COHEAO Guidance for Perkins Schools – Options for Perkins Borrowers Facing Financial Hardship

Congress recently passed emergency legislation called the CARES Act, which provides many benefits to help federal student loan borrowers during this challenging time. Unfortunately, that legislation only applies to loans that are “federally held” and does not extend to borrowers with Perkins loans being serviced at the school level. In an effort to provide maximum relief to borrowers with Perkins loans, COHEAO recommends that schools continue to follow the program guidelines and leverage the inherent and unique benefits of the Perkins loan program.

For Perkins borrowers who are impacted by the pandemic and contact the school, or servicer, expressing a financial hardship, the following benefits provide similar relief, and are subject to eligibility:

• Economic Hardship Deferment: Defers both principal and interest and has a post-deferment grace period of 6 months.   
• Unemployment Deferment: Defers both principal and interest and has a post-deferment grace period of 6 months.
• Forbearance: Temporarily postpones payments, interest continues to accrue and is due once regular payments resume.

All options listed above are limited to 36-months of eligibility.  Economic hardship and unemployment deferments require the borrower to provide the school with supporting documentation on an OMB-approved deferment form.  Forbearance may be granted through a verbal request.  For more details on these benefits, please refer to the Department’s Federal Student Aid Handbook on the IFAP website. 

What about Consolidation?  Borrowers who consolidate will be eligible for the CARES Act relief benefits.  When the borrower consolidates, the statutory rate will be reported and used as part of the weighted average interest rate of the consolidation loan.  However once the loan is booked, the TIVA will automatically put the borrower in a forbearance and 0% interest rate until September 30, 2020 per the CARES Act legislation.  Please note: Borrowers who plan to utilize the Federal Perkins cancellation benefits should not consolidate their loan.

In order to remain in compliance, COHEAO recommends that the following activities continue to take place, tempered with an understanding of the ongoing pandemic:

• Required 90-day telephone calls should continue to borrowers hitting delinquency triggers.
• Past due notices including intent to accelerate, acceleration and collection notices should still be sent.
• Defaulted loans should still be placed with collection agencies consistent with the school’s normal process and with the understanding that agencies are in the best position to modify outbound borrower contacts based on regulatory guidance from both Federal and state regulators as well as adapt to the changing nature of the pandemic.

COHEAO will continue to monitor developments and provide additional updates as they are announced.  The response to the pandemic continues to be fluid making it critically important that we stay connected as a community and continue to advocate for our borrowers and the Perkins program.