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AwardYear: 1997-1998 EnterChapterNo: 6 EnterChapterTitle: Federal Perkins Loan Program SectionNumber: SectionTitle: Contents PageNumbers: INTRODUCTION . . . . . 1 Recent Changes to the Federal Perkins Loan Program . . . . . 1 Participation Agreement and Federal Perkins Loan Fund . . . . . 3 Allocation of Funds--Federal Capital Contribution . . . . . 4 SECTION 1: STUDENT ELIGIBILITY . . . . . 7 Eligibility Factors . . . . . 8 Loan Availability . . . . . 9 Eligibility of Student Who Drops Out . . . . . 10 SECTION 2: MAKING & DISBURSING LOANS . . . . . 11 Loan Maximums . . . . . 11 Counseling Students . . . . . 13 The Promissory Note . . . . . 15 Comparison of July 1993 Notes with May 1996 Notes . . . . . 16 Changes in Loan Amount--May 1996 Notes . . . . . 17 School-Designed Note . . . . . 17 Minimum Monthly Payment Option . . . . . 18 Closed-end and Open-ended Promissory Notes . . . . . 18 General Disbursement requirements . . . . . 19 Frequency of Disbursements . . . . . 21 Uneven Costs/Unequal Disbursements . . . . . 21 Late Disbursements . . . . . 22 SECTION 3: REPAYMENT . . . . . 23 Grace Periods . . . . . 23 Grace Period for Borrower attending Less Than Half Time . . . . . 24 Prepayment . . . . . 26 Repayment Plan . . . . . 26 Exit Interview and Repayment Schedule . . . . . 27 Developing a Repayment Schedule . . . . . 27 Minimum Monthly Repayment Amounts . . . . . 28 Establishing Repayment Dates . . . . . 31 Interest Rates . . . . . 32 Length of Repayment Period . . . . . 32 Disposition of Promissory Note and Repayment Schedule . . . . . 34 SECTION 4: FORBEARANCE & DEFERMENT . . . . . 37 Forbearance . . . . . 37 Deferment . . . . . 38 In-School Deferment--Common to All Program Loans . . . . . 39 Deferment of Loans Made on or After July 1, 1993 . . . . . 39 Deferment of Perkins Loans Made Before July 1, 1993 . . . . . 43 Deferment of NDSLs Made Between October 1, 1980 and July 1, 1993 . . . . . 46 Deferment vs. Postponement for Service That Will Qualify for Loan Cancellation . . . . . 48 The Concurrent Deferment Period . . . . . 49 Deferment and Default . . . . . 49 Deferment vs. In-School Enrollment Status . . . . . 50 SECTION 5: CANCELLATION . . . . . 51 U.S. Army Loan Repayment Program . . . . . 51 Common Cancellation Procedures . . . . . 51 Cancellation Provisions Common to All Loans Made After July 1, 1987 . . . . . 53 Law Enforcement Cancellation Provision--Specific to Loans Made on or After November 29, 1990 . . . . . 53 Cancellation Provisions Specific to Federal Perkins Loans and NDSLs Made on or After July 23, 1992 . . . . . 54 Military Service Cancellation--Applies to All Loans Made on or After July 1, 1972 . . . . . 55 Cancellation Provisions Specific to Perkins Loans . . . . . 55 Death, Total and Permanent Disability, and Bankruptcy Cancellation Provisions--Applicable to All Loans . . . . . 56 Criteria for Teacher Cancellation . . . . . 56 Criteria Borrower Must Meet for Military Cancellation . . . . . 61 Criteria for Head Start Cancellation . . . . . 61 Criteria for Employee of a Child or Family Services Agency . . . . . 61 Criteria for Law Enforcement or Corrections Officer Cancellation . . . . . 62 Criteria for Disability Cancellation . . . . . 62 Criteria for Receiving a Bankruptcy Cancellation . . . . . 63 Reimbursing Amounts Canceled . . . . . 63 Definitions . . . . . 64 SECTION 6: DUE DILIGENCE--BILLING & ADDRESS SEARCHES . . . . . 67 Exit Interview . . . . . 67 Contact During Grace Periods . . . . . 70 Billing Procedures . . . . . 71 Address Searches . . . . . 74 SECTION 7: DUE DILIGENCE--LOAN COLLECTION . . . . . 77 Collection Procedures . . . . . 77 Actions a School May Take to Avoid Litigation . . . . . 79 Litigation . . . . . 81 Deposit of Funds Collected . . . . . 82 Costs Chargeable to the Federal Perkins Loan Fund . . . . . 82 Using Billing and Collection Firms . . . . . 84 SECTION 8: DEFAULT . . . . . 87 Compromise of Repayment of Defaulted Loan . . . . . 88 Penalty for Schools With High Cohort Default Rates . . . . . 89 Calculating a School's Cohort Default Rate . . . . . 89 Defaulted Loans Included in a School's Cohort Default Rate . . . . 90 Rules for Calculating the Number of Days in Default . . . . . 92 Cohort Default Rate for a School With More Than One Location . . . . . 93 Default Reduction Plan . . . . . 94 Assignment . . . . . 97 Default Prevention Software . . . . . 99 Default and Student Eligibility . . . . . 99 SECTION 9: BANKRUPTCY . . . . . 101 When Borrower Requests Discharge Based on Undue Hardship . . . . . 101 Procedures When Borrower Requests Adjustment in Repayment . . . . . 102 SECTION 10: CREDIT BUREAU REPORTING . . . . . 105 SECTION 11: PROGRAM FUNDS . . . . . 107 Fiscal Procedures . . . . . 108 Recordkeeping Requirements . . . . . 110 |