The September to-do list keeps getting longer: Perkins Loan reauthorization

When Congress reconvenes in September from its August recess, it must confront a daunting to-do list. By Sept. 30, the nation’s debt limit must be lifted in order to avoid defaulting on our obligations; an appropriations bill must be passed in order to keep the Federal government open and providing essential services; and the Children’s Health Insurance Program (CHIP) must be reauthorized. Additionally, one can only hope that some type of bipartisan measure to stabilize the individual insurance market is passed. Daunting indeed; did I mention that Congress is only scheduled to be in session for 12 days for the month?

One vitally important program that must also be re-authorized by Sept. 30, but has received virtually no public attention, is the Perkins Loan program. First started in the late 1950’s, and originally called the National Defense Student Loan program (NDSL), the Perkins Loan program is one of the three Campus-Based student aid programs, joining the Supplemental Educational Opportunity Grant (SEOG) and Federal Work-Study (FWS).

Funds for these programs are dispersed to students by college and university student financial aid officers, and collectively they represent a crucial component of the student aid portfolio, augmenting funds available from the much larger Pell Grant and Stafford Loan programs.

On its own, Perkins has provided low interest loans to many millions of students. For the 2015-16 academic year alone, over 420,000 needy students received approximately $1.5 billion in REPAYABLE assistance from Perkins. And best of all, it didn’t cost U.S. taxpayers a dime. In fact, the federal government has not appropriated ANY funds for the Perkins Loan program since 2004.

Participating colleges and universities simply re-loan funds repaid by previous borrowers to currently enrolled students. This “revolving fund” structure has proven successful over the nearly six decades that colleges and universities have participated in the Perkins Loan program. Since 2004, over 6.7 million students have borrowed over $14 billion, again without the expenditure of a single dime of taxpayer funds. This sounds to me, and to most reasonable people, like a pretty good deal.

So what’s the problem? The Federal government has successfully created and maintained a program that assists hundreds of thousands of students on a yearly basis to realize their educational aspirations, at NO current cost to the taxpayer. In my opinion, the continuation of the Perkins Loan Program is a no-brainer. However, reauthorization remains stalled for two interrelated reasons: a fundamental misunderstanding of the student aid delivery system, coupled with misplaced priorities.

Those who would let the Perkins Loan program disappear often claim that it is duplicative of the much larger, and much better known Stafford Loan program. This is simply wrong; in fact, the vast majority of Perkins borrowers also borrow under the Stafford program. For the most recent year for which data is available, approximately 65 percent of Perkins Loan recipients came from families with total annual incomes of less than $60,000. Clearly, these borrowers had unmet need that only a Perkins Loan could help them satisfy. Thus, eliminating Perkins drains about $1.5 billion out of the student aid portfolio on an annual basis and replaces it with, well, nothing. Students lose, and no one wins.

There is also a notion, championed by a great many, to move the Title IV student aid programs to something called “one grant, one loan”. Under such a scenario, the Pell Grant would be the only surviving federal grant program, and the Stafford Loan program would be the only surviving federal loan program. In fact, President Trump’s FY 2018 budget submission to Congress presumed the enactment of this misguided ”one grant, one loan" idea, as well as proposed the elimination of both SEOG and Perkins. Those who support this policy do so because they claim that it would simplify the financial aid process for students and their families. In fact, this too is simply wrong. Under “one grant, one loan”, the process by which a student applies for financial aid would not change at all. It would, however, simplify the job of the campus financial aid officer, but that should not be our goal (and I say this as a former Financial Aid Director). The primary, if not the exclusive goal of the entire financial aid delivery system should be to maximize the support available to needy students in all its forms (grants, loans, work), so that as many students as possible get to attend a school of their choice. “One grant, one loan” not only fails to accomplish this goal, but in fact its enactment would render higher education but a distant dream for far too many.

Congress last found itself in this position regarding Perkins in 2015. At that time, the decision was made to re-authorize Perkins for two years, and fold the larger issue of the future of Perkins and the other campus-based programs into the reauthorization of the Higher Education Act, the passage of which was thought at the time to be forthcoming in short order. Well, the two years are now up, the Congress is no closer to re-authorizing the Higher Education Act than it was in 2015, and the future of Perkins now hangs in the balance.

Simply put, Congress has an obligation to do the right thing, and re-authorize the Perkins Loan program by Sept. 30. This is the only solution that will keep needy students whole, and protect their interest. Most student aid advocates would prefer a permanent re-authorization, but if such is not possible, another two year continuation would suffice for now. While it may be difficult in terms of timing to pass a free-standing measure, a two year re-authorization could easily be included in some other “must pass” piece of legislation, such as an appropriations bill.

The guiding principle of Congress as it relates to student aid programs should be “will students benefit”? In reauthorizing Perkins, Congress will answer this question with a resounding “YES”.

Like I said, a no-brainer.

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