Perkins Student Loans: Need for Better Controls Over Loans Recovered from Closed Schools

The Perkins Student Loan Program establishes federally subsidized revolving loan funds at postsecondary schools that provide 10-year, 5-percent loans to financially needy students. Schools must provide at least 1 of their own funding for every 9 provided by the federal government. Each school is responsible for administering its fund including making loans, collecting loan payments, and keeping all loan records. During the 1989-90 school year, 3,230 schools participated in the program and disbursed about 883 Million in Perkins loans. As of June 30, 1989, cumulative federal appropriations had totaled about 6 billion since the program was enacted in 1958 as the National Defense Student Loan Program. If a school closes, a federal regulation 34 C.F.R 674.17 requires the school to 1 return to the Department of Education the federal share of its funds liquid assets cash balance and 2 transfer its outstanding Perkins loans to the Department or another institution approved by the Department. The total amount of assets a school has in its Perkins fund is referred to in this report as the net federal investment.