NAICU Washington Update

Recollection of Perkins Loan Revolving Funds Delayed, Giving Hope for Reimbursements

December 03, 2018

The U.S. Department of Education has announced that it will delay the recollection of the federal share of Perkins Loan revolving funds.  The announcement gives hope to colleges and universities that the postponement will provide the Department with the time it needs to finalize a mechanism to repay institutions for unreimbursed Perkins Loan cancellations.
Due to the termination of the Perkins Loan program last year, institutions of higher education that participated in the program will be responsible for returning their federal capital contributions (FCCs) to the federal government. While some institutions have already proactively returned their FCCs via the voluntary liquidation process, most institutions have been awaiting further guidance from the Department on the process of remitting their FCCs to the U.S. Treasury. Guidance from the Department of Education on the FCC remittance process had been expected by mid-December 2018.
However, Department of Education officials recently announced that it is indefinitely delaying guidance on the recollection of Perkins Loan FCCs. The delayed guidance is linked to the problem of unreimbursed Perkins Loan cancellations.
Although federal law provides for Perkins Loan forgiveness for qualified borrowers who serve in public service fields such as teaching, nursing, and the military, Congress has not funded the loan forgiveness program since 2010. As a result, institutions have had to write off the funds from students whose loans have been forgiven. Because the Perkins Loan program is funded by both FCCs and institutional capital contributions (ICCs), when institutions forgive Perkins Loan repayment to a qualified borrower it has the effect of expropriating private institutional dollars to the federal government. Without specific credit to colleges for loan forgiveness during the upcoming remittance process, institutions will never see their cancelled ICCs made whole. It is estimated that the total federal obligation for Perkins Loan Program forgiveness over the past decade exceeds $300 million.
Congress and the Department of Education have both publicly acknowledged that colleges and universities must be reimbursed for the congressionally-mandated cancellations. However, there has been disagreement over whether Congress must specifically appropriate funds for unreimbursed cancellations or if the Department of Education can act independently.
By delaying the Perkins Loan recollection process, there is hope among institutions that the Department will be able to successfully spearhead the process to reimburse institutions for the unpaid cancellations. Due to the large sums of money involved, it is likely that a federal  interagency task force will be convened to determine the legality and procedure for reimbursement.

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