Key insights
- To close out of the Perkins Loan program, every loan with an outstanding balance must be accounted for either by being assigned to the Department of Education or purchased by the institution.
- Higher ed institutions need to analyze their portfolio and consider their most advantageous time to close out.
- The Department of Education’s Assignment and Liquidation Guide can help you understand options for assigning loans with missing information.
Develop an exit strategy that works to your institution’s advantage.
It’s been almost eight years since Congress allowed the Perkins Loan program to expire. There are plenty of higher ed institutions that have closed out of the program — and many more that are still working toward this goal. To close out, every loan with an outstanding balance in the program must be accounted for either by being assigned to the Department of Education (ED) or purchased by the institution.
When is a good time to exit the program?
While the general industry consensus is that higher ed institutions want to just close out the program and be done, it can come at a cost. Institutions need to analyze their portfolio and consider their most advantageous time to close out.
If your portfolio is made up of students in repayment who are consistently making payments, it might make sense to stay in the program for a while. However, if you have many defaults and inconsistent repayment, it might be a good time to exit the program.
Remember — when you assign a loan to ED, you forego your interest in that loan. Work with a professional advisor who can help assess your institution’s situation and build a beneficial exit plan.
What if a loan is missing documentation?
When assigning loans to ED, the original promissory note — along with repayment history, judgement, and bankruptcy information — needs to be submitted. But what happens if you can’t find that promissory note signed 30 years ago, or if the institution switched third-party servicers and some of the repayment history disappeared? Is it certain that your institution will have to purchase this loan?
Not necessarily. ED has some alternatives. In its Assignment and Liquidation Guide, the section titled “What to do if you have missing or defective documentation or other extenuating circumstances” can help you understand options for assigning loans with missing information.
Join us on March 30 for a complimentary webinar as we review what an institution should expect when exiting the Perkins Loan program. Register today.
How we can help
Closing out of the Perkins Loan Program isn’t an overnight process — it will take significant resources and time. CLA’s higher education professionals can help you streamline the process and lay out a plan that works to your institution’s advantage.