Education officials are speaking out against President George W. Bush’s new budget—this time because of proposed funding cuts that would eliminate the Perkins Loan program.
The Perkins Loan, established in 1965, provides low-interest loans to lower- and middle-class families and gives students 10 years to repay them. As a revolving fund, the Perkins Loan uses money students pay back to continue to fund new loans. But Bush’s plan to cut domestic spending, beginning next fall, would recall the federal money invested in this program, effectively ending it.
In addition to providing low-interest funds, the Perkins Loan is also one of the few programs with a loan forgiveness provision, cancelling loans for students who plan to work in underserved areas, such as teaching and nursing.
“We are very concerned that the elimination of the Perkins Loan fund would make it even more difficult for students to determine how to afford to go to college,” said Hope Williams, president of North Carolina Independent Colleges and Universities, a statewide organization of 36 non-profit, private colleges.
For the 2002-2003 school year, 14,500 students in the state benefited from Perkins Loans with an average loan of $2,245, according to records at the University of North Carolina at Chapel Hill. Shirley Ort, associate provost and director of scholarships and student aid at UNC said her school distributed more than $9 million of Perkins capital to 3,366 students last year.
According to Bush’s budget proposal, the Perkins Loan program “duplicates other student loan programs and serves a limited number of institutions.” Officials on the Advisory Committee on Student Financial Assistance, an independent group that advises Congress on student aid legislation, confirmed that the Perkins Loan is seen as a small part of the loan program.
In order to fill the need created by eliminating Perkins Loans, the Bush administration has suggested increasing Pell Grant awards—federal, need-based grants ranging from $400 to $4,050 a year that do not require repayment. Bush’s plan would raise the maximum grant level $100 per year for five years, until it reaches $4,550 in 2010.
“Bush hopes to move the money out of the Perkins program and into supporting higher Pell Grants,” explained James Belvin, Duke’s director of financial aid.
Although the proposal suggests increasing the monetary value of Pell Grants, it also reduces the number of students eligible to receive them. The U.S. Department of Education will change the formula for eligibility by updating the tax tables used to structure student award packages, denying some students who would have been eligible in the past.
Officials at Durham Technical Community College, which does not distribute money through the Perkins Loan program, are worried that their Pell Grant program might suffer under the new plan. Financial Aid Officer Cameron Murray explained that “students receiving a small Pell Grant will not receive any, and some students may receive smaller amounts.”
The resulting greater financial burden will either fall on universities and colleges that will have to find new funding for students, or on the students themselves who will have to find alternative ways of paying for college.
“Our concern is that those students will still have financial need and will be back in the financial aid office asking for more help,” Williams said. “And not all colleges will be able to support that need.”
Emphasizing Duke’s commitment to meeting 100 percent of students’ need, Belvin said “we will certainly find a way to fill that gap. But how we will do that is an unknown.”
Currently, Duke operates with a self-help threshold, providing work study and federal loans—Perkins and Stafford loans—for students whose need reaches a certain level. If need surpasses this level, students may also receive grants from the University.
“Now, we will have to negotiate with someone to have a new loan program,” Belvin said. “Ultimately, students will have to borrow at higher prices.”
Even with the planned increase in Pell Grants, colleges will not receive as much federal funding, and officials at many schools worry that students will be forced to turn to more expensive loans.
“We applaud their efforts to increase the Pell Grants,” UNC’s Ort said. “But the changes would still leave a big hole in students’ financial aid packages.”
Education officials have expressed concern about Bush’s $2.6 trillion budget since he first brought it to the table in February, as about one-third of the 150 programs the administration plans to cut are in the education sector.
Williams noted that “the amount that they are proposing to increase the Pell Grants by will not be enough to balance the amount we are losing by cutting Perkins.... Students will still be on the losing side.”
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