Bush proposal would terminate Perkins Loan Program

John Palmer Features Editor

The Bush administration has proposed a budget for fiscal year 2006 that would terminate the Perkins Loan Program. This program is a popular financial aid option that helps students finance higher education. At Vassar, approximately 380 students would lose their Perkins loans, which have a total value of approximately $480,000.
President Bush’s proposed budget of $56 billion for the Department of Education is half a billion dollars less than allotted for fiscal year 2005. It marks the first cut in federal education spending in a decade, according to The Washington Post.
To make up for the elimination of Perkins loans, the Bush administration has proposed an increase in Stafford Loans and Pell Grants.
These increases, however, would not make up for the lost aid of the Perkins loans, according to Vassar’s Director of Financial Aid Michael Fraher.
“The problem is the proposed increases to Stafford loan eligibility won’t nearly cover the loss of loan eligibility from the elimination of the Perkins program,” said Fraher.
In an e-mail, President Fran Fergusson said, “The Pell grants and Stafford loans are wonderful, of course, but they too have limits placed on their maximum amounts by the federal government…They are no substitute for the Perkins program.”
Fergusson sent a campus-wide email encouraging students to call their senators and representatives.
Approximately 1,800 colleges and universities in the United States participate in the Perkins Loan Program.
Educational institutions administer the loans directly, not through a separate lender. According to Fraher, the college has a larger degree of flexibility in administering the loans if a student’s financial situation changes suddenly since the school is the direct lender under the Perkins program.
Under the Perkins Loan Program, undergraduate students may borrow up to $4,000 each year.
The loans are set at a fixed five percent interest rate with a grace period of nine months after graduation.
At Vassar, financial aid packages often consist of Stafford Loans and Perkins Loans, in addition to federally funded work-study programs. Fraher said that financial aid packages at Vassar have been including more Perkins loans and fewer Stafford loans.
Fraher said that the program at Vassar was self-sustaining and did not require additional funding from the federal government each year.
Graduated students repay the loans over time, and the repaid funds are used for current students packages.
“The program is not inefficient,” he said.
As more students consolidate their loans with a commercial lender after graduation, the College is able to redistribute the money to financial aid students. In recent years, the Office of Financial Aid has expanded the number of students that receive Perkins loans.
According to an all-campus e-mail sent on April 6 by Fergusson, the recalled loans would mean that Vassar would need to return $3,366,185 to the federal government.
To repay the loans, the College would return $600,000 in assets immediately, and outstanding loans would be paid back over ten years. In total, the federal government would receive approximately $6 billion from recalled loans.
Students around the country have been active in making sure the Perkins loans continue to fund higher education.
On April 7, students from Cornell, Barnard, and Columbia traveled to Washington to lobby for Congress to fund financial aid for higher education.
The Federal Pell Grant Program is also facing a shortfall of $4.3 billion. According to Fraher, approximately 280 students at Vassar receive Pell Grants each year, totaling $750,000. Bush’s plan is to increase the amount students may earn from the Pell Grant Program by $100 per year for the next five years.
The Perkins Loan program started in 1958 as the National Defense Student Loan (in response to the Soviet launch of the Sputnik satellite). Currently, it helps approximately 673,000 students nationwide pay for college.