By Thomas J. Botzman, Ph.D.
President, Misericordia University
Numbers have a way of revealing the real story that lies beneath the rhetoric and misinformation of controversial topics. Take the ongoing Federal Perkins Loan debate, for example. More than 1,700 institutions of higher education participate in the program, resulting in about 500,000 students in need being awarded loans to finance their college educations. You can quickly recognize that this program supports students around the country who are working to improve themselves.
The federal government began its new fiscal cycle on October 1. For the first time in 57 years, the proposed federal budget does not include the Federal Perkins Loan program – a campus-based program that provides funds to students with the highest level of financial need. Although there are a wide range of programs that aim to support our nation’s neediest students, the Perkins Loan has a few unique twists that make it, in my opinion, valuable to both students and taxpayers.
Most obviously, the Perkins Loan is a loan and not a grant. As such, the student agrees to pay back the loan over a 10-year period following graduation. With a 5% fixed interest rate, the repayment of the loan generates additional funds for the next generation of students. Furthermore, colleges and universities make contributions to the fund which extends the reach of the program.
At Misericordia, a cumulative federal contribution of $1.1 million was available for student loans during the 2014-15 academic year, with $245,000 of that amount in new loans. Those funds were supplemented by more than $600,000 of institutional money which also was lent to students. Although the limit for Perkins Loans to undergraduates is $5,500 annually, most students receive loans that amount to about $2,000 per year. Perkins Loan funds help fill the gap between other sources of financial aid and family contributions, so a student can meet the entire cost of attending a college or university of their choice.
One argument that led to the expiration of the Perkins Loan program is the existence of other vehicles that provide funds to students with significant financial need. Yes, the landscape of student aid programs is complicated. It requires expertise on the part of financial aid administrators in order to apply it appropriately and justly. It is important, nonetheless, to have an array of programs that meets the need of each individual and not just a mythical “typical” student.
The Pell Grant, for example, provides a much larger average award to a student, but it does not need to be repaid. While the Pell is definitely a progressive and respected option, it does not return funds to be lent again and again. The Stafford Loan Program also provides loans, but funding is not earmarked solely to students with the highest amount of need and does not carry a fixed interest rate.
I also note that there have been efforts by Congress to cut funding for Pell Grants and Stafford Loans, just as we have witnessed for the Perkins Loan program.
If the Perkins Loan program is not restored, the repayment of loans will return to the federal government. We would then have taken a program that has worked for nearly six decades by providing a hand up for so many students, and turned it into a political football with little return to taxpayers.
Support for education at the federal level is an investment in our collective future. It is simple arithmetic to figure out that a $2,000 loan each year for four years equals $8,000. That amount is obviously less than the $8,000, plus 5% interest the student repays – not to mention the lifetime of higher earnings that provide more taxable income.
We have taken a solid program that works for everyone and replaced it with, well, nothing. That’s not solid policy, good government, or building a future for all of us.