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Bush proposes elimination of Perkins Loans
Students ‘denied access’ to money that bridges gap
By Bradley Wooten
“It’s not a matter of affordability; it’s a matter of access.”
– Bruce Caplin, national co-chair of the Coalition of Higher Education Assistance Organizations Grassroots Action Network
For the fourth year in a row, President George W. Bush has proposed cuts to education funding that will affect college access and affordability for students nationwide unless students speak out.
“For those students who still have unmet needs and families who can’t afford to contribute, the Perkins Loans fill in the gap,” said Bruce Caplin, national co-chair of the Coalition of Higher Education Assistance Organizations (COHEAO) Grassroots Action Network.
A lobbying firm for schools and other organizations who work to promote access to higher education, COHEAO focuses on legislative and regulatory advocacy for federal Perkins and other campus-based student loan programs.
The Perkins Loan is awarded to students with exceptional financial need. The school acts as the lender using a limited pool of funds provided by the federal government.
“The Perkins Loan is the best student loan available,” Caplin said.
It is a subsidized loan, with the interest paid by the federal government during the time a student is in school and the nine-month grace period that follows. There are no fees and the interest rate is 5 percent over the 10-year repayment period.
The amount a student receives is determined by the school's financial aid office. For undergraduate students, it is capped at $4,000 per year with a cumulative limit of $20,000. Graduate students are capped at $6,000 per year with a cumulative limit of $40,000.
Bush’s budget completely eliminates the Perkins Loan program, a program that offers benefits other loans do not. If enacted, more than 670,000 student borrowers would lose out on partial or total loan forgiveness if they became teachers, law enforcement officers or if they serve in the military.
It is “vital” that students announce a public and vocal opposition to Bush’s proposal, Caplin said.
“Congress is going to hear from student loan professionals at the school because they’re the closest to the fight,” Caplin said. “Certainly members of Congress will listen to them, but the folks they will listen to the most are students who are Perkins Loans borrowers.”
If elected officials don’t hear from students and faculty, they will assume it’s not an important issue, Caplin said.
But not everyone views the elimination of Perkins Loans as a detriment to students.
“Students, of course, are taxpayers, and will be, so they have to look at how the government spends all of its money (and) what priorities are being funded,” said Tom Skelly, director of Budget Service for the U.S. Department of Education
Loans other than Perkins Loans are available in a variety of denominations and amounts, Skelly said.
“Why do you have a separate Perkins Loan program when you already have all these other programs providing the same kind of service?” Skelly said.
The Direct Loan service provided by the Department of Education offers loans with an interest rate that will increase to 6.5 percent July 1, still 1.5 percent higher than Perkins Loans.
Banks and other lenders have high interest rates and many begin collecting immediately after the loan is given, Caplin said.
“You’re talking about interest rates that are essentially credit card rates,” Caplin said. “You don’t stand a chance of paying that back.”
But the federal budget views Perkins Loans as inefficient, Skelly said. “Most of the Perkins loans go to maybe 1,000 undergraduate students.”
According to the Coalition of Higher Education Assistance Organizations, there are about 1,800 colleges and universities that participate in the Perkins Loans program. More than 600,000 students received Perkins Loans in 2005, and in 2004 that number was 70,000 students higher.
“In the big scheme of things, Perkins (Loans) … pack a big punch,” Caplin said.
The U.S. Department of Education estimated that some $7 billion in loans are outstanding and that it will take 10 years for students to pay that back.
Bush’s budget also proposed increasing Pell Grants by $100 each year for the next five years.
“So that would be at most $500, while the average Perkins loan is $2,000,” Caplin said. “When you do the math, the net loss to students (in federal aid each year) would be at least $1,500.”
“Folks are trying to do away with it because they want the money for deficit reduction,” Caplin said.
But Skelly of the U.S. Department of Education disagreed.
“You could say it’s paying off the deficit, paying for special education, agriculture subsidiaries, the war in Iraq; it doesn’t have any tag that goes with it,” he said.
Federal estimates for the amount of money in the federal Perkins Loans program ranges from $3 billion to $9 billion.
Since 1958, $7.8 billion in federal contributions have appropriated more than $25.7 billion in loans to students. That’s roughly 25 million awards in aid, Caplin said.
“It’s not a matter of affordability,” Caplin said. “It’s a matter of access. If this program goes away, that will deny access to tens of thousands of students.”
UW-Madison loaned more than $13.5 million in Perkins Loans to more than 5,200 students during the 2004-2005 academic year, the most recent year for which information is available.
“We’re not too pleased about the proposal (to eliminate Perkins Loans),” said Susan Fischer, director of the Office of Student Financial Services at UW-Madison.
“(Eliminating Perkins Loans) would leave a hole in students’ awards that we couldn’t fill,” Fischer said. “We’d be looking for alternative loans that are more expensive than any federal loan.”
Perkins Loans have benefited students for almost 50 years as a “good, solid” program, Fischer said.
“It’s a good, solid loan program,” Fischer said. “Why you would want to eliminate a proven program that is currently working well and smoothly is beyond me.”
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