Mandatory Assignment of Perkins Loans

To All COHEAO Members:

As you know last November, COHEAO wrote to the Department of Education expressing concerns and questioned the legality of the Department’s August 27, 2021 electronic announcement concerning the assignment of Perkins Loans. That letter can be found here.

Last week, COHEAO received a letter from Under Secretary James Kvaal in response to COHEAO’s November letter.  While the response from the Department does not address any of the substantive points made in the COHEAO letter, it does come closer to answering a critical question in this process.

The letter, in the second to last paragraph, states “Further, as the electronic announcement makes clear, institutions that wish to avoid assignment may do so if they have acceptable collection records by notifying the Department that documentation showing an acceptable collection record is available upon request and submitting such documentation to the Department of Education for review if and when requested.”

Earlier in the letter, the Department noted that institutions are required to “1) engage in litigation to collect on the debt; 2) attempt to collect on the loan through a different entity than the first attempt to collect; or 3) submit the account for assignment to the Secretary.  If a second attempt at collection is not successful within 12 months, the institution is required to continue annual attempts…”

Initial reading of this letter indicates that if an institution can document that their Perkins loans that are more than 2 years in default have either gone to litigation or been reassigned from one collection agency to another on at least an annual basis, that the institution is NOT required to assign those loans if they do not want to.  However, the letter does not specifically state that the Department would consider this an “acceptable collection record.”  As such, COHEAO has asked the Department the following question in follow-up – “Does the institution have an acceptable collection record if that institution can document that either the loan is in litigation or has an annual pattern (or less) of reassigning the loan to a different collector?”

When COHEAO receives a reply to this specific question, we will be sure to update and inform our members promptly.  Should you have any questions please feel free to contact Bob Moran at rmoran@bosepublicaffairs.com.