ERIC ED475537: Federal Student Aid Handbook, 2002-2003. Volume 5: Perkins Loans.

110 Pages·2002·2.2 MB·English

by  ERIC

DOCUMENT RESUME
ED 475 537
HE 035 778
Federal Student Aid Handbook, 2002-2003. Volume 5: Perkins
TITLE
Loans.
Office of Federal Student Aid (ED), Washington, DC.
INSTITUTION
2002-00-00
PUB DATE
109p.; Developed by Research & Publications Group. For the
NOTE
2001-2002 volume 5, see ED 454 767. For the 9 volumes of the
Student Financial Aid Handbook for 2002-2003, see HE 035 775-
782.
ED Pubs, P.O. Box 1398, Jessup, MD 20794-1398. Tel: 877 -433-
AVAILABLE FROM
7827 (Toll Free); Web site: http://www.fsa4schools.ed.gov.
PUB TYPE Guides Non-Classroom (055)
EDRS Price MF01/PC05 Plus Postage.
EDRS PRICE
Eligibility; *Federal Aid; *Financial Aid Applicants; Higher
DESCRIPTORS
Education; Need Analysis (Student Financial Aid); Paying for
College; Student Financial Aid; *Student Loan Programs
*Perkins Loan Program
IDENTIFIERS
ABSTRACT
This volume describes the Federal Perkins Loan Program, which
comprises Federal Perkins Loans, National Direct Student Loans (NDSLs), and
National Defense Student Loans (Defense Loans). Perkins Loans and NDSLs are
low-interest long-term loans made through school financial aid offices to
help needy undergraduate and graduate students pay for postsecondary
education. Some recent changes in student eligibility, types of promissory
notes, and loan discharges due to death or disability are outlined for the
2002-2003 academic year. The chapters are:
"Participation, Fiscal
(1)
"Making & Disbursing
Procedures,
"Student Eligibility";
& Records";
(2)
(3)
"Forbearance & Deferment";
"Repayment";
(6) "Cancellation";
(5)
Loans ".;
(4)
"Due Diligence: Billing & Collection"; and (8)
"Default." An appendix
(7)
discusses November 2001 Perkins and NDSL Promissory Notes.
(SLD)
Reproductions supplied by EDRS are the best that can be made
from the original document.
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Volume
of
9
5
Application and Verification Guide
Student Loan Guide
Volume 1; Student Eligibility
..
.
Institutional Eligibility, and Partici0.4t..
Volume 2:
.
i...
Volume 3:* Federal Pell Grant Program
Volume 4: Campus-Based Common ProvisionS:::,
.
Volume 5:
Perkins Loans
Volume 6: Federal Work-Study
Volume
FSEOG
Volume 8: Direct Loan and FFEL Progra
Volum 9: State Grant Programs
Developed By:
Research & Publications Group
Web Version: www.ifap.ed.gov
For Further Technical Assistance:
[email protected]
or 1-800 433 732?
