[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                        BUDGETING FOR EDUCATION: 
                       THE ROLE OF PERKINS LOANS 

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, SEPTEMBER 22, 2010

                               __________

                           Serial No. 111-31

                               __________

           Printed for the use of the Committee on the Budget


                       Available on the Internet:
       http://www.gpoaccess.gov/congress/house/budget/index.html

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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ALLYSON Y. SCHWARTZ, Pennsylvania    PAUL RYAN, Wisconsin,
MARCY KAPTUR, Ohio                     Ranking Minority Member
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 SCOTT GARRETT, New Jersey
EARL BLUMENAUER, Oregon              MARIO DIAZ-BALART, Florida
MARION BERRY, Arkansas               MICHAEL K. SIMPSON, Idaho
ALLEN BOYD, Florida                  PATRICK T. McHENRY, North Carolina
JAMES P. McGOVERN, Massachusetts     CONNIE MACK, Florida
NIKI TSONGAS, Massachusetts          JOHN CAMPBELL, California
BOB ETHERIDGE, North Carolina        JIM JORDAN, Ohio
BETTY McCOLLUM, Minnesota            DEVIN NUNES, California
JOHN A. YARMUTH, Kentucky            ROBERT B. ADERHOLT, Alabama
ROBERT E. ANDREWS, New Jersey        CYNTHIA M. LUMMIS, Wyoming
ROSA L. DeLAURO, Connecticut,        STEVE AUSTRIA, Ohio
CHET EDWARDS, Texas                  GREGG HARPER, Mississippi
ROBERT C. ``BOBBY'' SCOTT, Virginia  CHARLES K. DJOU, Hawaii
JAMES R. LANGEVIN, Rhode Island
RICK LARSEN, Washington
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
GERALD E. CONNOLLY, Virginia
KURT SCHRADER, Oregon
DENNIS MOORE, Kansas

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                 Austin Smythe, Minority Staff Director




















                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, September 22, 2010...............     1

    Hon. John M. Spratt, Jr., Chairman, Committee on the Budget..     1
        Prepared statement of....................................     3
        Letter, dated September 22, 2010, to Hon. Arne Duncan, 
          Secretary, U.S. Department of Education................    37
    Hon. Paul Ryan, Ranking Minority Member, Committee on the 
      Budget.....................................................     4
    Bob Perrin, president, Coalition of Higher Education 
      Assistance Organizations (COHEAO), Williams & Fudge, Inc...     6
        Prepared statement of....................................     9
        Response to questions submitted by Mr. Etheridge.........    28
    Sarah Bauder, assistant vice president, enrollment services 
      and student financial aid, University of Maryland, College 
      Park.......................................................    13
        Prepared statement of....................................    15
    Joseph Hill, senior, Georgetown University...................    17
        Prepared statement of....................................    19
    Maria Livolsi, director, State University of New York Student 
      Loan Service Center, prepared statement of.................    32
    Justin Draeger, president, National Association of Student 
      Financial Aid Administrators (NASFAA), prepared statement 
      of.........................................................    34
    Judith Flink, executive director, university student 
      financial services, University of Illinois; former 
      president, Coalition of Higher Education Assistance 
      Organizations, prepared statement of.......................    35


                        BUDGETING FOR EDUCATION:
                       THE ROLE OF PERKINS LOANS

                              ----------                              


                     WEDNESDAY, SEPTEMBER 22, 2010

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:02 p.m., in room 
210, Cannon House Office Building, Hon. John M. Spratt, Jr. 
[Chairman of the Committee] presiding.
    Present: Representatives Spratt, Doggett, Etheridge, 
McCollum, Bishop, Ryan, Djou.
    Chairman Spratt. The hearing will come to order. Mr. 
Bishop, come on up here if you want to. Come on up.
    I am pleased today that we have an opportunity to discuss 
the vitally important issue of college affordability, and 
specifically the Perkins Loan Program and the valuable 
assistance it provides in helping low-income students pay for 
college, especially now with the economy reeling. It makes a 
world of difference to have a college education.
    Today's New York Times carries an article with statistics 
confirming the economic value of a college education. Americans 
with a bachelor's degree earn on average almost 60 percent 
more--60 percent more--than those with only a high school 
degree. The difference is even greater for that age 25 to 34.
    Americans with a college degree also are far less likely to 
be unemployed. The 4.7 percent unemployment rate for college 
graduates in 2009 was less than half the 9.7 percent rate for 
high school graduates. In fact, over the last twenty years all 
of the increase in U.S. employment has been among people with a 
college degree or at least some college education. By contrast, 
employment for those with only a high school degree has 
actually dropped a bit over that period of time.
    Today's hearing will help us understand the fundamental 
picture. The Perkins Loan Program improves access to college 
for hundreds of thousands of students, and it supports 
thousands of jobs as well. That's why I'm determined to keep 
this program going, to keep it strong--helping students and 
supporting jobs--and why I think Congress needs to take action 
to make it permanent.
    The Perkins Loan Program is an important campus-based loan 
program that has been around since 1958, probably before Mr. 
Ryan here was born.
    Mr. Ryan. Way before I was born.
    Chairman Spratt. I remember well the Sputnik scare and what 
drove us to adopt the National Defense Student Loan Program.
    Today more than 1,700 colleges offer these low-interest 
Perkins loans to their neediest students, loans that often make 
the difference between those students being able to afford 
college or not.
    And Perkins loans aren't just vital to students; the 
program provides vital employment for thousands of folks across 
the country, both at colleges and at private loan servicing 
companies that some colleges use to administer their loans.
    These experts work with the students so they know all the 
details of their loan, and they help them ensure that upon 
graduation they know their options for repayment and loan 
forgiveness if they enter certain public service jobs.
    In Rock Hill, South Carolina, my home district, we have two 
companies who together employ several hundred people working on 
Perkins loans.
    We will hear testimony today from Bob Perrin, the President 
of Williams & Fudge, and in the audience I see other South 
Carolinians--Neil Welborn, Hal Todd, and Gina Santoro of Todd, 
Bremer & Lawson--both local companies that provide the human 
touch that contributes to making this a really successful 
program.
    Although Congress has provided no capital contributions 
since 2004 and no funds for loan forgiveness since 2009, the 
participating colleges are still disbursing new Perkins loans 
from their revolving funds. The revolving funds contain prior 
federal contributions, the college's matching grants, and loan 
repayments from graduates. But starting in October 2012, 
colleges will cease making new Perkins loans with the income 
from loan repayments, and instead send the funds back to the 
federal government.
    Current law scheduled all prior federal capital 
contributions to be recalled to the Treasury, spelling an end 
eventually to the Perkins Loan Program.
    Congress therefore needs to address this loan legislation 
or it will wither on the vine and disappear in 2012.
    Given this need for action, I am interested in working with 
my colleagues, the Administration, and the higher education 
community to find a cost-effective solution that keeps this 
program viable.
    Our colleague, Representative Tim Bishop, has joined me in 
introducing H.R. 5448, the Perkins Loan Extension Act. This 
bipartisan bill, co-sponsored also by the Ed and Labor 
Committee Chairman George Miller, would extend the recall date 
by one year to provide the time to craft a comprehensive 
approach to keep Perkins loans going.
    Additionally, today I will be sending a letter to the 
Secretary of Education urging the Administration to work with 
us on legislation to extend this loan program.
    I think it is imperative that we ensure that students 
continue to have access to these low-cost loans and that jobs 
associated with them don't disappear when we can ill afford to 
lose them.
    I ask unanimous consent to include the letter to the 
Secretary in the record.
    Today we will hear from three witnesses, each of whom can 
talk about Perkins loans from a different perspective. As I 
mentioned, Bob Perrin from Rock Hill is President of Williams & 
Fudge, and he is also the President of the Coalition of Higher 
Education Assistance Organizations, a group of 300 educational 
and commercial members that advocates for Perkins and other 
campus-based aid programs.
    We also have Sarah Bauder, Assistant Vice President for 
Enrollment Services and Financial Aid at the University of 
Maryland in College Park.
    And finally, we have Joseph Hill, a Georgetown University 
senior from Philadelphia, who will talk about the important 
role his Perkins loans played in his attendance and upcoming 
graduation from college.
    Let me turn to Mr. Ryan for any statement that he cares to 
make before we move to the witnesses' statements. Mr. Ryan.
    [The prepared statement of John M. Spratt follows:]

