Government

Perkins Loan Program, a Federal Stalwart Since 1958, Meets Its Demise

October 01, 2015

The Federal Perkins Loan Program died on Wednesday, the victim of a senator who has made it his mission to simplify student aid.

Perkins was the oldest federal student-loan program on the books: Created in 1958, it spanned 11 administrations and provided $36 billion in aid to 30 million low-income students during its lifetime. Supporters said the program made college possible for millions of students who would otherwise have been unable to attend or been forced to take on costly private loans.

They include students like Lindsey Graber, a 21-year-old senior at Southwestern College, in Kansas, who maxed out on her Stafford loans and took two jobs but still couldn’t cover her full cost of college. Perkins, she said, "has been a gap-filler for me and my family."

Yet Perkins, which was overshadowed for much of its life by the much larger Stafford loan program, was not without its critics. Some felt the program was overly complicated and duplicative; others took issue with its funding formula, which favored more-expensive colleges and institutions that had joined Perkins at its inception.

Under federal law, the Perkins program was set to expire at midnight on Wednesday. With the deadline looming, supporters mounted a last-ditch effort to save the program, introducing legislation to extend it for a year. They argued that Congress needed time to remake Perkins as part of the coming reauthorization of the Higher Education Act.

The bill passed the House of Representatives on Monday. But it ran into trouble in the Senate, where the Republican chairman of the education committee, Sen. Lamar Alexander of Tennessee, blocked it from advancing. Sen. Tammy Baldwin, a Democrat from Wisconsin who had tried to bring the bill up for a vote, called Mr. Alexander’s move "a perfect example of why the American people are so upset with Washington."

Mr. Alexander, who is in charge of renewing the Higher Education Act in the Senate, has made it a priority to streamline the student-aid system. Last week an aide to the senator called the Perkins program "outdated and unnecessary."

In theory, the Perkins program should have appealed to Republicans like Mr. Alexander, who have called for more institutional "skin in the game" in student aid. Under the Perkins program, colleges invest their own money and thus bear some of the risk of default. For every dollar that Congress provides to the program, colleges are required to put in 33 cents.

But rather than expanding the program, as President Obama has repeatedly proposed, lawmakers in both parties have allowed it to wither. They stopped providing new money to the program a decade ago, and haven’t reimbursed colleges since 2009 for loans that had been canceled through a program that forgives the Perkins Loans of students who enter public service.

Over time, the lack of federal reimbursements had caused the pool of available aid to shrink. In 2012-13, the program provided aid to just over half a million students, roughly half the number who received loans each year in the second half of the 1970s.

Helping the Neediest?

Most of the roughly 1,500 colleges participating in the Perkins Loan Program when it lapsed were four-year colleges. Federal law required them to award the aid to students with "exceptional financial need."

But some critics of the program questioned whether it was really serving the neediest students. While a third of dependent students who received the loans in 2012-13 came from families earning less than $30,000 a year, a similar share came from families earning more than $60,000. Data from the Education Department’s most recent survey of undergraduates show that almost 7 percent of Perkins Loan recipients come from families making more than $100,000, according to Mark Kantrowitz, senior vice president at Edvisors, a group of websites with information about student aid.

Some lawmakers, including Mr. Alexander, felt the $5 billion that it would take to extend Perkins for 10 years would be better spent on expanding Pell Grants.

"Our goal is to simplify the system," he said in a floor statement on Wednesday, noting that the interest rate on Perkins Loans, which is fixed at 5 percent, is currently higher than the rate on other federal loans to undergraduates, and that Perkins Loans are excluded from income-based repayment plans.

For now, though, there is just the loss of the Perkins program, with no new money in sight. Students who are currently receiving Perkins Loans will continue to receive them, but no new loans will be made. At Kansas’ Southwestern College, Brenda Hicks, director of financial aid, said she was trying to find institutional dollars to make up the $250,000 in Perkins Loans that the college awarded to its freshmen this year.

"What happened today is a cut to federal student aid for poor students," said Cynthia A. Littlefield, vice president for federal relations at the Association of Jesuit Colleges and Universities. "No matter what you call it — simplification or ‘one grant, one loan’ — it still is an elimination of a well-functioning program and a cut."

Kelly Field is a senior reporter covering federal higher-education policy. Contact her at kelly.field@chronicle.com. Or follow her on Twitter @kfieldCHE.