Introduction



|Section 4 |

Policy: Federal Perkins Loans Program

Regulations: 674.10 (Selection and Awarding of students), 674.31 (Perkins Master Promissory Note), 674.16 (Loan Disclosure) 674.19 (Fiscal Procedures and Records), 674.33(d) (Forbearance),674.38 (Deferment), 674.42 (Contact with the borrower), 674.43 (Billing), 674.45 (Collection), 674.46 (Litigation), and 674.52 (Cancellation)

Purpose: This section provides requirements for the Federal Perkins Loans.

Scope: Specifically Address:

1. Selection and Awarding of Students

2. Perkins Master Promissory Note (MPN)

3. Loan Disclosure

4. Fiscal Procedures and Records

5. Forbearance and Deferment

6. Contact with Borrowers

7. Billing

8. Collection

9. Litigation

10. Cancellation

Responsibilities:      

(Identify individuals and/or offices responsible for developing and updating this section)

Definitions:      

(Identify acronymns or definitions that will be used in this section)

Resources available to assist in the development of a manual:

• Fiscal Management Activity 6 Administrative Cost Allowance

• Perkins Due Diligence Activities 1, 2, 3 and 4

• Perkins Repayment Activities 1–2

• Perkins Forbearance and Deferment Assessment

• Perkins Cancellation Assessment

• Perkins Master Promissory Note (MPN) DCL GEN-15-21

• Review the 2016-2017 FSA Handbook (Volume 6) for guidance related to the topics in this section

|Part 4.1 |Selection and Awarding of Students |This section is required Regulation: |

| | |674.10 |

Procedures must include the following information:

• Selection procedures that are in writing, uniformly applied and maintained in the institution’s files.

• Definition of exceptional financial need for the purpose of the priority to all

students eligible under 34 CFR 674.9 but give priority to those students

with exceptional need.

Exceptional Need Defined as:

     

|Part 4.2 |Perkins Master Promissory Note (MPN) |This section is required Regulation: |

| | |674.31 |

Procedures must include the following information:

• Electronic signature standards

• Making changes to the MPN

• Minimum monthly payment option

Note: Institutions were notified in Dear Colleague Letter GEN-15-03, published on January 30, 2015, that the authority to make Federal Perkins Loans to new borrowers ended on September 30, 2015.  This new Perkins MPN because was released because some institutions may require a borrower who meets the Perkins Loan grandfathering provisions, as described in the Dear Colleague Letter, to complete a new promissory note each year.

Effective date for use of the revised Perkins MPN

As of January 1, 2016, schools may no longer distribute the Perkins MPN with the September 30, 2015 expiration date. On or after January 1, 2016 only the new Perkins MPN included with this Dear Colleague Letter may be distributed to borrowers. However, if prior to January 1, 2016, a school had already distributed the older Perkins MPN to a borrower, that MPN remains valid for making loans. If a school uses the Perkins MPN as a multi-award year promissory note eligible borrowers who previously signed a Perkins MPN with an earlier expiration date may continue to receive Perkins Loan advances under that MPN for up to 10 years from the date the student signed that MPN.

|Part 4.3 |Perkins Loan Disclosure |This section is required Regulation: |

| | |674.16 |

Procedures must include the following information:

• Establish procedures that explain a Perkins borrower’s rights and responsibilities for borrowing funds under the Federal Perkins Loan Program. These procedures must address all of the information in 674.16(a)(1) and (2)

|Part 4.4 |Fiscal Procedures and Records |This section is required Regulation: |

| | |674.19 |

Procedures that outline and follow provisions for maintaining general fiscal records as outlined in

34 CFR 668.24(b) and 34 CFR 668.164.

Please ensure that you have developed Fiscal procedures for this section. The Fiscal procedures that should be included are outlined in Section 1.5 of this guide. You may want to include a reference to that section of the guide to show that your Fiscal Control and funding accounting procedures are in place for the Federal Perkins Program.

In addition, your procedures must address the following Federal Perkins loan related fiscal information:

• Establish and maintain an internal control system of checks and balances

that insures that no office can both authorize payments and disburse funds

to students (See Section 1.2 of this manual).

• A separate bank account for Federal Funds is not required, except as provided in 34 CFR 674.19(b).

• Your school shall notify and bank in which it deposits Federal funds of the accounts into which those funds are deposited by ensuring that the name of the account clearly discloses the fact that Federal funds are deposited in the account; or Notifying the bank, in writing, of the names of the accounts in which it deposits Federal funds. The school shall retain a copy of this notice in its files.

• Your school shall ensure that the cash balances of the accounts into which it deposits Federal Perkins Loan Fund cash assets do not fall below the amount of Fund cash assets deposited in those accounts but not yet expended on authorized purposes in accordance with title IV HEA program requirements, as determined from the records of the school.

• If the cash balances of the accounts at any time fall below the amount described in 34 CFR 674.19(a)(3)(1), the school is deemed to make any subsequent deposits into the accounts of funds derived from other sources with the intent to restore to that amount those Fund assets previously withdrawn from those accounts. To the extent that these institutional deposits restore the amount previously withdrawn, they are deemed to be Fund assets.

