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The Perkins Loan Program: A Model of Affordable Higher Education Financing

October 16, 2017
Press Release
Op-ed Written by Congressman Lee Zeldin (NY-01)

“In 1958, the Federal Perkins Loan Program, originally known as the National Defense Student Loan Program, was enacted by Congress during the height of the Cold War in response to our country’s need to create a more educated workforce and regain our competitive edge in the areas of math, science and technology.  This very first student loan program provided financial assistance to thousands of students who otherwise would not have had access to higher education, and therefore, best contribute to our country’s ability to compete as a global power.  

Today, fifty-nine years later, our global threats have changed, but the Perkins Loan Program continues to fill a critical gap in affordable financing to nearly 425,000 low-income students nationwide each year.  The success of this long-standing program can be attributed to its sustainable structure, whereby approximately $1.1 billion in loans are originated annually through campus-based revolving funds established from a combination of federal and institutional contributions.  This institutional investment creates “skin in the game” and an environment of accountability and risk sharing.  

I believe that the architects of our country’s original loan program were guided by the same principles we value today. This program was designed to provide affordable financing and increase accessibility to higher education, without increasing the size of our federal government or burdening the American taxpayers with ongoing administrative costs.

The Perkins Loan Program is a partnership between the federal government and institutions of higher learning.  The institutions contribute to the capital investment of the fund and agree to maintain responsibility for all aspects of the program’s administration.  The risk-sharing structure of the revolving loan fund fosters accountability from colleges and universities which originate the loans, counsel students, and work closely with borrowers throughout repayment to ensure the funds are available for generations to follow.

This model is so successful that the dollars invested have been loaned, repaid and loaned again – several times since the program’s inception.  In fact, this self-sustaining loan program has operated so efficiently, it has remained financially viable even without any federal contributions for the past 12 years.  In that timeframe, more than six million students have been awarded in excess of $14 billion in low-cost Perkins Loans without the investment of ANY additional taxpayer money.  In my home state of New York, the State University of New York, or SUNY system, has over 15,000 students benefiting from the Perkins program, representing over $25 million in affordable loans.  In the First Congressional District, which I represent, Stony Brook University serves hundreds of students annually and over $600,000 in loans in the 2017-18 school year.

Two years ago, the Perkins Loan Program temporarily expired, but was quickly revived in response to the public outcry from colleges, students and parents nationwide.  Now, Congress must act again, by passing H.R. 2482, which I cosponsor, the Federal Perkins Loan Program Extension Act. Families and students from New York State stand to lose the most if Perkins is ever eliminated.  In the 2015-16 academic year, $110.5 million in Perkins Loans were awarded to approximately 45,000 students attending college in New York – more than any other state in the nation.

Today, during a time of rising student loan indebtedness, Perkins Loans provide the stability of low-interest loans at the most favorable terms to students with economic need - including a fixed 5% interest rate, no origination fees and flexible repayment terms.  In addition, interest does not accrue while borrowers are enrolled or in deferment, and Perkins Loans offer full or partial loan forgiveness to borrowers who work in designated, high-need, public-service areas.

The historic success and sustainability of Perkins is a model of simplicity, efficiency and risk-sharing, which align with the current goals of higher education reform.  While there may be improvements to consider when Congress next reauthorizes the Higher Education Act, the Perkins Loan Program should be extended for two more years to ensure that students are not harmed during the process.

The need to create a more educated workforce and compete as a global power has not changed, nor has the goal to provide affordable financing and increase accessibility to higher education.  Whether Democrat or Republican, liberal or conservative, extending the Perkins Loan Program is an issue we should all support; it is truly a win-win for students, families and taxpayers.  As Congress debates the future of student aid programs, we should look to the successful funding and administrative structure of the Perkins Loan Program as a model to be expanded rather than eliminated.”