Perkins Talking Points
Expanding and Improving the Federal Perkins Loan Program: Key Issues
The Obama Administration and the House have taken the welcome step of proposing a major expansion of the Perkins student loan program, something advocated by The Coalition of Higher Education Assistance Organizations for many years. However, the proposed “Direct Perkins Loan Program” fails to serve students as well as it should. Key improvements must be made to truly expand educational opportunity for all Americans.
Here are COHEAO’s proposals for improvements:
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Retain the in-school interest benefit. The Perkins Loan Program has a fixed interest rate of 5%, making it the lowest-cost student loan. These loans accrue no interest while students are in school and for nine months afterwards, a very important benefit that reduces students’ debt burden. This interest benefit should continue under the new Perkins Program. Perkins Loan borrowers’ debt burden upon graduation should be kept as low as possible rather than increased by thousands of dollars in order to pay for school construction or other programs, as the House bill proposes. An undergraduate Perkins borrower will owe $5,000 more when they graduate if they lose the in-school benefit. Graduate students will owe even more.
Retain the in-school interest benefit. The Perkins Loan Program has a fixed interest rate of 5%, making it the lowest-cost student loan. These loans accrue no interest while students are in school and for nine months afterwards, a very important benefit that reduces students’ debt burden. This interest benefit should continue under the new Perkins Program. Perkins Loan borrowers’ debt burden upon graduation should be kept as low as possible rather than increased by thousands of dollars in order to pay for school construction or other programs, as the House bill proposes. An undergraduate Perkins borrower will owe $5,000 more when they graduate if they lose the in-school benefit. Graduate students will owe even more.•Allow schools to continue managing the Perkins Loan Program in order to achieve the best results for the program and its students. The experienced professionals at schools are best equipped to work with their student borrowers as they have done for decades. Schools care about their former students. They have a vested interest, far more than a national federal contractor, in working with borrowers to help them get smoothly through the repayment process. It is in the best interest of the borrower to work with their school rather than having the federal government immediately involved in loan collection. There is no other entity within the loan processes that has a greater interest in the borrower’s successful repayment than that of the institution participating in the Perkins Loan Program.
Allow schools to continue managing the Perkins Loan Program in order to achieve the best results for the program and its students. The experienced professionals at schools are best equipped to work with their student borrowers as they have done for decades. Schools care about their former students. They have a vested interest, far more than a national federal contractor, in working with borrowers to help them get smoothly through the repayment process. It is in the best interest of the borrower to work with their school rather than having the federal government immediately involved in loan collection. There is no other entity within the loan processes that has a greater interest in the borrower’s successful repayment than that of the institution participating in the Perkins Loan Program. •Make use of schools’ expertise in managing the Perkins Loan Program to best serve their students’ needs. Since the Perkins Loan Program was created in 1958 as the National Defense Loan Program, colleges have had the flexibility to make loans available to students according to their need. Financial Aid Administrators should be able to award Perkins Loans to especially needy students without having to force students to borrow up to their full Stafford eligibility first.
Make use of schools’ expertise in managing the Perkins Loan Program to best serve their students’ needs. Since the Perkins Loan Program was created in 1958 as the National Defense Loan Program, colleges have had the flexibility to make loans available to students according to their need. Financial Aid Administrators should be able to award Perkins Loans to especially needy students without having to force students to borrow up to their full Stafford eligibility first.•Retain the superior Perkins Loan Cancellation benefits. Perkins Loans can be cancelled under current law for borrowers who work in public service jobs. Congress in 2008 added six additional professions eligible for cancellation. Perkins cancellation opportunities are far more flexible and helpful for borrowers than those available to Stafford borrows. The House bill repeals these benefits.
Retain the superior Perkins Loan Cancellation benefits. Perkins Loans can be cancelled under current law for borrowers who work in public service jobs. Congress in 2008 added six additional professions eligible for cancellation. Perkins cancellation opportunities are far more flexible and helpful for borrowers than those available to Stafford borrows. The House bill repeals these benefits.•Leverage Federal Funds by requiring an Institutional Contribution. The Perkins Loan Program acts as a true partnership between schools and the federal government. Schools should continue contributing reasonable amounts of funds to expand educational opportunity.
Leverage Federal Funds by requiring an Institutional Contribution. The Perkins Loan Program acts as a true partnership between schools and the federal government. Schools should continue contributing reasonable amounts of funds to expand educational opportunity.The House Bill includes positive proposals that COHEAO supports: an expansion of available loan funds to include more students and schools. It also keeps at least the current level of loan funds available to schools currently participating in Perkins.
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ILLINOIS STUDENT LOAN ADMINISTRATORS
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