       Prepared Statement of Hon. John M. Spratt, Jr., Chairman,
                        Committee on the Budget

    The hearing will come to order.
    I am pleased that today we have an opportunity to discuss the 
important issue of college affordability and, specifically, the Perkins 
loan program and the valuable assistance it provides in helping low-
income students pay for college. Especially now, when the economy is 
still reeling, it makes a world of difference to have a college degree. 
Tuesday's New York Times had an article with statistics confirming the 
economic value of a college education: Americans with a bachelor's 
degree earn on average almost 60 percent more than those with only a 
high school degree, and the difference is even greater for those age 25 
to 34. Americans with a college degree are also far less likely to be 
unemployed; the 4.7 percent unemployment rate for college graduates in 
2009 was less than half the 9.7 percent unemployment rate for high 
school graduates. In fact, over the last twenty years, all of the 
increase in U.S. employment has been among people with a college degree 
or at least some college classes. By contrast, employment for those 
with only a high school degree has actually dropped a bit over time.
    Today's hearing will help us understand the fundamental picture: 
the Perkins loan program improves access to college for hundreds of 
thousands of students, and it supports thousands of jobs, as well. 
That's why I'm determined to keep the Perkins loan program strong--
helping students and supporting jobs--and why Congress needs to take 
action.
    The Perkins loans program is an important, campus-based loan 
program that has been around since its inception in 1958 as the 
National Defense Student Loan program. Today, more than 1,700 colleges 
offer these low-interest Perkins loans to their neediest students, 
loans that often make the difference between those students being able 
to afford college, or not.
    And Perkins loans aren't just vital to students; the Perkins loan 
program provides vital employment for thousands of people across the 
country, both at colleges and at the private loan servicing companies 
that some colleges use to administer their Perkins loans. These experts 
work with the students so they know all the details of their Perkins 
loan, and help ensure that upon graduation they know their options for 
repayment or loan forgiveness if they enter certain public service 
jobs. In Rock Hill, South Carolina, in my home district, we have two 
companies who together employ several hundred people working on Perkins 
loans. We will hear testimony today from Bob Perrin, the President of 
Williams and Fudge, and in the audience I see other South Carolinians 
including Niel Welborn, Hal Todd, and Gina Santoro from Todd, Bremer & 
Lawson--both local companies that provide the human touch that 
contributes to making the Perkins loan program successful.
    Although Congress has provided no Perkins loan capital 
contributions since 2004 and no funds for loan forgiveness since 2009, 
participating colleges are still disbursing new Perkins loans from 
their revolving funds. The revolving funds contain prior federal 
contributions, the college's matching funds, and loan repayments from 
graduates. But starting in October 2012, colleges will cease making new 
Perkins loans with the income from loan repayments, and instead send 
the funds back to the federal government; current law schedules all 
prior federal capital contributions to be recalled to the Treasury, 
spelling an end to the Perkins loan program. Congress therefore needs 
to address Perkins loan legislation, or this program will wither on the 
vine in 2012.
    Given this need for action, I am interested in working with my 
colleagues, the Administration, and the higher education community to 
find a cost-effective solution that keeps the Perkins loan program 
viable. Our colleague, Rep. Bishop, has joined me in introducing HR 
5448, the Perkins Loan Extension Act. This bipartisan bill--cosponsored 
also by Education and Labor Committee Chairman George Miller--would 
extend the recall date by one year to provide the time to craft a 
comprehensive approach to keep Perkins loans flowing. In addition, 
later today I will be sending a letter to Education Secretary Arne 
Duncan urging the Administration to work with Congress on legislation 
to extend Perkins loans. I think it is imperative that we ensure that 
students continue to have access to these low-cost Perkins loans, and 
that jobs associated with Perkins loans don't disappear when we can 
least afford to lose them. I ask unanimous consent to include the 
letter to the Secretary in the hearing record.
    Today we will hear from three witnesses, each of whom can talk 
about Perkins loans from a different perspective. As I mentioned 
earlier, Bob Perrin from Rock Hill is both President of Williams and 
Fudge, and the elected President of the Coalition of Higher Education 
Assistance Organizations, a group of 300 educational and commercial 
members that advocates for Perkins and other campus-based aid programs. 
We also have Sarah Bauder, Assistant Vice President for Enrollment 
Services and Financial Aid at the University of Maryland in College 
Park. And finally, we have Joseph Hill, a Georgetown University senior 
from Philadelphia, who will talk about the important role his Perkins 
loans played in his attendance and upcoming graduation from college.
    Before we hear from our witnesses, I'd like to now turn to 
Congressman Ryan for any opening statement he would care to make.

    Mr. Ryan. Thank you, Mr. Chairman, thank you for calling 
this hearing on the future of the Perkins Loan Program.
    We all share a commitment to investing in the next 
generation and preparing our workforce to lead in today's 
competitive global economy. I applaud the Administration for 
taking steps to promote accountability and reforms to address 
the unconscionable failures in some of our classrooms and 
promote greater incentives to reward performance and success.
    I also have concerns with efforts to further centralize 
decisions in Washington that would best be left to states, 
local school districts, teachers, and parents, as well as the 
recent government takeover of the entire student loan industry.
    While I look forward to discussing the proper role of the 
federal government in making our world-class higher education 
system more competitive and more accessible to more Americans, 
we gather today in the House Budget Committee without a budget 
for the upcoming fiscal year and without a clue of how to 
finance our commitments to priorities like defense, health, and 
education.
    It is true, I was born after Sputnik, I was actually born 
after we put a man on the moon, but I wasn't born yesterday, 
and the country faces $1.5 trillion deficits, adding to the $13 
trillion total debt. The entitlement tsunami coming our way 
will overwhelm the federal budget and shred our critical social 
safety net if we fail to act.
    Advocates of programs like Perkins loans must take 
seriously the threat to national priorities if we fail to 
account for our looming fiscal crisis.
    I hope that today's hearing can allow for a candid 
discussion on how the federal government can promote a world-
class education for our children and how we can address the 
unconscionable debt burden we are passing on to the next 
generation.
    To those committed to continuing the rapid rise in spending 
for programs such as education we should do so by making other 
tradeoffs in the budget, and we must begin to reform our 
entitlement program so that they can meet their critical 
missions and give the next generation a more prosperous, more 
secure, and debt free Nation.
    Thank you.
    Chairman Spratt. Thank you, Mr. Ryan.
    Now let me give Mr. Bishop an opportunity to say something, 
because he probably has more direct hands-on experience with 
this program than anyone sitting in the room outside our 
experts.
    Mr. Bishop.
    Mr. Bishop. Mr. Chairman, thank you very much for holding 
this hearing, and it is an honor for me to join you in co-
sponsoring the bill that would extend the Perkins Loan Program 
for a year so that we may figure out a permanent solution.
    I was born before 1958, which is readily apparent, I am 
sure, but I went to college in part courtesy of what was then 
called a National Defense Student Loan. Upon graduating from 
college I became a college administrator, and for a period of 
time I was a director of financial aid, so I suspect I am the 
only member of Congress who has actually administered a Perkins 
Loan Program--at the time I was doing it, it was called 
National Direct Student Loan Program. I have a deep 
appreciation for the role that not just Perkins loans play, but 
the role that campus-based programs in general play--SEOG and 
Work Study as well--and I believe they are tools that allow the 
financial aid officer to really work on the dual related issues 
of access and affordability.
    I am very worried about two pretty powerful statistics. One 
is that we have fallen from first to sixth in the world in the 
proportion of our high school graduates who go on to college. 
The second is that we have fallen from first to twelfth in the 
world in the proportion of our population that has a college 
degree. I think neither number bodes well for our future; I 
think our future is wrapped up in having a workforce that is 
educated and competitive, and higher education is a crucial 
component of that, and I believe that Perkins Loan availability 
is a crucial component of facilitating enrollment.
    So I look forward to working with my colleague, Mr. Spratt, 
and others on first forging a one-year extension, and then 
secondly a more permanent extension of the program so that both 
students and administrators can plan for the future with some 
degree of accuracy.
    So I thank you, Mr. Chairman, and I yield back the balance 
of my time.
    Chairman Spratt. Thank you, Mr. Bishop.
    A couple of housekeeping details at this point. I would ask 
unanimous consent that all members be allowed to submit an 
opening statement for the record at this point. Without 
objection, so ordered.
    And to all of our witnesses and all those in attendance we 
welcome you to our Committee room. The written testimony of all 
witnesses will be made part of the record so that you may 
summarize as you see fit.
    Mr. Perrin, we will begin with you. Welcome to our 
Committee, and we look forward to your testimony. The floor is 
yours.