Publication Comments:
[email protected]
BEST COPY
AVAILABLE
For Additional Copies and Address Changes:
www.ifap.ed.gov
(see FSA Publications and How to Order) or 1-87? 4ED PUBS
Table of Contents
Volume 5 - Perkins Loans
Introduction
LOAN TYPES
RECENT CHANGES
Student eligibility, New Promissory Notes, Discharge due to death or total and permanent
disability
Chapter I: Participation, Fiscal Procedures, & Records
1
PROGRAM PARTICIPATION AGREEMENT
1
2
ALLOCATION OF FUNDS
2
TRANSFER OF FUNDS
2
CASH MANAGEMENT
Account requirements,Transaction requirements, Business requirements
4
RECORDKEEPING REQUIREMENTS
Repayment history and promissory note
6
REIMBURSEMENT TO THE FUND
Chapter 2: Student Eligibility
7
7
ELIGIBILITY CRITERIA
8
OTHER ELIGIBILITY FACTORS
Willingness to repay, Previous Perkins Loan write-off due to inability to collect, Previous Perkins
Loan cancellation due to disability, Previous Perkins Loan discharged in bankruptcy
9
SELECTION PROCEDURES
Chapter 3: Making & isbursing Loans
11
LOAN MAXIMUMS
11
12
DISCLOSURE TO STUDENTS
13
THE PROMISSORY NOTE
Approved promissory notes, Closed-end vs. open-end, Changes in loan amount, Minimum
monthly payment option
17
GENERAL DISBURSEMENT REQUIREMENTS
Power of attorney, Frequency of disbursements, Uneven costs/unequal disbursements, Returning
funds disbursed prior to attendance, Credit bureau reporting
19
NEW PROMISSORY NOTES: Q AND AS
Chapter 4: Repayment
21
21
GRACE PERIODS
Initial grace periods, Post-deferment grace periods, Initial grace period for less-than-half-time
attendance, Calculating the grace period
23
PREPAYMENT
23
INTEREST ACCRUAL
24
ESTABLISHING A REPAYMENT PLAN
Calculating the payment amount
4
MINIMUM MONTHLY REPAYMENT AMOUNTS
25
Conditions for minimum monthly repayment, Multiple loans at same school, Loans from multiple
schools
PAYMENT PROCESSING
27
INCENTIVE REPAYMENT PROGRAM
27
28
ESTABLISHING REPAYMENT DATES
EXTENDING THE REPAYMENT PERIOD FOR HARDSHIP AND LOW-INCOME INDIVIDUALS 29
DISCHARGE DUE TO DEATH OR TOTAL AND PERMANENT DISABILITY
30
Death,Total and permanent disability
CLOSED SCHOOL DISCHARGE
31
BANKRUPTCY DISCHARGE
31
Responding to complaint for determination of dischargeability, Procedures for responding to
proposed Chapter 13 repayment plan, Resuming/terminating billing and collection, Bankruptcies
filed before October 8, 1998, Bankruptcy and student eligibility
Chapter 5: Forbearance & Deferment
37
FORBEARANCE
37
Hardship
DEFERMENT
38
In-school, Graduate fellowship, Rehabilitation training, Seeking full-time employment, Economic
hardship, Concurrent deferment
HARDSHIP DEFERMENT FOR LOANS MADE BEFORE JULY 1,1993
43
DEFERMENT EXCLUSIVE TO PERKINS LOANS MADE BEFORE JULY 1,1993, AND NDSLS
MADE BETWEEN OCTOBER 1,1980 AND JULY 1,1993
43
Service comparable to Peace Corps/ACTION volunteer,Temporary total disability deferment,
Internship/residency deferment, Parenting deferments
46
DEFERMENTS EXCLUSIVE TO LOANS MADE BEFORE OCTOBER 1,1980
DEFERMENT AND DEFAULT
46
DEFERMENT VS. IN-SCHOOL ENROLLMENT STATUS
47
Chapter 6: Cancellation
49
TEACHING AND OTHER SERVICE CANCELLATIONS
49
49
CANCELLATION PROCEDURES
Application, Cancellation rates, Concurrent deferment, Payment refund
CANCELLATION RESTRICTIONS
50
Prior service, Defaulted loans, National and Community Service Act of 1990
TEACHER CANCELLATION
51
Who is a teacher?
What qualifies as teaching full-time for a full academic year?
What if the borrower teaches part-time at multiple schools?
What if the borrower teaches in a private school?
What if the borrower teaches in a preschool or prekindergarten program?
