This September marked the first time the Federal Perkins Loan Program phased out to streamline higher education government student loan programs.

About 1,700 colleges have applied and received federal funding to distribute these loans — they will soon be required to return any grants they received under the Perkins program within the last decade.

The Federal Perkins Loan Program provides low-cost, government-guaranteed loans for low-income students to help cover higher education costs, according to the United States Department of Education.

Described as the government’s “oldest student loan program” by The Chronicle of Higher Education, Congress voted to disperse these loans to new undergraduate borrowers until Sept. 30, 2017. Perkins loans were no longer distributed to graduate student borrowers as of Sept. 30 of this year.

Undergraduate students are able to borrow up to $5,500 and graduate students can borrow up to $8,000 a year with low-interest due to the student’s “exceptional financial need,” according to the program report. No interest is charged to the student during their schooling period. A fixed 5 percent interest rate is enacted when the student graduates and enters repayment nine months after graduation.

Each year 500,000 students receive some form of Perkins loan, according to DOE’s Office of Federal Student Aid.

Of about 75 percent of Syracuse University students who receive some form of financial support, nearly 25 percent receive Perkins loan, according to the SU Office of Financial Aid website. Those who receive the loan program can get up to $2,000 a year to help aid their education.

For the nearly 3,200 students who meet the criteria for low-income, the change isn’t without a significant grace period that will help them transition.

The university still hopes for the program’s revival. Since the second quarter report in 2015, SU has reported $180,000 in lobbying activity. A portion of that money was related to the reauthorization of the Federal Perkins Loan Program. In 2016, the university reported $50,000 in lobbying activity under Eric Persons, a lobbyist and associate vice president of government and community relations at SU.

Upon a meeting with a Daily Orange reporter, Persons declined to comment on Perkins loans.

Those against the termination of the Perkins loan program argue that the program provides extra funding for students with financial need who will have a hard time finding it elsewhere.

SU’s Director of Financial Aid Michelle Sipely said she is hopeful that the program will not completely slip away. With its low and fixed interest rate, it is the most affordable and reasonable loan offered to low-income students.

“In 2018-19, we won’t be able to award Perkins to anyone, not even the grandfathered students we thought we would be able to,” Sipely said. “We’re hopeful that if the program goes away they’ll replace it with something that is similarly beneficial to students.”

Fallback loans for students that are already in place include the Federal Parent PLUS loan and private alternative loans, which Sipely said, the university wouldn’t ever recommend to or automatically package for students.

The university continues to lobby and support the idea that Perkins will remain if reauthorization can happen within the next year or two.

Sandy Baum, senior fellow in the Income and Benefits Policy Center at the Urban Institute, said she is in favor of the program’s termination due to the inequitable system of distributing the loans.

“The distribution formula is widely viewed to be inequitable,” Baum said. “You have lots of private colleges that enroll, some but not inordinate numbers of low-income students, that have lots of money and community colleges for example have little money.”

Baum described the program as “a revolving fund” where institutions can take money people have paid back with no added funds from the federal government within the last few years.

“Institutions with more Perkins money don’t like it because they like the idea that they can package more loans for students and they don’t call it financial aid,” Baum said. “It’s hard to argue that this actually very small program is in any way going to transform access to higher education.”

The future of the federal government funding for low-income students is unclear. Baum suggests raising federal loan limits on a consolidated federal subsidized student loan program would best benefit both the system and its loan borrowers.

Sen. Lamar Alexander (R-Tenn.), who blocked funding of the program in 2015, claimed streamlining program applications and reducing arbitrary loan programs are necessary for making federal grants feasible. Applications for loans such as the Perkins loan require the Free Application for Federal Student Aid sheet with 108 questions.

Rep. Mike Bishop (R-Mich.) said in a press release that Congress should make the application process easier for students by simplifying the financial aid system.

Whether universities will grant more aid or simply acknowledge the new gap in loans after the loss of Perkins loans will be determined on a case-by-case basis when the program officially expires for undergraduates in September 2017, Baum said.

Sipely said SU continues to fight for the program.

“Hope will not die until the Perkins loan program does,” Sipely said.

Published on October 12, 2016 at 9:53 pm