The Perkins Loan Program: Change or die!
The Federal Perkins Loan Program is set to expire in 2014. The Obama administration wants to continue funding it, but has proposed sweeping changes that have many in the financial aid and academic communities up in arms. The program has been serving needy students for more than 50 years. Is that all about to change?
Federal Perkins Loan Program history
- 1958: National Defense Student Loan Program offers interest rate of 3 percent, with interest subsidized by the government while the student is in school. Grace period--the post-graduation period before repayment begins and interest starts to accrue--is 6 months.
- 1972: Name changes to National Direct Student Loan.
- 1981: Rate changes from 3 percent to 5 percent.
- 1986: Renamed Perkins Loan to honor Carl D. Perkins, Kentucky congressman, major proponent of student aid for higher education.
- 1987: Grace period changes from 6 months to 9 months.
- 2014: Who knows?
What changes are coming, and why?
The Chronicle of Higher Education reports that the program is in danger because Congress is working to reduce the deficit amid growing concerns about over-borrowing.
Approximately 1,700 schools currently participate in the Federal Perkins Loan Program; they determine loan recipients and handle loan collections. Loans target the neediest students, allowing the schools wide discretion over awarding funds. Some loan forgiveness provisions are available, for example, for teachers in certain high-need areas.
President Obama's 2012 education budget proposes the following changes:
- Expanding funding significantly; adding 2,700 new institutions to the program and substantially increasing the number of students who would benefit
- Making the loan program more efficient and using the savings to expand the Federal Pell Grant Program, which also targets the neediest students and offers grants that are not repaid
- Increasing loan interest rate to 6.8 percent, the same rate as for Unsubsidized Stafford Loans
- Making interest on the loans accrue while students are in school
Academic and financial aid community attempt Perkins Loan resuscitation
In February 2011, Joseph E. Aoun, president of Northeastern University, drafted a letter about the Perkins Loan Program to Arne Duncan, Secretary of Education. Co-signed by numerous professionals from colleges, universities and educational organizations, the letter praises some of the proposed changes while expressing concerns about the negative impact on student access to higher education. In June, Aoun met with undersecretary of education, Martha J. Kanter, and a panel of Department of Education officials, college presidents and other education leaders to try and find a way to preserve the program.
Panel member, Terry W. Hartle, of the American Council on Education, pointed out three possibilities for the program:
- To remain the same, which is highly unlikely
- To be overhauled per the administration's proposed changes
- To die
To save the program, Aoun lobbied for a fourth possibility. College leaders should follow Kanter's suggestion that they show Congress hard evidence of Perkins Loan successes…and soon…if the patient has any chance of survival.