Colleges may have to return Perkins loan program money

WASHINGTON — About 1,700 colleges and universities could soon be required to return billions of dollars in federal grants they received more than a decade ago under the Perkins loan program for financially needy students.

The program has been largely self-sustaining, with no new federal money appropriated since fiscal 2005 (except for reimbursements to schools when graduates qualify for loan forgiveness).The original federal investment was used to create revolving loan funds at each participating campus, and those have been replenished with money repaid by graduates each year.

Congress allowed the Perkins loan program to expire on Sept. 30. If lawmakers don't renew it, colleges eventually will have to return the money in the revolving loan funds to the federal government, according to Cyndy Littlefield, vice president for federal relations at the Association of Jesuit Colleges and Universities.

Perkins loans carry an interest rate of 5% and repayment is delayed until nine months after a student leaves school. Graduates who choose public service careers such as law enforcement, teaching or as a public defender are eligible for loan forgiveness after 10 years on the job.

In 2013-14, the program provided 539,444 college students with $1.17 billion in aid, according to the U.S. Department of Education. The average award was $2,210. Undergraduate students are eligible for up to $5,550 annually, based on financial need. Graduate students are eligible for up to $8,000.

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New York had more college students with Perkins loans — 55,963 — than any other state.

At Marist College in Poughkeepsie, 680 out of 4,500 full-time undergraduate students have Perkins loans averaging $1,800 per year, said Joe Weglarz, executive director of student financial services.

"It's sort of a cushion for students who are running into financial challenges,'' Weglarz said. "We are awarding it to our more needy families.''

Students with existing Perkins loans will be eligible for additional loans until they complete their degree, as long as they stay at the same school and do not change their major.

Schools offering the loans were required to contribute a one-third match for their Perkins grants in order to participate, Littlefield said, so they would be able to keep some money after the federal government recovers its share.

Many colleges and universities contend that eliminating Perkins and another federal student aid program — the federal Supplemental Educational Opportunity Grant — will translate into a cut in federal student aid.

"We owe it to our students to not give up yet,'' Littlefield said. "We are going to take any opportunity we can legislatively.''

Education Secretary Arne Duncan says it makes more sense to modernize and improve the program than to eliminate it.

"I would challenge Congress to redesign Perkins to make it larger, better targeted and more effective at helping students and families attend schools that offer a quality and affordable education, and I'd be enthusiastic about working with them to do that,'' he said in a statement.

Democratic Sen. Charles Schumer of New York, a supporter of the Perkins loan program, thinks the best chance for renewal may be to include it in the next budget measure that will keep the federal government operating past Dec. 11.

The House agreed by voice vote last week to renew the Perkins program for a year. A one year extension also was proposed in the Senate, but Republican Sen. Lamar Alexander of Tennessee objected to a floor vote last week

Alexander chairs the Senate Health Education Labor and Pensions Committee, which is working on an overhaul of the federal Higher Education Act. Alexander wants to limit federal college aid to one grant — the Pell grant — and one loan program.

"Reauthorizing the Perkins loan (program) will cost $5 billion over 10 years,'' Alexander said last week, explaining his objection to an extension. "Many witnesses before our committee have said that $5 billion would be better spent on more Pell grants, which is going to result from our (legislation)."

Unlike other federal loan programs, the Perkins program doesn't allow recipients to cap their monthly payments at 10% or 15% of their income, to lower their interest rate or to seek loan forgiveness after 20 years, Alexander said.

He says his committee can complete a bipartisan overhaul of federal college aid programs by the end of the year.

Sen. Patty Murray of Washington, ranking Democrat on Alexander's committee, is doubtful a higher education overhaul can be signed into law any time soon and students shouldn't have to wait for it to happen.

"To me we should be reauthorizing Perkins and then dealing with the rest we have to deal with,'' Murray said. "I would say to students, you need to let your members of Congress know this is a critical issue for you.''

The American Council on Education, which represents presidents of two- and four-year colleges and universities, is "strongly in favor'' of temporarily renewing the Perkins loan program.

"It's one thing to consider changes to student lending as a whole, and we think that's appropriate,'' said Jon Fansmith, the council's director of government relations. "And Sen. Alexander is certainly right to look at simplification and easing the burden on students, but it has to be done holistically and has to take into account what's happening with the expiration of Perkins.''

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