NAICU Washington Update

Once Again, No Reimbursement for Federal Perkins Loan Service Cancellations

May 19, 2014

On May 13, the Department of Education formally announced that it would not be reimbursing colleges that provided loan forgiveness for Perkins Loan borrowers who completed public service jobs. Nevertheless, campuses must still provide the forgiveness for borrowers. As has been the practice for a number of years, the Department will calculate the 2012-2013 reimbursement payment for which a school would have been eligible to receive, and maintain a record of that amount.

In related news, the Department on April 18, 2014 published “the Orange Book,” i.e., Federal Perkins Loans Cohort Default Rates (CDR) as of June 30, 2013. Rates are listed by institution. Most NAICU member institutions have low rates, but a few have rates at or above 25%. According to the law, institutions at or above 25% are not entitled to receive a federal capital contribution to provide Perkins Loans. This is a meaningless penalty because, for the last decade, there have been no additional federal funds appropriated. However, an institution that has a CDR of 50% or more for three years can no longer participate in the program.

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