the requirement to assign them. If you feel this applies your school, be prepared to submit relevant documentation to the Department of Education for review when requested.
In addition, there may be other reasons not to assign individual Perkins Loans on a case-by-case basis, including:
- Borrower is deceased. In this situation, use the NSLDS Death Status Conflict Report to assist in identifying deceased borrowers whose loans can be canceled instead of assigned.
- Borrower is in current bankruptcy proceedings. An exception is if the school is liquidating their portfolio, in which case they can assign loans in bankruptcy. If your school is not liquidating, you should wait until a loan is dismissed from the bankruptcy proceedings before proceeding with assignment.
- Borrower is in litigation proceedings. Such loans should not be assigned until a judgment is rendered and the school transfers the judgment to the Department of Education. Schools can also choose to withdraw legal action from the court if they wish to assign the loan immediately.
- The loan has a small balance under $25. Such loans should not be assigned but can be written off per Perkins regulations.
- Borrower is actively making payments. The Department of Education states such loans do not need to be assigned.
- Borrower has made a recent payment(s). Schools might choose to not assign such loans based on recent payment activity.
How can I best navigate the assignments process in the timeline?
The assignments process involves borrower notifications, contacting collections agencies, creating forms, generating a loan history, and more – for each and every loan. It’s a considerable amount of administrative work. If your office hasn’t already located documents and started the process, it may prove difficult to meet the June 30 deadline. That doesn’t mean you shouldn’t make your best effort to comply. Schools in this situation should reach out to the FSA to discuss your timeline and avoid a focused program review of your Title IV administrative capability.
Still have questions on the assignment process? Reach out to ECSI and we’ll walk you through the process.