   STATEMENTS OF BOB PERRIN, PRESIDENT, COALITION OF HIGHER 
  EDUCATION ASSISTANCE ORGANIZATIONS, WILLIAMS & FUDGE, INC.; 
SARAH BAUDER, ASSISTANT VICE PRESIDENT ENROLLMENT SERVICES AND 
   FINANCIAL AID; JOSEPH HILL, SENIOR, GEORGETOWN UNIVERSITY

                    STATEMENT OF BOB PERRIN

    Mr. Perrin. Thank you, Chairman.
    Chairman Spratt, Ranking Member Ryan, and Members of the 
House of Representatives' Committee on the Budget, I want to 
express my gratitude to each of you for extending to me an 
opportunity to testify today.
    I will share why the Federal Perkins Loan Program must 
continue as a campus-based program that offers unique benefits 
to students.
    Over its long history, the Perkins Loan Program has often 
been the financial bridge that has enabled students to enroll 
or continue their studies at the college of their choice by 
providing low-interest loans.
    Loan forgiveness benefits that provide cancellations for 
teaching, military service, nursing, and many other degrees has 
encouraged generations of students to choose careers in public 
service professions.
    First I would like to take a moment to share my experiences 
and my background.
    I am currently celebrating my 30th year in higher education 
financial aid, so I guess that makes me born before Sputnik. My 
career began at the University of South Carolina where I worked 
for many years helping counsel students who were in the process 
of completing their degrees and preparing to repay their 
student loans.
    Presently I am President of Williams & Fudge, Inc., a 
higher education accounts receivable management company of 250 
employees located in Rock Hill, South Carolina. We partner with 
over 1,000 colleges and universities and assist with management 
recovery of their student loans and receivables.
    I currently serve as the elected President of the Coalition 
of Higher Education Assistance Organization, often referred to 
as COHEAO. This is an organization comprised of volunteers from 
colleges and universities and their servicers who are dedicated 
to advocating for access to higher education. Our motto is, 
more education for more people. And COHEAO's membership 
represents thousands of years of experience working with 
students on higher education student loans.
    The organization's expertise has often been tapped by 
congressional leaders, as well as current and past 
administrations, to provide recommendations for both 
legislative and regulatory issues, and it is the sole national 
association dedicated to providing access to higher education 
through campus-based student lending programs, including the 
Perkins Student Loan.
    According to the Department of Education, 1700 campuses 
nationwide made over $1.1 billion in Perkins loans to 
approximately 551,000 students in fiscal year 2009. Campuses in 
all but one state participate in the Perkins Loan Program, 
which provides loans of up to $5,500 per year to undergraduate 
students with financial need.
    Because the total available funds are limited the average 
annual loan amount is about $2,125, but it is funding that 
often makes a difference for low- and middle-income students 
who are struggling to finance their education.
    Perkins serves to fill the gap between limited grant funds 
and Stafford loans and the cost of education. For that, it is a 
crucial program.
    The Perkins Program has a long and interesting history. In 
1947 the President's Commission on Higher Education established 
a national goal of having one-third of our country's citizens 
graduate with a four-year college degree.
    Ten years later, after the launch of the first space 
satellite, Sputnik, by the Soviet Union, Congress enacted a 
bipartisan bill called the National Defense Education Act. 
Signed into law on September 2nd, 1958, by President 
Eisenhower, the NDEA represented the birth of federal student 
loans.
    Title II of the NDEA created the National Defense Student 
Loan Program to make low-interest federal loans available to 
needy students who are pursuing undergraduate and graduate 
degrees.
    This same program, the NDSL, is now known as the Federal 
Perkins Loan Program and has been serving our country for over 
52 years by providing low-interest student loans to financially 
disadvantaged students.
    This program has been providing opportunities for students 
through 11 presidential administrations and 26 sessions of 
Congress.
    Today the Federal Perkins Loan Program is faced with a 
major challenge. Under current law, colleges will be forced to 
begin repaying prior federal funding to the Treasury in October 
2012 instead of continuing to make new loans with the funds, a 
change that would end the program and leave hundreds of 
thousands of students without the low-cost loans they need.
    This recall date has been pushed back a number of times in 
past legislation, most recently in the 2007 College Cost 
Reduction and Access Act.
    There has always been a unique partnership between the 
federal government and the colleges and universities that 
participate in Perkins. Colleges and universities are required 
to match from their own funds at least one-third for every 
federal dollar appropriated. Many institutions have put even 
more of their own funds into the program in order to stretch 
those federal dollars. This is a feature of the Federal Perkins 
Loan Program that is particularly important from a budgetary 
perspective. Federal funds are not only matched, they are 
recycled over and over again.
    One of the key differences between the Perkins and other 
federal student loan programs is a revolving loan fund. Those 
$39 million that were appropriated in 1959 continue to be lent 
and repaid by students. Five generations of student loan 
borrowers have now benefitted from those same dollars.
    The Federal Perkins Loan Program targets the neediest 
students. During award year 2006 to 2007, 27 percent of 
families that had dependent students enrolled in colleges had 
an income under $25,000. In addition, 21 percent of Perkins 
loan borrowers were independent student, and 47 percent of 
those had annual incomes of less than $20,000.
    Institutional financial aid administrators have flexibility 
in determining the amount of a Perkins loan awarded to 
students. This enables them to package the financial aid in a 
manner that best benefits the students. Students can use the 
Perkins loan as a low-interest alternative to help fill 
financial gaps for low- and middle-income students.
    The Perkins loan also provides full loan cancellation 
opportunities for students who pursue careers in public 
services, and these are cancellations that are much more 
superior to the Direct Loan program.
    The interest rate for Perkins has remained fixed at five 
percent since the early '80s. Interest does not accrue on any 
amounts filed during in-school enrollments, grace periods, and 
during periods of eligible deferment. Not assessing interest 
during these periods substantially reduces students' overall 
financial obligations when they leave school.
    To illustrate how important this benefit is, assuming that 
an undergraduate student received the maximum award annually, 
he or she would owe an additional $5,000 upon graduation if 
interest had accrued.
    Despite all these electronic innovations developed during 
the last decade, students continue to need personal interaction 
to explain their financial aid and to help them with their loan 
obligations. Student aid is often students' first exposure to 
managing their finances. As such, student loan administrators 
are in essence educators, and they play a valued role in 
preventing and controlling delinquencies often by providing 
their scholars with the type of financial education that is 
going to serve them much longer than the term of their Perkins 
loan. These same administrators provide detailed explanation of 
entitlements and benefits that are associated with not just 
Federal Perkins, but all financial aid programs.
    The relationship between the loan administrators and the 
students continue after they graduate. We believe that most 
students continue to seek financial counsel from the personnel 
of the college they attended. There is this recognition factor 
and a level of comfort that has been inherited in the process.
    Colleges and universities also recognize that the student 
borrower today is the alumni contributor of the future once 
they have become established financially.
    Any servicers contracted by the school to provide billing 
and collections to augment the institution's functions are held 
accountable to provide quality service and meet all federal and 
state requirements. The majority of these institutions award 
services based on very competitive bids and RFPs. To win 
business, servicers must meet the expectation of the 
institutions.
    Another critical point I'd like to make is the potential 
for thousands of jobs being eliminated both from the private 
and the public sector if the Perkins Loan Program is forced to 
close. Positions that provide entrance, exit interviews, 
financial literacy, and overall management of the campus-based 
programs on many campuses throughout this Nation would be 
eliminated if the Perkins Loan Program expires or is 
structurally changed. Substantial job losses would be 
experienced from private companies that provide the billing and 
the collection services.
    One concern about extending the Perkins Loan Program and 
its student benefits is that the program's unusual structure 
doesn't fit the mode for calculating federal program costs. In 
other words, I understand that the Congressional Budget Office 
and the Office of Management and Budget have calculated that 
there may be a federal cost to such an extension. In reality, 
such a cost does not represent increased spending.
    Over the years Congress has appropriated funds to the 
Perkins Program. Those funds were counted as spending at the 
time of the appropriation, so the money that institutions 
currently have in their revolving fund or what is owed to them 
has already been spent. Those federal funds are also continuing 
to leverage institutional funds to make the federal dollar go 
further.
    Like most Americans, I am very worried about the size of 
our federal budget deficit, but I don't believe that extending 
the Perkins Loan Program with already spent federal funds plus 
contributions from colleges, will increase the deficit. It just 
doesn't make sense that simply continuing the Perkins Loan 
Program without adding federal dollars counts as new federal 
spending.
    I also don't think that it will make sense to American 
students who will face an even greater debt burden or be unable 
to pursue higher education if Perkins is allowed to die.
    I urge this Committee to take a close look at this unusual 
situation, and for Chairman Spratt and Ranking Member Ryan to 
work together to come up with a solution to the scoring problem 
that will allow the extension legislation to move forward.
    The 110th Congress recognized that the Federal Perkins Loan 
Program still continues to play an important role within the 
financial aid landscape when it reauthorized the program in the 
Higher Education Opportunity Act of 2008, which is the most 
recent reauthorization of the Higher Education Act. They made a 
strong statement of support, which I have included in my 
written testimony.
    In summary, we ask that the Committee continue to recognize 
that the Perkins Loan Program remains an essential part of the 
financial aid system that makes higher education possible for 
millions of students.
    I also respectfully ask on behalf of COHEAO members around 
the country and the students that they serve that Members of 
the Committee co-sponsor H.R. 5448, Congressman Spratt's bill 
extending the Perkins Loan Program.
    I want to once again thank the Committee for the 
opportunity to submit testimony, and I welcome your questions.
    [The prepared statement of Bob Perrin follows:]

