Penn works to preserve student loan option

Students awaiting their financial aid for the upcoming school year may soon miss one of their loan options.

The federal Perkins Loan program, a government-funded student aid program established in 1958, is set to expire in 2014.

With approximately 1,800 colleges and universities nationwide participating, the program provides low interest federal loans for needy students in order to help them pay for their post-secondary education.

At a time when Congress is facing mounting pressure to keep its financial issues at bay, the Perkins Loans program is among government-funded initiatives that could get cut to help ease the national deficit crisis.

According to Director of Student Financial Aid Bill Schilling, eliminating the program would result in Penn graduate and professional students borrowing more from alternative loan programs such as the Federal GradPLUS loan program — which has a higher interest rate of 7.9 percent, compared to Perkins’ 5 percent.

Furthermore, undergraduate students would “probably have to borrow through private loan programs to replace the small amount of Perkins Loans they are currently borrowing,” Schilling wrote in an email.

However, Schilling added that Penn’s undergraduate financial aid policy does not include loans. While students do have the option of taking out loans, Penn provides loan-free aid packages that “widen access for qualified students from all economic background,” he wrote. This means that regardless of a student’s financial eligibility, Penn will replace loans with grants to help pay for the student’s education.

Nevertheless, for the students that do need the loan, the Perkins Loan program contains features that make it more attractive than other loan programs. Besides the lower interest rate, the loan is subsidized by the government for the time the borrower is in school and contains loan-forgiveness options.

Aside from Stafford loans — which don’t have a fixed interest rate and can be unsubsidized — and private loans — which cost more to take out and vary based on credit score — the Perkins loan is an attractive option for students.

Lee Huttner, a 2010 College graduate who will attend graduate school in the fall, took out Perkins loans during all four years of his undergraduate education and will continue to do so for his graduate studies. He credits a flexible 10-year repayment period as one of the attractive features of the Perkins program.

“The best aspect of the Perkins loans is how long they let you pay it back, especially for students entering graduate schools,” he said.

Associate Vice President of Federal Affairs Bill Andresen said that Penn President Amy Gutmann has reached out to lawmakers to make renewing the Perkins loan program a top priority.

Along with working organizations like the American Association of American Universities, “Gutmann wrote to every member of the Pennsylvania delegation outlining priorities for renewing the Perkins loans,” Andresen said.

Still, “the prospects for renewing the Perkins loan are unclear,” he said, noting that the issue is of lower priority for Congress, especially when negotiations for raising the debt ceiling and finalizing a budget for the 2012 fiscal year take greater precedence.

President Barack Obama has submitted a proposal to renew this program and institute changes to make it more sustainable, including an increase to the loan program’s current interest rate or the removal of the in-school subsidy.

Schilling said he believes this overhaul plan is a step in the right direction toward maintaining the Perkins program. “Given the overarching issue of deficit reduction, I think a program along the lines of the President’s proposal is the best that we can hope for,” he said.

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