With Perkins Loan Program Set to Expire in 3 Years, College Presidents Work to Preserve It

June 14, 2011

As college-access advocates work to preserve federal student-aid funds in a difficult budget climate, it's natural that most of their attention is focused on Pell Grants. After all, that program provides low-income students with grants that don't have to be repaid. But Joseph E. Aoun, the president of Northeastern University, is worried that the Perkins Loan program, which provides low-interest federal loans to needy students at participating colleges, is getting lost in the shuffle. And, with that program set to expire in 2014, it is an urgent concern.

So, with the help of Martha J. Kanter, the under secretary of education, Mr. Aoun brought together a panel of college presidents, Education Department officials, and other higher-education leaders on Tuesday to discuss the program's future. That meeting built on a letter Mr. Aoun and a group of other college presidents sent to the secretary of education in February asking to work with the department to find a way to preserve the program.

The college presidents, from both public and private institutions, all spoke of the important role Perkins Loans play on their campuses, filling the gap between college costs and other financial aid. For many low-income students, several panelists noted, a Perkins Loan is all that stands between a student and needing to take out a higher-interest private loan. "In a real sense, the Perkins Loan is the last chance not to say 'no' to a student who wants to go to school," said the Rev. Charles L. Currie, president of the Association of Jesuit Colleges and Universities.

Patricia A. McGuire, president of Trinity College in Washington, D.C., added that many of the students who receive Perkins Loans on her campus don't even have the creditworthy co-signer they would need to borrow a private loan. Ms. McGuire summed up her request for the Perkins program: "Keep it, somehow keep it, and keep it simple."

As Congress works to reduce the deficit, advocates might have to give up many of the program's desirable features—a low interest rate, an in-school subsidy, and loan-forgiveness options—to preserve the program. "We're facing a very difficult series of choices in the next several months," said James Kvaal, deputy under secretary of education. In a perfect world, he said, the department could maintain all of the loan's current terms and support the maximum Pell Grant, but in reality there will have to be tradeoffs.

Terry W. Hartle, senior vice president for government and public affairs for the American Council on Education and one of the panelists, laid out three possibilities for the Perkins program going forward. One possibility, he said, is that the program could survive in its current form. This would take "divine intervention," Mr. Hartle said, noting the presence of several priests on the panel.

Another possibility, Mr. Hartle said, would be adopting the overhaul of the program designed by the Obama administration, which would bring the program to more campuses, change its terms, and save money that could be used to support the Pell Grant program. The administration's proposal would also raise the interest rate on Perkins Loans, take away the in-school subsidy, and replace its loan-forgiveness options with those available to Stafford borrowers.

While Perkins Loans would look a lot like unsubsidized Stafford Loans under the plan, colleges would retain the flexibility they have in the Perkins program to decide how to award the money. The proposal would also change the formula for distributing funds, in part, to provide a financial incentive for colleges that successfully graduate low-income students.

The final possibility, Mr. Hartle said, is that the program could die.

Mr. Hartle described the administration's proposal as the "last, best hope" to preserve the Perkins program. But even that could be a tough sell. As concerns about overborrowing mount, he said, there might not be much support for starting a new loan program. And he said it's unclear that the cost savings the administration expects will hold under House budget rules.

Mr. Aoun summed up the panelists' thoughts as "keep it simple, keep it going, it's a last chance loan, and we need it." But, he added, college leaders must advocate for the program.

To do that, Ms. Kanter said, college leaders will have to show Congress and the public evidence of how Perkins loans benefit their students, not just anecdotes of students who have been helped.

And, Mr. Aoun said, they should do it soon. "Time is of the essence," he said. "There's a really urgency, and this is why we are here today."