Perkins Loans – Repealed but not replaced

 

Both Congress and the White House appear to be in the mood to repeal but not replace important social legislation. The one most directly affecting ISU students is the failure of the Congress to extend the Perkins Loan program, which expired September 30th. Although an extension bill has

strong bipartisan support, Republican Senator Lamar Alexander, chair of the Senate education committee, and Majority Leader Kevin McCarthy in the House of Representatives refused to bring the bill to a vote. The current

academic year’s funding will continue, but unless a new law is passed, no loans will be issued to new applicants through this program.

 

Originated in the 1950’s, the Perkins loan program was designed to help low

-income students with “exceptional need.” Perkins loans have a fixed 5% interest rate, an annual cap of $5000, and no interest accrues until nine

-months after graduation. Loans can be reduced or forgiven if graduates go into certain careers, such as medicine or teaching. In order to help more students, many universities lent smaller amounts, so the average Perkins loan is about $2,000 per year.

 

The program supplements the much larger, federally-funded Direct Subsidized

loan program. In contrast to the subsidized Federal program, the actual lender was the school students were attending. When students repaid their Perkins loan, the funds were re-circulated and re-lent to more students.

No new Federal money has been put into the program since 2010.

 

We heard from recent ISU Presidential candidates that a small amount of financial help can make the difference to a student whose financial situation is very constrained. Given the rise in tuition rates, any help is welcome.

So why repeal the program? The Heritage Foundation argues that such “easy”

access to loans for students motivates colleges to raise tuition rates. Another argument is that students find having multiple sources of loans with different rates and repayment rules too confusing. Both arguments are laughable.

 

Senator Tammy Baldwin, who introduced the extension bill, and Senator Alexander are making vague noises about working on a bi-partisan bill. Let’s hope they do that, but in the meantime, why repeal without any replacement? This action only hurts students who need help the most, and also makes things more confusing for students and financial aid offices.