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If the Federal Perkins Loan program ends in September 2015, as scheduled, it is unclear just what it will mean for students and schools.


What the Perkins Loan Wind-Down Means for Students and Schools

  • 2/17/2015

The higher education world is buzzing with speculation about the winding down of the Federal Perkins Loan program. Unless Congress takes action to restore the program, schools will not be allowed to award Perkins Loans to new borrowers after September 30, 2015.

“Schools are very concerned about how the Perkins Loan program will be closed out, but they need to remember that a lot still hasn’t been decided,” says Brenda Scherer, a manager in higher education with CliftonLarsonAllen.

Expiration was set 50 years ago

The expiration of the program, which provides low interest loans to help students finance the costs of postsecondary education, was set as a provision of the law that created it, the Higher Education Act of 1965.

In late January 2015, the U.S. Department of Education (ED) issued Dear Colleague Letter GEN 15-03 to address the grandfathering of Perkins Loans for students who receive a loan before June 30, 2015. According to the letter, these students will still be able to receive Perkins Loans until 2020, provided they meet certain criteria.

However, the ED acknowledged that there are other aspects of the program directly impacting schools that will need to be addressed in a wind-down, including the settlement of school revolving funds and outstanding loan portfolios. The ED says it will provide guidance in coming months.

In 2011, the ED first announced that the Perkins program would be allowed to expire. As part of that announcement, schools participating in the program would have to return the federal share of amounts collected after October 1, 2012. But the process was delayed after an uproar in the higher education community.

Congressional inaction

Since Congress has not acted to restore the program, the ED is being forced to end it. Its highest priority is being given to protecting the students who have benefited in the past.

“The Department of Education is obviously looking at how to close the program without harming the students, and grandfathering it out until 2020 makes sense,” Scherer says. “If schools are forced to pay back the federal contribution in a lump sum payment, they may have to close or at least reduce programs.”

Scherer adds, “Since the ED’s first priority is to help students get an education, I can’t imagine them coming out with a plan that requires a lump sum payment. It could potentially hurt too many students, and that would be a tough political position for the ED to take.”

How we can help

CLA higher education professionals will continue to follow these developments, and will provide additional guidance once the ED comes out with further details of its wind-down plan. Higher education leaders can also voice their views on this topic by contacting their local legislators and by working through industry trade groups such as National Association of College and University Business Officers.