Department of Education Working on Reimbursing Institutions for Cancelled Perkins Loans

March 20, 2019

COHEAO and others have been talking to the Department of Education and Congress about the obligation under the Higher Education Act for the Department to reimburse institutions for their share of cancelled Perkins loans.  With no new loans being made and the Department in the process of winding down the program, this issue must be resolved.  Congress, at COHEAO’s request and with support from others in higher education, in appropriations legislation for the current fiscal year reminded the Department of this obligation.

Indeed, top Department officials have been working on this process for several months – with a delay caused by the partial government shutdown – and are nearing a solution that would result in institutions being made whole.  This will probably be a gradual process that will take a few years to complete.  Institutions that liquidate their Perkins program will not receive anything since that liquidation includes assignment of all rights to the loans to the Department.

The Acting Undersecretary of Education Diane Jones in answer to a question at the March 11 public briefing on the Department’s budget request for Fiscal Year 2020 confirmed what COHEAO understood to be the case.  A transcript of what she said is below.  To clarify, she is saying that the Department plans instead of asking Congress to appropriate money for reimbursements to allow schools to retain some or all of their collections of Perkins loans until they have received the institutional share of cancelled loans, including the arrearages that have built up over the years.  Notably, the Department has delayed announcing their plans for collecting the federal share of collected Perkins loans while they work out a process for reimbursement to institutions.

It is not known exactly when the Department will announce its plans because other parts of government have to sign off, but we expect to hear something this spring.  Again, it is important to note that institutions will lose their share of cancelled Perkins loans if they liquidate their programs.

Here is what Undersecretary Jones said at the budget briefing.  She was asked by a university representative if the Department would need to ask Congress for an appropriation of money in order to reimburse institutions for their share of cancelled loans or otherwise needed funding or authority from Congress.

Jones replied: “If we were to make lump sum payments to reimburse institutions… (pause) In the Perkins Loan program there are certain activities that result in the cancellation of a student’s loan repayment obligations.  If we were to make lump sum payments there is an institutional share of a Perkins loan and  a Department share of a Perkins loan, and when the Perkins program was still in operation the institution would get their share back from a cancelled loan, and so that is what we are talking about here.  If we were to do a single payout to all institutions at one time it would require an appropriation.    We are looking at other ways that we can address the situation.  We know that it has been several years that institutions haven’t gotten their share back. We are looking at that through the lens of sometimes you all lost money, and sometime we owe you money, and how do we reconcile it?”

If you have any questions, please contact Harrison Wadsworth at hwadsworth@bosepublicaffairs.com.