   Prepared Statement of Bob Perrin, President, Coalition of Higher 
  Education Assistance Organizations (COHEAO), Williams & Fudge, Inc.

    Chairman Spratt, Ranking Member Ryan, and members of the House of 
Representatives Committee on the Budget, I want to express my gratitude 
to each of you for extending to me an opportunity to testify today. I 
will share why the Federal Perkins Student Loan Program must continue 
as a campus-based program that offers unique benefits to students.
    Over its long history, the Perkins Loan Program has often been the 
financial bridge that has enabled students to enroll or continue their 
studies at the college of their choice by providing low interest loans. 
Loan forgiveness benefits that provide cancellations for teaching, 
military service, nursing, and many other degrees have encouraged 
generations of students to chose careers in public service professions.
    First I would like to take a moment to share my experiences and 
background. I am currently celebrating my thirtieth year in higher 
education financial aid. My career began at the University of South 
Carolina where I worked for many years helping counsel students who 
were in the process of completing their degrees and preparing to repay 
their student loans.
    Presently I am President of Williams & Fudge, Inc; a higher 
education accounts receivable management company of two hundred fifty 
(250) employees located in Rock Hill, South Carolina. We partner with 
over 1,000 colleges and universities, and assist them with management 
and recovery of their student loans and receivables.
    I currently serve as the elected President of the Coalition of 
Higher Education Assistance Organizations, often referred to as 
(COHEAO). This is an organization comprised of volunteers from colleges 
and universities, and their servicers, who are dedicated to advocating 
for access to higher education. Our motto is ``More Education for More 
People.'' COHEAO'S membership represents thousand of years of 
experience working with students on higher education student loans. The 
organization's expertise has often been tapped by Congressional 
leaders, as well as current and past administrations, to provide 
recommendations for both legislative and regulatory issues, and it is 
the sole national association dedicated to providing access to higher 
education through campus-based student lending programs, including the 
Perkins Loan Program.
    According to the Department of Education, 1,700 campuses nationwide 
made $1,106,100,000 in Perkins loans to 521,000 students in fiscal year 
2009. Campuses in all but one state participate in the Perkins Loan 
Program, which provides loans of up to $5,500 per year to undergraduate 
students with financial need. Because the total available funds are 
limited, the average annual loan amount is $2,125, funding that often 
makes the difference for low- and middle-income students who are 
struggling to finance their education. Perkins serves to fill the gap 
between limited grant funds and Stafford loans and the cost of 
education. For that, it is crucial.
    The Perkins Program has a long and interesting history. In 1947, 
the President's Commission on Higher Education established a national 
goal of having one-third of our country's citizens graduate with a four 
year college degree. Ten years later the world witnessed the launch of 
the first space satellite (Sputnik) by the Soviet Union. Congress 
recognized that the satellite launch into space posed a scientific and 
technological challenge to this country and that developing the mental 
talents and skills of its citizens was vital to national security. As a 
result, Congress enacted a bi-partisan bill called the National Defense 
Education Act (NDEA).
    Signed into law on September 2, 1958 by President Eisenhower, the 
NDEA represented the birth of federal student loans. Title II of the 
NDEA created the National Defense Student Loan Program (NDSL) to make 
low interest federal loans available to needy students who were 
pursuing undergraduate and graduate degrees. The NDSL program provided 
opportunities for students who focused on academic disciplines such as 
engineering, science, math, and teaching in elementary or secondary 
schools.
    The National Defense Student Loan Program, now known as the Federal 
Perkins Student Loan Program, has been serving our country for fifty 
two years by providing low interest student loans to financially 
disadvantaged students. This very same federal student loan program has 
been providing opportunities for students through eleven Presidential 
administrations, and twenty six sessions of Congress.
    Today the Perkins Loan Program is faced with a major challenge. 
Under current law, colleges will be forced to begin repaying prior 
federal funding to the Treasury in October 2012 instead of continuing 
to make new loans with the funds, a change that would end the program 
and leave hundreds of thousands of students without the low-cost loans 
that they need. This recall date has been pushed back a number of times 
in past legislation, most recently in the 2007 College Cost Reduction 
and Access Act.
    A bill (H.R. 5448) has been introduced by my representative, 
Chairman John Spratt, to extend the October 2012 Perkins sunset 
provision by one year to October 2013. Members from both sides of the 
aisle are strong supporters of the Perkins loans and H.R. 5448 is 
currently co-sponsored by Congressman George Miller, Chairman of the 
House Education and Labor Committee, Congressman Tim Bishop (NY), who 
serves on both the Budget, and Education Labor Committees, and 
Congresswoman Cathy McMorris Rodgers who also serves on the House 
Education and Labor Committee and is a member of the Republican 
Leadership Team. Passage of this bill would provide an opportunity for 
Congress, the Administration, and members of the higher education 
community to work together and secure and streamline Perkins for future 
generations.
    Unlike any other federal student loan programs in the past or 
present, there has always been a unique partnership between the Federal 
Government and the colleges and universities that participate in 
Perkins. The National Defense Education Act of 1958 created a loan 
program that was funded by both the federal government and university 
funds. Colleges and universities were originally required to match at 
least one-ninth of the federal funds received each year. The matching 
investment by the colleges and universities grew from this original 
match to its current level of one-third for every federal dollar 
appropriated. Many institutions have put more of their own funds into 
the program in order to stretch the federal dollars further. This is a 
feature of the Perkins Loan Program that is particularly important from 
a budgetary perspective: federal funds are not only matched, they are 
recycled over and over.
    One of the key differences between the Perkins and other federal 
student loan programs is the revolving loan fund. Those $39,883,000.00 
dollars appropriated in 1959 continue to be lent and repaid by 
students. Five generations of student loan borrowers have now benefited 
from those same dollars. It is our belief that the revolving loan fund 
concept demonstrates a sound fiscal principle in managing federal 
dollars and is important to the functioning of the program.
    COHEAO member colleges provide excellent examples to illustrate the 
benefits provided by the revolving loan fund. One of our member schools 
has received a total of $166 million in federal capital contributions 
since 1959. This same school has contributed a total of $53 million 
from their own institutional funds. The revolving student loan fund for 
this particular school has received a total of $219 million. As of 2009 
this same institution has lent $912 million dollars to 392,141 
students.
    An investment in higher education provides immeasurable benefits 
for the student loan recipient, society in general, and the future 
economy of our country. The Federal Perkins Student Loan Program and 
its predecessors, the National Defense and National Direct Student Loan 
Program continue to target the neediest students. During award year 
2006-2007, 27% of families that had dependent students enrolled in 
college had an income under $25,000. In addition, 21 percent of Perkins 
Loan borrowers were independent students and 47 percent of those had 
annual incomes of less than $20,000.00
    Financial need is determined by a formula established by Congress 
and is based upon the financial data reported by the student and family 
on the FAFSA. Institutional financial aid administrators have 
flexibility in determining the amount of Perkins awarded to students. 
The flexibility provided to institutions enables them to package the 
financial aid in a manner that best benefits the student. Pell Grant 
funding is limited while the demand for financial assistance continues 
to grow as non-traditional students return to school for retraining, 
education that is needed to meet our country's economic challenges. 
Students can use the Perkins loans as a low-interest alternative to 
help fill financing gaps for low- and middle-income students.
    Congress has always recognized the importance of providing loan 
