After 57 years of assisting nearly 20 million low-income students to finance their dreams of obtaining a higher education, the Federal Perkins Loan program could soon be grinding to a halt.
The Perkins Loan program, which has offered more than $41 million in low-interest loans to students at nearly 1,500 schools since 1958, is set to expire tonight unless Congress takes action to extend the availability for one year as provided under a resolution [PDF] in The Higher Education Act.
According to U.S. News & World Report’s The Student Loan Ranger blog, barring the passage of the resolution – which currently seems unlikely – schools would be prohibited from issuing new Perkins loans to students who have not received them prior to Oct. 1, 2014.
The potential end of the program doesn’t mean that students currently receiving Perkins loans are out of luck.
Instead, as the Student Loan Ranger points out, students who already receive disbursements will continue to collect the loans until their program is completed at their existing school.
Perkins Loans – set at a fixed 5% interest rate – are available through a revolving fund maintained by institutions, who then divvy out the loans to students attending a graduate or undergraduate program on at least a half-time basis.
Undergraduate students can receive up to $5,500 in Perkins funds per year, up to a total maximum of $27,500 for the entire duration of their program. Graduate students are eligible for up to $8,000 per year, with a total maximum of $60,000 for the length of their program.
The program offers a variety of benefits for borrowers, including an interest-free period while the student is enrolled in school. Additionally, the Perkins loan will not accrue interest when a loan is in deferment or during the typical nine-month grace period after graduation.
The future of the program has been in question for several years, as other federal student loan programs like Stafford loans and Pell Grants have been more widely used.
The Perkins Loan program problem has recently come down to budgetary issues, the Student Loan Ranger reports. By stopping the distribution of new Perkins loans, the government can funnel funds to other programs.
Last week, a group of senators introduced a resolution expressing support for the continuation of the Perkins Loan program “in order to provide educational opportunities to future generations of students who need low-cost financing to make their dreams of higher education possible.”
The resolution passed the House on Monday, but has since received strong opposition in the Senate.
What Borrowers Should Know as Perkins Loan Program Set to Expire [U.S. News & World Report The Student Loan Ranger]