Today, the Federal Perkins Loan Program will expire, leaving approximately 700,000 students without access to these low-interest loans.
With its expiration approaching, lawmakers on both sides of the aisle have called for Congress to vote on a two-year extension of Perkins loans. It is not the first time that Congress has extended the program. The last extension was passed for two years in 2015. Despite the significant bipartisan support, key members blocked the bill.
Of those in opposition to prolonging the federal loan program are House Majority Leader Kevin McCarthy (R-CA) and Chairman of the Senate Education Committee, Senator Lamar Alexander (R-TN).
“It was made clear at that time two years ago, that this was the last time the program would be extended, but we wanted to have a smooth transition, and we did not want students and colleges and universities to be surprised,” Sen. Alexander said on the Senate floor Thursday.
Alexander said the main reason for the last extension was to inform students and give them enough time to prepare for the program to end.
“The expiration of this loan program was not, therefore, and should not have been a surprise,” Alexander said.
The program’s end does not impact those with a current loan, and since the program was set to expire this year anyway, no one has been approved for a Perkins loan in the following year.
“They were ended two years ago, and every student was told in his or her financial aid information that the Perkins loan program ends this year, and so you can’t expect to have one next year — and no one has been granted one next year — so no one who has a loan is losing a loan,” Alexander said.
The senator calls the program messy and complicated for students. He said the program is not running efficiently or fulfilling its purpose of providing low-interest loans, and instead is hurting students more than helping.
“The Perkins loans have a higher interest rate than other loans that are available to students today. The interest rate is 5% compared with 4.45% for undergraduate loans,” he said.
Another criticism Alexander mentioned was the repayment process for these loans. Students who utilize Perkins loans aren’t eligible for helpful repayment options like income-based repayment or forgiveness programs. In result, Alexander says that the default rate for the Perkins loan is higher than the Federal Stafford loans.
But members have urged the senator to reconsider.
Senator Alexander’s response on the floor came following a letter sent to him from Senators Rob Portman (R-OH), Tammy Baldwin (D-WI), Bob Casey (D-PA), and Susan Collins (R-ME) that urged the opportunity for a vote on an extension. According to the Congressional Budget Office, the Senate’s two-year extension would cost taxpayers $900 million.
In the letter, the senators said that they acknowledge some reforms need to be made and should be debated on. But the senators said that not passing an extension is unfair to the families who rely on the financial assistance.
The Perkins Federal Loan pProgram was established in 1957 and is the nations oldest federal student financial aid program. Geroge W. Bush, Barack Obama, and current President Donald Trump have all recommended reforming or ending the program.
Alexander says it’s time for Congress to discuss ways to simplify the student loan process and find solutions. He supports reauthorizing the Higher Education Act and instituting a financial aid system where the government offers only one federal loan, one federal grant, and one federal work-study program.
The Perkins loan will expire today, Saturday, September 30th.