Cancellation for teaching in low-income schools
Cancellation for teaching in special education
Cancellation for teaching in a field of expertise
NURSE OR MEDICAL TECHNICIAN CANCELLATION
56
CHILD OR FAMILY SERVICES CANCELLATION
56
EARLY INTERVENTION CANCELLATION
56
HEAD START CANCELLATION
57
5
57
LAW ENFORCEMENT OR CORRECTIONS OFFICER CANCELLATION
58
MILITARY SERVICE CANCELLATION
58
VOLUNTEER SERVICE CANCELLATION
59
U.S. ARMY LOAN REPAYMENT PROGRAM
59
REIMBURSING AMOUNTS CANCELED
59
DEFINITIONS
Chapter 7: Due Diligence: tilling & Collection
63
63
GENERAL REQUIREMENTS
63
EXIT INTERVIEWS
65
DISCLOSURE OF REPAYMENT INFORMATION
66
CONTACT DURING GRACE PERIODS
67
BILLING PROCEDURES
Late charges, Notices of overdue payments, Contacting the borrower by telephone, Contacting
the endorser--loans before July 23,1992, Loan acceleration
69
ADDRESS SEARCHES
70
COLLECTION PROCEDURES
Credit bureau reporting, Efforts to collect, Ceasing collection, Alternatives to litigation, Litigation
75
BILLING AND COLLECTION COSTS
Assessing and documenting costs
77
USING BILLING AND COLLECTION FIRMS
Account protection
Chapter 8: Default
79
79
DEFAULT STATUS AND STUDENT ELIGIBILITY
Satisfactory repayment arrangements, Loans with judgments, Previously defaulted loans
discharged for school closure
80
LOAN REHABILITATION
81
ASSIGNMENT
Required documentation,Terms of assignment
82
DEFAULT REDUCTION ASSISTANCE PROJECT
83
PERKINS COHORT DEFAULT RATES
Defining and calculating the cohort default rate, Borrowers entering repayment, Borrowers in
default, Loan not included in cohort default rate, Rules for calculating the number of days in
default
85
PENALTIES FOR HIGH COHORT DEFAULT RATES
Appendix A: November 2001 Perkins and NDSL Promissory
Notes
6
0
Hniroducion
INTRODUCTION
The Federal Perkins Loan Program comprises Federal Perkins Loans, National Direct Student
Loans (NDSLs), and National Defense Student Loans (Defense Loans). (No new Defense Loans
Perkins Loans and NDSLs are
were made after July 1, 1972, but a few are still in repayment.)
low-interest (currently 5 %), long-term loans made through school financial aid offices to help
needy undergraduate and graduate students pay for postsecondary education.
LOAN TYPES
A loan made to a new borrower under the Federal Perkins Loan
Program is a Perkins Loan. (New borrowers should have no
outstanding balance on a Defense Loan or NDSL.) If the borrower has
an outstanding balance on a Defense Loan or NDSL when the new
loan is obtained, the new loan is an NDSL. Loans made from July 1,
1972 through June 30, 1987 were NDSLs. Loans made before July 1,
1972 were Defense Loans.
RECENT CHANGES
Student eligibility
Effective July 1, 2002, if the Department has conditionally
Student eligibility cite
discharged (see below) the borrower's Perkins Loan or NDSL due to
34 CFR 674.9(i)
permanent and total disability and the borrower is applying for
34 CFR 674.91))
another Perkins Loan or NDSL, the borrower must:
submit to the school a physician's certification that the
borrower's condition has improved and that he or she is able
to engage in substantial gainful activity;
sign a statement acknowledging that any new or
conditionally discharged Perkins Loan or NDSL cannot be
discharged on the basis of any present impairment, unless
the condition substantially deteriorates to the extent that the
definition of total and permanent disability is again met; and
sign a statement acknowledging that collection activity must
resume on any conditionally discharged loans.
Also, the borrower is not eligible to receive any additional loans
until the Department resumes collection on any conditionally
discharged loans.
5-i
7
Volume 5
Perkins Loans, 2002-2003
New promissory notes
The Department issued new promissory notes, available for
immediate use, in Dear Partner Letter CB-01-15. The new
promissory notes reflect changes required by the Higher Education
Amendments of 1998.
Discharge due to death or total and permanent
disability
Effective July 1, 2002, if your school concludes that a borrower is
Disability discharge cite
totally and permanently disabled, you must assign the account to the
34 CFR 674.61(b)
Department for a determination of eligibility for discharge. If the
Department makes an initial determination that a borrower is eligible
for discharge, the Department will place the loan in a three-year
conditional discharge status.
