The Federal Perkins Loan Program, also known as Perkins Loans, are federal loans with a low-interest rate for undergraduate and graduate students with significant financial need. This program recently expired on September 30th after the U.S. Senate failed to pass a bill to extend the program. They attempted to use a quicker process to pass the bill, which requires unanimous consent. However, Senator Lamar Alexander objected, which made the bill fail.
The conversation around the student loan industry, particularly with the Perkins Loan Program, is that it is overly complicated and needs to be simplified. According to an article published by Student Loan Hero, Senator Lamar Alexander stated that “it is time for our country, through legislation by this Congress and attempted to pass it through an expedited process requiring unanimous consent, to move on to a simplified federal student aid program, that has only one federal loan for students, one federal grant for students and one work-study program for students.” Alexander and other Senators believe that the Perkins Loan only adds to the complexity of the system.
However, there are many advocates of the program who say, according to Inside Higher Ed, that eliminating the Perkins Loan Program does not reduce complexity but force students to find other means to fund their education. The Executive Director of the Coalition of Higher Education Assistance Organization, Harrison Wadsworth, stated: “the plan two years ago was that [HEA] would be reauthorized in two years and that Perkins would be part of that discussion.” In 2015, the Perkins was extended and it was done so with the understanding that Congress would reauthorize the Higher Education Act with the Perkins Loan Program being a part of the discussion.
The main reason why many say it adds too much complexity to the student loan system is due to the Perkins Loan uniqueness. According to an article by Forbes, The Perkins Loan is different because it does not get all of its funds from the government. With Perkins, the federal government seed the money to the colleges directly, which then the colleges add a contribution of their own. As the students repaid their loan, this enabled the school to issue new loans. The complexity comes in the form of the student having to make two payments: one to the federal government or servicer to pay his or her traditional loan, and one to the school for the Perkins loan.
It is clear that there is division over whether or not the Perkins Loan Program should be continued. Although Senator Lamar Alexander objected the extension, he said that he would work with Baldwin to find a long-term solution to make college more affordable. Right now, there is no timeline for any bill that may be introduced to bring the program back to life. However, anyone who already has a Perkins Loan will be able to keep it to the end of the school year. For those who do not have a Perkins Loan, you should determine what other federal student aid options are available, and if they are none, then you may have to consider taking out a private loan. Keep in mind the latter may have a higher interest rate and do not have the same benefits as federal student loans.