cancellation benefits to encourage students to consider a career in 
targeted public service occupations. The Federal Perkins Loan Program 
continues to provide more cancellation opportunities than any other 
loan program. Students who pursue careers in teaching at low income 
schools, teaching special education students, military, nursing, 
firefighting, law enforcement, and legal aid among other professions, 
are eligible for cancellation benefits up to 100 percent of the entire 
loan. The majority of these cancellation benefits are awarded over a 
five year period with partial benefits granted for each year in 
eligible public service professions and beginning immediately upon 
completion of the first year.
    The interest rate for Perkins has remained fixed at 5 percent since 
the early 80's. Interest does not accrue on any amounts borrowed during 
in-school enrollment, grace periods, and during periods of eligible 
deferments. Not assessing interest during these periods is a tremendous 
benefit for Perkins borrowers and substantially reduces their overall 
financial obligations when they leave school. To illustrate how 
important this benefit is, assuming that an undergraduate student 
received the maximum annual award, he or she would owe an additional 
$5,000.00 upon graduation if interest had accrued.
    We all live in an electronic age where essentially any information 
you desire is available with the click of the mouse. Textbooks will 
soon be obsolete with the introduction of electronic book readers such 
as Kindles and Ipads. Despite all of the electronic innovations 
developed during the last decade, students continue to need personal 
interaction to explain their financial aid and to help them with their 
loan obligations.
    Those institutions who currently participate in The Federal Perkins 
Student Loan program continue to employ experienced professionals whose 
responsibilities are to manage the program in accordance with 
established federal regulations and school policies. These same 
institutional staff members are the people that students will depend 
upon to counsel them throughout the life cycle of the loan.
    Student aid is often a student's first exposure to managing their 
finances. As such, student loan administrators are in essence educators 
and play a valued role in preventing and controlling delinquencies, 
often by providing their borrowers with the type of financial education 
that is going to serve them much longer than the term of their Perkins 
Loan. These same administrators provide detailed explanations of 
entitlements and benefits that are associated with not just Federal 
Perkins, but all financial aid programs. The relationship between the 
loan administrators and the students continues after they graduate.
    A report titled ``Lowering Student Default Rates: What One 
Consortium of Historically Black Institutions Did To Succeed'' 
described the value of institutions managing their own debt to prevent 
defaults, and the benefits of using outside partners. The report noted 
the effectiveness of on-campus financial literacy and counseling 
services for at-risk borrowers, but also stated, ``Partnerships'' with 
outside entities-all with experience in skip tracing, the process of 
finding and successfully contacting borrowers, collection, and 
personalized customer service proved as important to successful default 
management as on-campus relationships,'' essentially identifying the 
two key elements of the Perkins Loan Program-the human touch of campus-
based servicing and quality partnerships among schools and their 
vendors.
    Allowing the Perkins Loan Program to sunset will lead to unintended 
consequences. Imagine being a student on a college campus who is about 
to graduate and is focused on finding a job after graduation, finding a 
place to live while trying to be independent of your parents for the 
first time. You have received aid during your attendance at college and 
receive the occasional piece of correspondence by letter or email that 
outlines the amount of aid borrowed, terms of repayment, and documents 
that describe future obligations. You have no previous credit 
experience other than your student loans. The loss of the Perkins Loan 
Program has eliminated the job of a professional at your school who 
would have been available to advise you on managing your loans. The 
only available resource to answer your questions becomes a 1-800 number 
that is answered by someone in a call center somewhere who reads from 
scripts as he speaks to hundreds of people a day.
    Will this scenario provide you and other students the opportunity 
to discuss in detail your personal situation and receive the best 
guidance available to prevent potential default? We believe that most 
students continue to seek financial counsel from the personnel at the 
college they attended. There is a recognition factor and level of 
comfort that has been inherent in the process.
    Under the current Perkins loan structure, colleges and universities 
have a vested interest in ensuring that their student loan borrowers 
are well versed in understanding their loan obligations.
    College and universities also recognize that the student borrower 
of today is the alumni contributor of the future once they have become 
established financially. Any servicers contracted by the school to 
provide billing and collection support to augment the institution's 
functions are held accountable to provide quality service and meet all 
federal and state requirements. The majority of these institutions 
award services based on competitive bids and RFP's. To win business, 
servicers must meet the expectations of the institution.
    Another critical point to make is the potential for thousands of 
jobs being eliminated both from the private and public sector if the 
Perkins Loan Program is forced to close. Positions that provide 
entrance/exit interviews, financial literacy, and overall management of 
the campus based programs on many of the campuses throughout the nation 
could be eliminated if the Perkins Loan Program expires or is 
structurally changed. Additional job loss would be experienced from 
private companies that provide the billing and collection services.
    One concern about extending the Perkins Loan Program and its 
student benefits is that the program's unusual structure doesn't fit 
the mold for calculating federal program costs. In other words, I 
understand that the Congressional Budget Office and the Office of 
Management and Budget have calculated that there may be a federal cost 
to such an extension. In reality, such a cost does NOT represent 
increased spending. Over the years, Congress has appropriated funds to 
the Perkins Program. Those funds were counted as spending at the time 
of the appropriation, so the money that institutions have in their 
revolving funds or that is owed to them has already been spent. Those 
federal funds are also continuing to leverage institutional funds to 
make the federal dollar go further.
    Like most Americans, I am very worried about the size of our 
federal budget deficit, but I don't believe that extending the Perkins 
Loan Program with already-spent federal funds plus contributions from 
colleges will increase the deficit. It just doesn't make sense that 
simply continuing the Perkins Loan Program without adding federal 
dollars counts as new federal spending. I also don't think it will make 
sense to America's students who will face an even greater debt burden 
or be unable to pursue higher education if Perkins is allowed to die.
    I urge this Committee to take a close look at the unusual situation 
and for Chairman Spratt and Ranking Member Ryan to work together to 
come up with a solution to the scoring problem that will allow the 
extension legislation to move forward.
    The 110th Congress recognized that the Federal Perkins Loan Program 
still continues to play an important role within the financial aid 
landscape. Included in the Higher Education Opportunity Act of 2008, 
which is most recent reauthorization of the Higher Education Act of 
1965, was a sense of Congress Statement:
      sec. 466. sense of congress regarding federal perkins loans
    It is the sense of Congress that the Federal Perkins Loan Program, 
which provides low-interest loans to help needy students finance the 
costs of postsecondary education, is an important part of Federal 
student aid, and should remain a campus-based aid program at colleges 
and universities.
    In summary, we ask that the Committee continue to recognize that 
the Perkins Loan Program remains an essential part of the financial aid 
system that makes higher education possible for millions of students. 
All of us as COHEAO members look forward to the opportunity to work 
with the Committee, Congress, and the Administration to find solutions 
that will continue and hopefully expand the Perkins Loan Program and 
retain the unique, student-friendly attributes that come with campus-
based loan servicing. I also respectfully ask, on behalf of COHEAO 
members around the country and the students they serve, that Members of 
the Committee co-sponsor H.R. 5448, Chairman Spratt's bill extending 
the Perkins Loan Program.
    I want to once again thank the committee for the opportunity to 
submit testimony, and I welcome your questions.

