1. Perkins Loan Closeout
April 13th, 2017

2. Perkins Loan Closeout: Why Now?

3. Perkins Loan Program History
National Defense Student Loan (NDSL) Program established in 1958
NDSL changed to Perkins Loan Program in 1986
Purpose: To provide loans to students from low-income families
Established through Department of Education and School contributions to a revolving loan pool
No Federal contributions have been made since 2005.
Over $1 billion advanced to students in FY2016.
$1,044,000,000 advance for year-ended September 30, 2016 for FSA per FSA annual report

4. Why is the Perkins Loan Closeout Relevant Now?
Lack of funding from Federal government
Dwindling loan pools
Burdensome administrative requirements
Administration of Perkins Loans changes after September 30, 2017 ( award year)
Department of Education issued Dear Colleague Letter GEN
Federal Perkins Loan Extension Act of 2015 prohibits any further automatic extension of the Perkins Loan Program under section 422(a) of the General Education Provision Act (GEPA)
-ED’s Dear Colleague Letter and the Federal Perkins Loan FAQ indicated that the department will be providing details about the return of the Federal share of the institution’s Perkins Loan Revolving funds at a later date. Yet to issue additional guidance.

5. Perkins Loan Liquidation

6. Assignment and Liquidation
Primary guidance found in the Federal Perkins Loan Program Assignment and Liquidation Guide
What is Perkins Liquidation?
The prescribed process for ending participation in the Federal Perkins Loan Program
Involves review of the outstanding Perkins Loans to determined if the loans have been maintained and administered properly so that they can be assigned to the Department of Education.
Most recent update to the Liquidation Guide as of December 20, 2016

7. Why might a school liquidate?
Voluntary withdrawal from the Perkins Loan Program
Schools are urged to liquidate its Perkins Loan Portfolio and program fund if it is no longer advancing Perkins Loan funds to students
Eligibility to participate in FPL terminated by Department of Education (ED)
Lack of approval by ED for continued participation in the Federal Perkins Loan Program during school’s recertification process
School is closing
-Barring any other guidance from ED this is their general guidance for schools who are no longer advancing Perkins Loans, therefore it can be inferred that ED expects each school to liquidate its Perkins Loan Fund until further notice is provided by ED.
Perkins Loans will not be able to be advanced after the school year under the program wind-down.
No distributions can be made after June 30, 2018
Liquidation process is expected to take 180 days although could vary by institution
Additional time may be needed for the final audit official closeout letter from the Department.

8. Financial Implications of Liquidation
Private Schools
Limited – FCC already reported as Liability
Public Schools
Can be significant
Option to report as liability or as revenue/net position

9. Financial Implications of Liquidation

10. Steps to Liquidate 1. Intent to Liquidate 2. Notify Borrowers
3. Assign Loans
4. Purchase Loans
5. Update Perkins Loans records in NSLDS
6. Perkins Loan Closeout Audit
7. Remit the Federal Share
8. Complete Final FISAP Data

11. Step #1: Intent to Liquidate
A school must notify the Department of Education of the School’s intent to liquidate its Perkins Loan Program.
Completed through the eCampus Based System.
Schools should ensure that they have gathered the majority of the necessary documentation before declaring the intent.

12. Step #2: Notify Borrowers
Schools must notify students that their loans are intended to be assigned to the Department of Education at least 30 days before the assignment has been completed.
Sample notification letter can be found in the Federal Perkins Loan Program Assignment and Liquidation Guide.

13. Step #3: Assign Loans
Assign all outstanding Perkins loans to the Department of Education within 45 days following the intent to liquidate.
Schools have choice of manual or electronic completion of assignment forms and submission of materials.
Assignment Guidance found in the Perkins Loan Assignment System (PLAS) User Guide
Note: The timing is important as students must be notified thirty days before assignment, therefore Schools only have 15 days in which to notify students after the intent to liquidate.

14. Step #3: Assign Loans (cont.)
What is required for each Assignment?
Assignment Manifest (automatically generates if done online)
Perkins Assignment Form
Institutional Certification – typically one per school
Assignment Form – Borrower and Loan Information – one per student
Original Promissory Note or Perkins Master Promissory Note (MPN)
Repayment History (account activity)
Judgment Information (if applicable)
Bankruptcy Information (if applicable)
Promissory Note: If only a copy available, a “Certified True Copy” can be provided.

