Looming Battle Over Perkins Loans

Colleges fight to save an expiring federal loan program that some key congressional Republicans are eyeing for elimination.

September 3, 2015

Colleges and universities are ramping up their efforts to preserve a federal student loan program that some congressional Republicans are eyeing for elimination in the next several weeks.

The Federal Perkins Loan Program, which allows colleges to make loans of typically several thousand dollars to certain students, will expire on Sept. 30 unless Congress acts to reauthorize it.

The program is relatively small for the federal government. Last year, more than 500,000 students received Perkins Loans totaling more than $1 billion. That’s only a fraction of the roughly $150 billion in student loans and grants the federal government awards each year.

Still, many colleges and universities view the Perkins program as important to the financial aid packages they create for students -- especially because institutions have more flexibility in how the funds are awarded than is true for most other federal aid.

The program also has some allies in Congress. Ninety-five members of Congress -- led by Representative Louise Slaughter, a New York Democrat -- on Monday sent a letter to the House and Senate education committees urging them to stop the program from expiring.

The Perkins program has previously faced threats from budget hawks in Congress or the White House. But some key Republican lawmakers on those committees are now looking to cut the program as part of an effort to simplify and streamline the federal government’s various student loan programs.

“It makes little sense for Congress to extend the Perkins loan program, which is outdated and unnecessary, would come at a significant cost to taxpayers, and provides little benefit to students,” an aide to Republicans on the Senate education committee said in an email on Wednesday.

Lauren Aronson, a spokeswoman for the House education committee, led by Representative John Kline, a Minnesota Republican, said in a statement about the Perkins program that “the current patchwork of federal student aid programs has become so confusing that it can discourage individuals from pursuing a higher education.”

Not only would Congress have to pass legislation to continue the program, but lawmakers would also have to find more than $500 million elsewhere in the budget to offset what the Congressional Budget Office has determined is a cost of renewing the program, according to several people briefed on the budget estimate.

Some advocates for the Perkins program called that estimate misleading because it is based on the government “losing” out on revenue it would receive if the program were to be dismantled and colleges would have to return all of the federal funds they currently use to make the loans. Continuing the program wouldn’t actually cost the government money, they said, noting that Congress hasn’t chipped in any money to the Perkins program since 2004.

Proponents of the program say it plays an important role in financial aid packages for students.

The Perkins loan programs gives colleges “flexibility to fill the gaps of needy students,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators.

“All the campus-based programs, in general, are relatively small expenditures that schools feel have a large impact,” Draeger said. “There is merit to this conversation about simplifying federal loans for students, but you can’t pit and parcel programs without a more comprehensive look at all programs.”

Other campus-based aid programs include the Federal Work-Study program and Federal Supplemental Educational Opportunity Grants, which provide funding to low-income students.

The pending expiration of the Perkins loan program comes as Congress is working on a massive rewrite of the Higher Education Act, which governs all federal student loan programs.

For many Republicans, and some Democrats, a central goal in a new Higher Education Act is to pare back rules and regulations on colleges and simplify how the government awards student loans and grants.

Senator Lamar Alexander, the Tennessee Republican who chairs the Senate education committee, has proposed eliminating the Perkins loan program in legislation that would consolidate the government’s existing loan programs into one.

Cyndy Littlefield is vice president for federal relations at the Association of Jesuit Colleges and Universities, which is one of several college groups that have formed a coalition to lobby to keep Perkins.

“The problem, from a political perspective now, is that everyone is on board the mantra of eliminating student debt -- and who would not want to eliminate student debt?” Littlefield said. “But Perkins Loans really serve needy students and it covers part of their cost of college without forcing them to go to private lenders.”

Some 1,500 colleges and universities currently make loans to students under the Perkins Loan Program using a mixture of federal dollars and the institution’s own funds. Students qualify for the loans based on financial need.

Colleges are required to put up at least one-third of the money, and federal dollars cover the remaining two-thirds. But Congress hasn’t contributed money to the program since 2004 -- the federal share of Perkins money currently comes from older Perkins Loan borrowers paying back their debt.

Some of the nation’s wealthiest universities participate heavily in the Perkins program. In the 2013-14 school year, federal records show, the top 10 institutions disbursing the largest amount of Perkins Loans included New York University ($13.4 million), Stanford University ($12.3 million), the University of Pennsylvania ($10.9 million), the University of Michigan at Ann Arbor ($10.2 million), Cornell University ($9.4 million) and Harvard University ($9.4 million).

Congressional authorization for the Perkins Loan program technically ended last year, but it was automatically extended through this fall under a separate federal law.

If Congress doesn’t act before the automatic extension ends on Sept. 30, colleges would no longer be able to make new Perkins Loans to students, except for limited circumstances in which a student is already receiving a Perkins Loan and needs another one to graduate.


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