    Chairman Spratt. Thank you very much, Mr. Perrin.
    Ms. Bauder.

                   STATEMENT OF SARAH BAUDER

    Ms. Bauder. Hi, I want to thank you for having me.
    I am Sarah Bauder, I am the Assistant Vice President for 
Student Financial Aid and for Enrollment Services at the 
University of Maryland. I have been at the university since 
1996 and was originally at St. Mary's College in Maryland for 
eight years before that.
    The university has 24,000 undergraduate students and 9,000 
graduate students. We award about $20 million in Pell grants, 
and about 17 percent of our undergraduate population is a Pell 
grant recipient, so we have some high-need students.
    We have about $100 million receiving some type of student 
loan, whether it is a plus loan or a Stafford loan, and we have 
about $35 million of university operating funds that we award 
for those in need.
    The Perkins Loan Program, which is about $1.5 million that 
we award to about 1,000 students, is pretty small in comparison 
to the rest of the aid that we award; however, that shouldn't 
be the focus.
    The focus is the way it is designed, and its design is what 
makes it so unique and makes it so effective for us at the 
ground level.
    Perkins is a revolving account, as we've talked about, that 
students pay back. We lend it out as students pay it back; we 
have every vested interest to make sure those students pay it 
back, because we want to award it to those students who need 
it. So we make sure that students have financial literacy, that 
we have one-on-one counseling with them, and that we focus on 
making sure they return the funds.
    Let me for the next few minutes put you in the world of 
financial aid and at my desk. We award Perkins loans in three 
different ways.
    The first way is through our algorithms, and we target it 
toward Pell grant-eligible students, and obviously those are 
high-need students. It is a low-interest loan, five percent. It 
is subsidized. Oftentimes these students are saying ``a loan, 
that is a four-letter word, we don't really want a loan.'' But 
once we explain the beauty of the loan--that it is subsidized 
by the government and you have nine months after you leave here 
at the University of Maryland to start paying it off--then they 
are much more apt to take it.
    I also believe that every student actually should have a 
loan. It teaches them later skills in life. Everyone is going 
to have some type of debt--whether it is mortgage, whether it 
is a car payment, whatever it may be, you are going to have 
some debt--and it's good to learn about it in a safe and 
managed environment where someone is actually watching what's 
going on and you have special repayment, you can get into work 
fields that will pay it off. I think a little bit of student 
debt is actually good for every student.
    So Pell grant recipients are the first population we look 
at.
    The second population is academic achievement programs, and 
this is part of the Trio Program. These are typically first 
generation students whose parents did not attend college. They 
are usually from a single-parent household, usually minority 
students. And it is a population that typically would self-
select out of college.
    They go to a summer transition program at our institution, 
and as part of that program we award two-thirds of the cost of 
that program from a university grant and one-third from 
Perkins. And we actually go through and we teach them the basic 
tenets of economics. How does interest work for you? How does 
interest work against you? And it is actually a really good 
educational tool outside the classroom in terms of how debt 
actually can work for you in terms of your credit score, as 
long as you are paying it back, and what ramifications happen 
if you don't pay it back. So this is a really good teaching 
tool for these students.
    The third population that we target toward is appeals, and 
I am going to talk a little bit more about this because I think 
this is really large in most institutions.
    The economy has hit everybody regardless of income bracket. 
In any one normal year before the economy started sliding 
southward we would have about 300 appeals. In 2008-2009 we had 
1,100. Last year we had 1,700. And this year if we stay on the 
same path we are going to have over 2,100. That is 2,100 
students who are coming to us after they are packaged and 
saying ``I need additional funds in order to stay here at 
college.''
    So I see a lot of families, a tremendous amount, hundreds 
of families in a year, and I am going to talk about a family 
that I just saw last week.
    A family came in, and they just missed being eligible for a 
Pell grant--still very needy, they just weren't Pell-eligible. 
They had exhausted all their Stafford loans. They exhausted all 
the university grant funding. We have a Keep Me Maryland grant 
that we give, and we had given them the maximum of that and 
they still needed additional funds.
    And I was able to call up to our bursar's office and say, 
what's our repayment on our Perkins Loan Program? We had money 
in the pot and I could award it. And this is how we do it with 
appeals. And we say I have $2,000 that I can give to you to 
help pay for college. It is the tipping point. It actually 
keeps students in college and keeps students here.
    That family that I met with was absolutely delighted. We 
put them on a TERP payment plan, we gave them $2,000 in a 
Perkins loan, which is extremely nominal, and the student 
stayed in college.
    And so because the Perkins Loan Program is in the control 
of the university, the funds are coming in, we can award it as 
we see fit. It is about the individual, it is not about the 
masses.
    If you look at Pell grants or Stafford loans it goes 
through an algorithm, we award it, and it is done. Where 
Perkins is much more at the individual level, and we can talk 
to the student and talk to them about those funds.
    My concern with Perkins is that it is dwindling. And so as 
I look at it, the federal contributions as we talked about have 
not been available for quite a few years, and as we pay back 
into the program--students pay back--they are very appreciative 
of it. And so it would be a disadvantage to the student not to 
have that program available to them.
    It is a great investment in the student, it is a great way 
for the student to invest in themselves, and so I would urge 
that we keep the program as it is.
    I want to thank you for having me here, and if you have any 
questions feel free to ask them.
    [The prepared statement of Sarah Bauder follows:]