15. Step #4: Purchase Loans
Schools are required to purchase loans that cannot be assigned via reimbursing the program Fund (an internal transfer)
Department of Education will not accept loans if the appropriate documentation has not been retained or provided in the assignment documents.
Repayment at this stage not a repayment of funds to the Department of Education, but only to the program fund. Remittance of federal share is completed via step #7.

16. Step #5: Update NSLDS
Status must be updated in NSLDS as assigned or school purchased.
Completion of the liquidation process requires that there be zero school held open loans in NSLDS
Code “AE” is reported for transferred loans in the loan status for assigned loans
Code “UC” is reported for non-defaulted Purchased Loans
Code “UD” is reported for defaulted Purchased Loans

17. Step #6: Closeout Audit
All schools must have a closeout audit completed by an independent third-party accountant.
Closeout audit can be completed through the Single Audit for schools that report under the Single Audit Act.
Schools that do not fall under the Single Audit Act must have a separate audit completed.

18. Step #7: Remit the Federal Share
Schools must remit the Federal share of the remaining Perkins cash assets to the Department of Education.
Determined via the Distributional Shares Formula
Federal Share will be automatically calculated within eCampus Based System.
Closeout audit requires that portions of the calculation are audited.

19. Distributional Shares Formula

20. Step #8: Complete Final FISAP Data
Completed through the eCampus Based System online and Final FISAP data is entered in Phase 4 of the Perkins Intent and Closeout Form.

21. Perkins Loan Closeout Audit

22. Engagement of Independent Auditors
Schools that fall under the Single Audit Act
Schools’ financial statement auditors should be notified that the Perkins closeout will need to be completed as a part of the Single Audit.

23. Engagement of Independent Auditors
Schools that don’t fall under the Single Audit Act
Must submit a letter of engagement for an independent audit within 45 days after the school ends participation in the FPL program to the Department of Education.
Must submit a copy of the completed audit no later than 90 days after the school ends participation in the FPL program.
A school’s participation in the FPL program is considered to have ended once all outstanding loans in the portfolio have been fully retired, assigned or accepted by the Department, or purchased.

24. Audit Period
Audit report is intended to cover the period from the date the last FISAP was filed to the date when the school ends its participation in the program.

25. Audit Procedure Requirements
If the institution has completed the liquidation of its Perkins Loan Portfolio, verify that the institution has purchased or assigned to the Department any Perkins Loans with outstanding balances.
Will likely require the School to provide the auditors with listing of all loans assigned and purchased
Auditor will test a sample to ensure that proper procedures were followed for assignment or that proper amount of funds were transferred to the Perkins fund to purchase the loans.

26. Audit Procedure Requirements (cont.)
If the process of liquidating outstanding loans has not been completed, verify that the institution has informed the Department of Education of how the institution will provide for the collection of the outstanding loans under the program.
Would apply for assignments in dispute
Auditor would likely review documentation regarding resubmission of assignment documentation or acknowledgement that school will purchase the loans

27. Audit Procedure Requirements (cont.)
Verify that the institution, as a part of its procedures for maintaining program and fiscal records for all transactions that occurred after the most recent FISAP was filed, reconciled the following information:
All loans for the total number of borrowers that make up the portfolio have been accounted for. This includes retired loans, including loans purchased, and loans assigned to ED (including validating the computed accumulated interest charged on the loans).
Service cancellation data in Section A and all data in Section C of Part III of the school’s latest submitted FISAP.
Federal Capital Contribution (FCC)
Institutional Capital Contribution (ICC)
Overall cash on hand or excess amounts
Cash would include any payments to the Perkins Loan Fund for any loans the school may have purchased.

28. Audit Report Submission
School must send pdf copy of Closeout Audit Report or portion of that contains required Perkins closeout information to
Subject of should include the name of school, OPEID number and the Words “CLOSEOUT AUDIT REPORT”.

29. Final Liquidation Completion Letter
Once all steps have been completed including submission of the Final FISAP Data and the audit report has been received by ED, an official letter of approval for liquidation completion and closeout will be issued to the school.
Letter will be posted to schools self-service page in eCB.

30. Q&A