25 Nov The Uncertainty Surrounding Perkins Loans
College students with extreme financial need benefit from the Federal Perkins Loan Program. In addition to the Direct Student Loans or PLUS Loans that are available, Perkins Loans can make the difference in a student’s ability to pay for college. These loans are offered to undergraduate and graduate students, but they are based on the availability of funds at the individual college. The college is the lender and borrowers make payments directly to the college that provided their loan.
With an interest rate currently set at 5%, undergraduate students may be eligible to receive up to $5,500 per year while graduate and professional students may receive up to $8,000. The total amount borrowed may not exceed $27,500 for undergraduates and $60,000 for graduate students, including any amounts borrowed as an undergraduate. Students who attend school at least half-time have nine months after graduating, leaving school, or dropping below half-time status before repayment begins.
Currently there is a great deal of uncertainty as to whether this program will continue. According to the National Association of Student Financial Aid Administrators (NASFAA), the Perkins Loan Program was only authorized through September 30 of this year under the Higher Education Act (HEA). NASFAA states that student aid programs received an automatic one-year extension through the General Education Provisions Act effective on October 1.
It is generally believed that the U.S. Department of Education (ED), intended for the Perkins program to be authorized through the 2014-15 year along with all other student aid programs, but NASFAA has not been able to confirm this assumption. The problem lies in a little-known section of the Higher Education Act which required schools to return Federal funds from the Perkins Loan Program to the government after October 1, 2012. It is unclear whether federal budgets have already taken this anticipated return of money into account. If they have, it could require additional legislation, funding actions, or changes to student aid programs in order for the schools to keep these monies.
This uncertainty could affect any student or prospective student who is counting on receiving Perkins Loans for the 2015-2016 school year. The outcome of this year’s elections could play a big factor in determining how the student loans landscape looks in the future. Time is of the essence for Congress to act on this issue before financial aid packages are put in place for next year. Continuing this program may come down to schools, students, and advocates communicating its importance to their legislative representatives. It is possible students currently receiving Perkins Loans could continue to do so for another five years, but this could have a huge impact on next year’s college freshmen.
Keep up-to-date on actions surrounding the Perkins program and let your representatives in Washington know that it matters to you. Talk to a professional College Financial Aid Advisor about how this uncertainty impacts your college decision-making process. Contact College Financial Aid Advisors (CFAA) or visit my About.com website, Paying for College.