     Prepared Statement of Sarah Bauder, Assistant Vice President, 
Enrollment Services and Student Financial Aid, University of Maryland, 
                              College Park

    Chairman Spratt, Representative Ryan, and other members of the 
Committee, I want to thank you for inviting me to appear before you 
today to speak about the role of the Federal Perkins Loan Program. My 
name is Sarah Bauder and it is my good fortune to serve as the 
Assistant Vice President for Enrollment Services and Student Financial 
Aid at the University of Maryland, College Park. The University of 
Maryland is home to 26,000 undergraduate students and approximately 
10,000 graduate students. Of our undergraduate population, 70 percent 
of Maryland resident students and 50 percent of non-resident students 
file the Free Application for Federal Student Aid (FAFSA). By filing 
the FAFSA, there is a tacit understanding the family is requesting and 
expecting some form of financial assistance to help pay for college.
    My office awards nearly $20 million in Pell grants, $90 million in 
Federal Stafford loans, $35 million in institutional funding, and $15 
million in endowed and departmental scholarships each year. 
Comparatively, we award $3 million in campus-based programs. The 
campus-based programs include the Federal Supplemental Educational 
Opportunity Grant, the Federal Work-Study Program, and the Perkins Loan 
Program.
    Relative to other federal student aid programs, our Perkins Loan 
awards are small. At the University of Maryland, we award approximately 
$1.5 million to almost 1,100 students. That's minuscule compared to our 
other programs. However, I do not believe the size of the program 
should be its only measure of success and/or effectiveness. The Perkins 
Loan Program--like the other campus-based programs--fills a unique 
purpose in a financial aid administrator's toolkit to help students and 
families meet their postsecondary educational expenses. The Perkins 
Loan Program is one of the most significant loan programs at the 
University of Maryland and has a positive impact among a broad range of 
students. In the world of financial aid, it is the David among the 
Goliaths of other aid.
    Campus-based programs allow the university to select which students 
receive limited award funds while adhering to federal policy. By its 
very nature, the Perkins Loan Program provides schools the flexibility 
to provide additional aid to needy students. The importance of this 
flexibility cannot be overstated. Financial aid administrators work 
where the rubber meets the road and have a unique perspective that 
allows them to assess students and families' ability to pay for college 
in ways that aid applications will never be able to assess. When aid 
administrators see students and families struggling with unique 
circumstances, they need some flexibility to deliver funds to ensure 
the success of these students.
    The Perkins loan program is especially unique because funds are 
distributed through a revolving account that is made up of both 
university and federal funds. As students pay back their loans, the 
University re-awards those funds to other students. This means that 
Colleges and Universities have a vested interest in making sure 
students are able to repay their loans so those funds can serve other 
students.
    The Perkins loan program provides generous terms and conditions to 
needy students. The program is a subsidized loan, meaning students do 
not have to pay interest on the loan while they are in school or during 
periods of enrollment. The fixed, 5 percent interest rate and robust 
loan forgiveness provisions make this loan especially attractive to 
students who might otherwise struggle with large amounts of loan debt. 
At the University of Maryland, we target Perkins funds to three main 
groups of students; those who qualify for the need-based Pell Grant 
program, families that appeal for additional aid, and students in the 
Academic Achievement Program (AAP).
    The purpose of the Academic Achievement Program is to provide 
additional funding and academic support to low-income, first generation 
students who often self-select out of attending college. The program is 
specifically geared toward students who otherwise would not be able to 
attend college and who demonstrate financial need, academic ability, 
uncommon persistence and maturity despite adverse life situations. 
These students are required to attend a summer transitional program 
(STP) designed to assist students in both their academic and personal 
adjustment to the University.
    Two-thirds of the cost to attend the summer program is paid through 
University grant funds and one-third through the Perkins loan program. 
We prefer for these students to turn towards low-cost loans like the 
Perkins Loan Program so that their first debt is in a safe and managed 
environment where financial literacy and life skills on indebtedness 
are taught by university counselors. In addition, over 95% of these 
students will borrow through the Stafford Loan program during their 
tenure as a student. Through our one-onone counseling and hands-on 
approach to the Perkins Program, these students also learn about their 
Stafford loan and are better able to manage their own debt.
    The economic downturn over the last three years has been 
indiscriminate in its effect on Maryland families and has negatively 
impacted every income bracket. Many traditionally high income families 
have lost their jobs, their homes and their savings and have joined the 
ranks of the poor. They know a college education is a good investment. 
However, many of them do not have the financial resources to pay the 
entire bill. Financial aid appeals for additional money have increased 
200% over the last three years.
    Most of these families have exhausted every other avenue to help 
bridge the gap between what they can afford and the cost of attendance. 
Most often, we use Perkins loans to bridge that gap. Tough economic 
times, job loss, current and future financial uncertainty have made 
student financial aid programs become even more important in keeping 
the doors of higher education access open. The Perkins loan program has 
been the source that has helped fill the gap and helps students and 
families avoid costly private student loans that lack the generous 
terms, benefits, and protections of federal student loans.
    What often is not discussed is the psychological and emotional side 
of requesting and receiving additional financial help. This cannot be 
overlooked. No one likes to publicize their hardships and asking for 
help is difficult. Imagine having to call or visit with a financial aid 
professional to discuss personal finances. The conversation starts at 
an emotion and tension level higher than most discussions. Then imagine 
having to tell a parent or student that there is no more funding 
available. Our goal is to offer some form of assistance to every family 
who is asking. The vision for my office is 'no student will leave the 
University of Maryland due to lack of financial resources'. Because the 
Perkins loan program is flexible and comes from a revolving account, we 
award many families who appeal for additional aid--and have exhausted 
all other resources--the Perkins loan. For most, it is a rewarding 
solution to a difficult problem.
    In closing, I think it's important to acknowledge that the 
relatively small size of the Perkins Loan Program doesn't accurately 
sum up its importance to students and parents. Since its inception at 
the University of Maryland, we have awarded $75,064,899 to 45,328 
students. It's the unsung hero of loan programs at the University of 
Maryland. Its unique and important role in our awarding practices makes 
me concerned about the future of this program. In recent years, loan 
cancellations have gone unfunded by the federal government, which when 
combined with even low levels of default, means the program is slowly 
dwindling. As the Budget Committee considers future funding for this 
program, I ask that it also considers the unique role it has played for 
millions of students. As student advocates, our greatest fear is when 
changes to the student aid programs could result in fewer dollars for 
students. Congress has recently made historic investments in student 
financial aid and we must guard against any possible erosion to those 
gains.
    Thank you for this opportunity and I would be happy to answer any 
of your questions.

    Chairman Spratt. Thank you for being here, and thank you 
for the excellent testimony.
    Now a student, a senior at Georgetown, Mr. Joseph Hill.

