Legislation passed by the Senate this week would renew the Perkins loan program for college students for two years, but with new eligibility restrictions — but the bill will still require passage by the House, says Brian J. Tumulty, writing for the Democrat & Chronicle.
New undergraduate applicants will qualify for the loan if they have been turned down by other lending institutions. This policy was explained in the legislation written by Republican Sen. Lamar Alexander of Tennessee who is the chairperson of the Senate Health, Education, Labor, and Pensions Committee.
Those graduate students who have already procured a Perkins loan would be allowed to continue in the program until the last of the 2016-2017 school year. Other graduate students will not be eligible for the provision.
Alexander had been against renewing the Perkins loan program, which expired at the end of September. He would like to consolidate and streamline federal college loan programs through reauthorizing the Higher Education Act. This move will not occur until next year, as Congress adjourns later this week.
In September, House Republicans and Democrats joined to sanction a two-year renewal of Perkins loans that was not the same as the bill the Senate approved on Wednesday. Inside Education reports that Alexander's office has said this legislation is part of a "managed shutdown" of the Perkins loan program.
More than 20,000 low-income students in Wisconsin alone have received over $41 million in aid, and Harvard University gave its students $9.4 million in Perkins loans in the same year. Stafford loans have been below 5% for the last few years, but it is possible they will not continue at such a low rate. The loans have no fees and extend a longer grace period to repay than do other federal loan payments, writes Johnnie Parsons of The Telegraph Times Daily News.
Overall, 500,000 students borrow $1 billion from Perkins each year. New York had more students with Perkins loans, 55,963, than any other state.
The changes made by the current bill are in place to cover the cost of continuing the Perkins loan program, but in the end, it could make it more expensive for low-income students to borrow what they need for college.
The Washington Post's Danielle Douglas-Gabriel reports that the government recalculates student loan rates each year based on the auction of 10-year notes by the Treasury Department, along with a fixed margin. Because of this, the rate can increase, but never more than 8.25% for undergraduate loans.
Alexander wants to consolidate all federal loan programs into one unsubsidized loan, which will probably be brought up during the reauthorization of the Higher Education Act.
Perkins is crucial for students who reach the borrowing limit on federal Stafford loans. Without Perkins loans, students would have to pursue a private student loan, which does not have the same consumer protections or the benefits of a federal loan.
The ACA International (the Association of Credit and Collection Professionals) website reported on Wednesday afternoon that Rep. Mike Bishop (R-Mich.) said:
"Earlier this year, I was proud to champion legislation in the House extending the Perkins Loan program and providing low-income students the certainty they need to pursue a higher education. I commend our Senate colleagues for joining this effort and reaffirming our commitment to helping those students who face severe financial hardship. I hope we send this bill to the president's desk as soon as possible and provide students the support they need as they work toward their college degrees."