Guidance Regarding Interest Relief to Perkins Loan Borrowers

The Department of Education, Office of Federal Student Aid, has just provided the following information in response to COHEAO requests for guidance with regard to providing interest relief to Perkins Loan borrowers.  We wanted to share it with you as soon as possible.

Thank you for your inquiry.  As noted in our April 3, 2020 electronic announcement (EA), in order to provide Perkins borrowers with loans held by institutions the same loan relief afforded to borrowers with loans held by the federal government during the COVID-19 national emergency, the Department has given schools the flexibility to provide the same zero interest and cessation of payments benefits to the Perkins loans they hold on a voluntary basis until September 30, 2020.  These options are not considered to be an incentivized repayment plan being offered by the school and would therefore, not cause the school to have to reimburse their Perkins Loan Revolving Fund for any interest lost during this covered period.  Since there is no negative impact to the schools, we strongly encourage schools to work with all of their Perkins borrowers; however, since these options are voluntary, a school may choose to only offer 0% interest to those students specifically requesting assistance.  However, if your school is not offering the benefit to all of its Perkins Loan borrowers, we strongly encourage you to consult with your legal counsel.  Please monitor the Information for Financial Aid Professionals (IFAP) website at ifap.ed.gov and the ED’s coronavirus website at ed.gov/coronavirus for updates or changes to the guidance provided in this response.

The Following is the Perkins Loan section of the Department’s April 3 guidance:

All Federal Student Loans Not Held by the Federal Government—Zero Interest and Suspension of Payments

Federal Family Education Loan (FFEL) Program lenders and institutions who hold Perkins loans may provide the same zero interest and cessation of payments benefits to the loans they hold on a voluntary basis. Borrowers of these loans should contact their servicer (or the institution if paying the institution directly) for additional information.

The Following was also included later in the April 3 guidance:

Federal Perkins Loan Program
Borrowers in Repayment (§ 674.33)

The Department authorizes institutions to grant forbearance, for a period not to exceed three months, to a Federal Perkins Loan borrower who is in repayment and who is unable to make payments due to a COVID-19 related interruption.

For an institutionally held Perkins Loan, interest accrues during any period of forbearance. A borrower may request this forbearance orally or in writing and is not required to submit documentation to be considered eligible for this forbearance. An institution must document the forbearance in the borrower’s file. To receive forbearance beyond the three-month period, the borrower must make a request to the institution and provide supporting documentation. (At the expiration of the three-month period, the institution should examine the borrower’s situation to determine potential eligibility for an economic hardship deferment or unemployment deferment, as appropriate.) This period of forbearance is counted toward the three-year maximum limit on the number of years of forbearance that may be granted to a borrower.

Collection of Defaulted Loans (Part 674, Subpart C—Due Diligence)

The institution may stop collection activities through September 30, 2020 upon notification by the borrower, a member of the borrower’s family, or another reliable source that the borrower has been affected by the COVID-19 national emergency. Collection activities must resume when the period ends. The institution must document in the loan file why it suspended collection activities on the loan and is not required to obtain evidence of the borrower’s status while collection activities have been suspended.

Satisfactory Repayment Arrangements on Defaulted Loans (§ 674.2)

An institution should not treat any scheduled payment the borrower fails to make as a missed payment in the stream of six on-time, consecutive, monthly payments required for the borrower to make satisfactory repayment arrangements on a defaulted Perkins Loan and to re-establish their eligibility for assistance under Title IV of the HEA. If the Department does not extend the effective period for the temporary relief provided by this guidance, the required sequence of qualifying payments resumes at the point at which it was discontinued.

Payments to Rehabilitate Defaulted Loans (§ 674.39)

An institution should not treat any scheduled payment the borrower fails to make as a missed payment in the stream of nine on-time, consecutive, monthly payments required for the borrower to rehabilitate the defaulted loan. If the Department does not extend the effective period for the temporary relief provided by this guidance, the required sequence of qualifying payments resumes at the point at which it was discontinued.