8
5-ii
afon2
Pari_ca
Procedures2
Racal
Records
Schools must maintain funds and records according to the procedures of the Federal Perkins
Loan Program.
Program Participation
PROGRAM PARTDOPATION AGREEMENT
Agreement cite
A school that wants to participate in any Federal Student Aid
34 CFR 674.8
(FSA) program must sign a Program Participation Agreement with the
Secretary. (See Volume 2 Institutional Eligibility and Participation for
more general information about the Program Participation
Agreement.) The agreement requires the school to submit annually to
the Department a report containing information that will enable the
Department to determine the school's cohort default rate (discussed
in chapter 8 of this volume).
The agreement for the Federal Perkins Loan Program also
requires the school to establish and maintain a Fund and to deposit
into the Fund:
the Federal Capital Contribution (FCC) the school receives
as its federal allocation for the program for each award year
(explained later in this chapter);
the school's matching sharethe institution's capital
contribution (ICC), discussed on the next page;
payments the school receives for repayment of loan
principal, interest, collection charges, and penalty or late
charges on loans from the fund;
payments the school receives from the federal government
for cancellations (such as teacher cancellations) of Perkins
Loans and National Direct Student Loans (see chapter 6 of
this volume);
any other earnings on fund assets, including net interest
earnings on funds deposited in an interest-bearing account
(total interest minus bank charges incurred on the account);
and
proceeds of any short-term no-interest loans the school
makes to the fund in anticipation of receipt of its FCC or of
loan collections.
5-1
9
Perkins Loans, 2002-2003
Volume 5
Allocation cites
ALLOCATOON OF FUNDS
HEA 462
As discussed in Volume 4 Campus-Based Common Provisions, a school
34 CFR 673.4(a)
applies for program funds annually through the electronic Fiscal
Operations Report and Application to Participate (FISAP). The
Basis for initial allocation
Department allocates funds directly to schools. The allocation for the
HEA 462(a)
Federal Perkins Loan Program, the FCC, is the amount of funding the
school is authorized to receive from the Department for an award year.
Basis for reallocation
34 CFR 673.4(a)
Beginning with the 2000-2001 award year, the Department will base
your school's initial FCC allocation on the amount allocated for the
School's matching share
1999-2000 award year.
34 CFR 674.8 (a)(2)
Your school's matching share or ICC is one-third of the FCC (or
Returned funds
25% of the combined FCC and ICC).
34 CFR 673.4(d)
If a school returns unexpended Perkins funds, the Department
reallocates 80% of the returned funds in accordance with the statutory
formula in section 462(i) of the Higher Education Amendments of
1965, as amended, (HEA) and reallocates 20% in a manner that best
carries out the purposes of the Federal Perkins Loan Program.
If a school returns more than 10% of its FCC, the Department will
reduce the school's FCC for the second succeeding year by the dollar
amount returned.
TRANSFER OF FUNDS
Your school may transfer up to a total of 25% of its FCC for an
Transfer of funds cite
award year to either or both the Federal Supplemental Educational
34 CFR 674.18(b)
Opportunity Grant (FSEOG) and Federal Work-Study (FWS)
programs.
Work-colleges funds
Your school must match any Perkins funds transferred to FSEOG
A work-college may transfer up to 100 per-
or FWS at the matching rate of that program, but the match doesn't
cent of its initial and supplemental Perkins
have to be made until the transfer has occurred.
Loan allocations to the Work-Colleges Pro-
gram. Any unexpended funds must be
You must award transferred Perkins funds according to the
transferred back to the Federal Perkins
requirements of the program to which they are transferred.
Loan Program at the end of the award
year.
You must report any transfer of Perkins funds on the Fiscal
Operations Report portion of the FISAP.
A school that transfers funds to the FWS, FSEOG, and/or Work-
Colleges programs must transfer any unexpended funds back to the
Federal Perkins Loan Program at the end of the award year.
CASH MANAGEMENT
Each year, your school must submit a FISAP; your school must
Perkins cash management cite
ensure that the information reported is accurate and must submit it on
34 CFR 674.19
5-2
10