• Identify how the school maintains funds received under Federal Perkins Loan

in accordance with 668.163.

• Ensure that the school deposits its FCC into its Fund prior to or at the same time it deposits any FCC.

• Establish and maintain program and fiscal records that are reconciled monthly.

• A process to coordinate and submit a Fiscal Operations Report (FISAP) plus other information the secretary requires. A process to insure that the information reported is accurate and is submitted at the time specified by the Secretary.

• The process to ensure the school follows the record retention and examination provision in 668.24.

• The process to ensure that the school retains a record of disbursements for each loan made to a borrower on a Master Promissory Note (MPN). This record must show the date and amount of each disbursement.

• The process to ensure that for any loan record signed electronically, your school maintains an affidavit or certification regarding the creation and maintenance of the school’s electronic MPN or promissory note, including the school’s authentication and signature process in accordance with the requirements of 34 CFR 674.50(c)(12).

• The process to ensure that your school maintains a repayment history for each borrower. This repayment history must show the date an amount of each repayment over the life of the loan. It must also indicate the amount of each repayment credited to principal, interest, collection costs, and either penalty or late charges.

• The process to ensure that your school retains the disbursement and electronic authentication and signature records for each loan made using an MPN for at least three years from the date the loan is canceled, repaid, or otherwise satisfied.

• The process to ensure that your school retains repayment records, including cancellation and deferment requests for at least three years from the date on which a loan is assigned to the Secretary, canceled or repaid.

• The procedures to ensure that your school keeps the original promissory notes and repayment schedules until the loans are satisfied. If required to release original documents in order to enforce the loan, your procedures must ensure that the school retains certified true copies of those documents.

• The procedures to ensure that your school keeps the original paper promissory note or original paper MPN and repayment schedules in a locked, fireproof container.

• The procedures to ensure that if a promissory note was signed electronically, the school stores it electronically and the promissory note is retrievable in a coherent format. An original electronically signed MPN must be retained by the school for 3 years after all the loans made on the MPN are satisfied.

• The procedures to ensure that after the loan obligation is satisfied, the school returns the original or a true and exact copy of the note marked “paid in full” to the borrower, or otherwise notifies the borrower in writing that the loan is paid in full, and retains a copy for the prescribed period.

• The procedure to ensure your school maintains separately its records pertaining to the cancellations of Defense, NDSL, and Federal Perkins loans.

• The procedures to ensure that only authorized personnel have access to the loan documents.

|Part 4.5 |Deferment and Forbearance |This section is required Regulation: |

| | |674.33(d); 674.38 |

Required information:

• Process and handling of a student’s request for a forbearance as outlined in 34 CFR 674.33(d)

• Process for handling and processing a student’s request for a deferment except as provided in 34 CFR 674.38(a)(2).

• Process for reviewing continued eligibility of a deferment on an annual basis.

|Part 4.6 |Contact with the borrower |This section is required Regulation: |

| | |674.42 |

Required information:

• Process for disclosing the required information contained in 674.42(a) either shortly before the borrower ceases at least half-time study at the school or during the exit interview.

• Process to ensure that Federal Perkins Exit Counseling is conducted in accordance with 674.42(b).

The Process for disclosing the required information is:

     

|Part 4.7 |Billing |This section is required Regulation: |

| | |674.43 |

Required information:

• Billing procedures for all actions routinely performed to notify borrowers of payments due on their accounts, to remind borrowers when payments are overdue, and to demand payment of overdue amounts.

• Provide process to address all billing procedures that include at least the steps outlined in 674.43.

|Part 4.8 |Collection |This section is required Regulation: |

| | |674.45 |

Required information:

• Collection procedures that address a more intensive effort, including litigation as described in 34 CFR 674.46 to recover amounts owed from defaulted borrowers who do not respond satisfactorily to the demands routinely made as part of the institution’s billing procedures.

• Collection procedures that address when a borrower does not satisfactorily respond to the final demand letter or the following telephone contact made in accordance with 674.43(f), that the institution follows the requirements outlined in 674.45(1)(2)(3).

The Collection procedures are:

     

|Part 4.9 |Litigation |This section is required Regulation: |

| | |674.46 |

Required information:

• Litigation procedures if collection efforts described in 674.45 do not result in the repayment of a loan, the institution shall determine at least once every two years the guidance provided in 674.46.

|Part 4.10 |Cancellation |This section is required Regulation: |

| | |674.52 |

Required information:

• Procedures that outline how to qualify for a cancellation of a loan, a borrower shall submit to the institution to which the loan is owed, by the date that the institution establishes, both a written request for cancellation and any documentation required by the institution to demonstrate that the borrower meets the conditions for the cancellation requested.

• Address requirements for cancellation in regards to Part-time employment, Cancellation of a defaulted loan, and Concurrent deferment period as outlined

in 34 CFR 674.52.

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2016-2017 Section 4, Federal Perkins Loan, Page 6 of 6

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