                    STATEMENT OF JOSEPH HILL

    Mr. Hill. Chairman Spratt, Ranking Member Ryan, and Members 
of the Committee, my name is Joseph Hill and I would like to 
thank you for the opportunity to testify this afternoon about 
the program which without a doubt made it possible for me to 
attend Georgetown University, something that I had dreamed 
about for years, but never deemed within reach.
    The Perkins loans I received, combined with generous 
Georgetown scholarships, outside grants, and part-time work 
throughout my years at Georgetown in the summer, enabled me to 
pursue my degree in government and philosophy and to experience 
firsthand how government works with internships here on Capitol 
Hill and in my home city of Philadelphia.
    I am a product of the Philadelphia Public School system and 
a dual enrollment program at Montgomery County Community 
College.
    My mother works in the health department for the City of 
Philadelphia and often works 12-hour days to support my nine-
year-old brother and me.
    My father is a realtor with his own dream of being a 
classroom teacher. My dad suffers from a neuromuscular disease 
called Myasthenia Gravis, which has rendered him weak and 
immobilized, compelling him to undergo regular infusion 
treatments.
    His condition was very severe when I was a young child, 
resulting in frequent hospitalization. It improved for several 
years and then worsened considerably during my senior year in 
high school, which created significant financial challenges for 
my family.
    I can't express how proud of him I am, because in spite of 
the limitations his disability imposed he kept working to 
support and provide for us to the extent he could, and even 
pursued a teacher's certificate, student teaching at his former 
high school.
    Due to the cost associated with putting me through 
Georgetown and complications associated with his disability, 
his dream had to once again be put on hold, but his compassion 
and sense of responsibility to his community continues to 
endure. And I am sure I don't need to tell anyone here about 
the difficulties realtors are facing in this economy.
    I am also happy to note that my parents are here with us 
today and were able to make the trip from Philadelphia.
    During my sophomore year of high school, Roxborough High 
was the scene of a violent riot where students were injured, 
police stormed the building, and the school cafeteria was 
shuttered. This incident, combined with a number of others that 
plagued the school, made learning incredibly difficult and 
forced my parents and me to seek other educational options that 
would unleash my true potential. I was lucky.
    At 16 I was able to enroll in Montgomery County Community 
College in suburban Philadelphia with some scholarship 
assistance, and have those credits applied to my high school 
diploma. There I was able to focus, work hard, study under 
dedicated professors, and earn a 4.0 GPA.
    This opened my eyes to the possibility of attending the 
school of my choice. I applied to several, but I really wanted 
to pursue political science in Washington, D.C., where I would 
have an up-front view of how the federal government develops 
policies to ensure that the American dream is provided for 
those of us who have yet to experience it. I must say I never 
imagined I would be testifying before the House Budget 
Committee.
    When I was accepted to Georgetown I was thrilled, but when 
my parents looked over the initial financial aid package they 
didn't see how we could do it. But Georgetown worked with us 
and provided $26,000 in Georgetown scholarships in addition to 
several small scholarships I received, including one from the 
Urban League and another from the NAACP.
    Still we were faced with a significant amount to make up. 
And then there was a Perkins loan, which helped my parents fill 
that gap.
    Last week I was talking to my mother, and without 
hesitation she said, ``it still wouldn't have worked without 
that Perkins loan.''
    I will be graduating next May and I am in the process of 
applying to teach back home in Philadelphia. As a black male I 
recognize the importance for young people in urban school 
districts to have black male role models who come from similar 
experiences so they can see hope and opportunity through 
circumstances that often seem hopeless and bleak.
    Before I close I think it is important for the Committee to 
know a little bit more about the Perkins Loan Program at 
Georgetown beyond me.
    Last year university-wide there were 840 Perkins loan 
recipients. About 350 of those were undergraduates just like 
me, and they received average Perkins loan of about $2,688. 
Just like me, every one of those Perkins loan students also 
received Georgetown scholarships, as well as other federal 
financial aid. There were also 60 graduate students and over 
200 Perkins students in both the law and medical schools.
    Again, those loans were part of the financial aid packages 
that are enabling all of us to pursue educations that will 
allow us to make a difference in our respective communities.
    I am confident that those are loans that will be repaid on 
time.
    I want to thank you again for inviting me to be here, and I 
hope that Congress will find a way to preserve and maintain the 
Perkins Loan Program. I am pleased that Georgetown University 
and the Association of Jesuit Colleges and Universities, of 
which we are a member, are working to see that the Perkins Loan 
Program will continue to be a resource for students like me.
    As the U.S. continues to fall further behind other nations 
in the proportion of adults with a college education, as 
Congressman Bishop mentioned from first in the world to 
twelfth, we simply cannot afford to eliminate resources that 
open the doors of colleges and universities to talented young 
people of all backgrounds.
    I understand the daunting nature of our budget woes, but 
the Perkins Loan Program is an investment that has made a huge 
difference in my life and serves as an affirmation of a core 
American value: that in America you can go as far as diligence 
and hard work with take you.
    I thank you for your time and will now respond to any 
questions the Committee may have.
    Thank you.
    [The prepared statement of Joseph Hill follows:]

    Prepared Statement of Joseph Hill, Senior, Georgetown University

    Chairman Spratt, Ranking Member Ryan and members of the committee: 
Thank you for the opportunity to testify this afternoon about a program 
which, without a doubt, made it possible for me to attend Georgetown 
University, something I had dreamed about for years, but never deemed 
within reach. The Perkins loans I have received, combined with generous 
Georgetown Scholarships, outside grants, and part-time work throughout 
my years at Georgetown and each summer, enabled me to pursue my degree 
in Government and Philosophy and to experience first-hand how 
government works, with internships here on Capitol Hill and in my home 
city of Philadelphia.
    I am a product of the Philadelphia Public Schools and a dual 
enrollment program at Montgomery County Community College. My mother 
works in the Health Department for the City of Philadelphia. She often 
works twelve-hour days to support my nine year-old brother and me. My 
father is a Realtor with his own dream of being a classroom teacher. My 
dad suffers from a nuero-muscular disease called Myasthenia Gravis, 
which has rendered him weak and immobilized, compelling him to undergo 
regular infusion treatments. His condition was very severe when I was a 
young child, resulting in frequent hospitalization. It improved for 
several years, and then worsened considerably during my senior year in 
high school, which created significant financial challenges for my 
family. I can't express how proud of him I am because, in spite of the 
limitations his disability imposes, he kept working to support and 
provide for us to the extent he could and even pursued teacher 
certification; student-teaching at his former high school. Due to the 
cost associated with putting me through Georgetown, and complications 
associated with his disability, his dream had to, once again, be put on 
hold, but his compassion and sense of responsibility to his community 
continues to endure. And I'm sure I don't need to tell anyone here 
about the difficulties Realtors are facing in this economy.
    During my sophomore year of high school, Roxborough High was the 
scene of a violent riot where students were injured, police stormed the 
building, and the school cafeteria was shuttered. This incident, 
combined with a number of others that plagued the school, made learning 
incredibly difficult, and forced my parents and me to seek other 
educational options that would unleash my true potential. I was lucky. 
At 16, I was able to enroll in Montgomery County Community College in 
suburban Philadelphia, with some scholarship assistance, and have those 
credits apply to my high school diploma. There, I was able to focus, 
work hard, study under dedicated professors, and earn a 4.0 grade point 
average. This opened my eyes to the possibility of attending the school 
of my choice. I applied to several, but I really wanted to pursue 
political science in Washington, D.C., where I would have an up-front 
view of how the federal government works to ensure that the American 
dream is provided for those of us who have yet to experience it. I must 
say, I never imagined I would be testifying before the House Budget 
Committee.
    When I was accepted, I was thrilled. But when my parents looked 
over the initial financial aid package, they didn't see how we could do 
it. But, Georgetown worked with us and provided $26,000 in Georgetown 
scholarships in addition to several small scholarships I received 
including from the Urban League and the NAACP. Still we were faced with 
a significant amount to make up. And then, there was a Perkins loan, 
which helped my parents fill that gap. Last week, I was talking to my 
mother, and, without hesitation, she said, ``It still wouldn't have 
worked without that Perkins Loan.'' I will be graduating next May, and 
I am in the process of applying to teach back home in Philadelphia. As 
a black male, I recognize the importance for young people in urban 
school districts to have black male role models who come from similar 
experiences, so they can see hope and opportunity through circumstances 
that oft seem hopeless.
    Before I close, I think it is important for the Committee to know a 
little bit about the Perkins Loan Program at Georgetown beyond me. Last 
year--university wide--there were 840 Perkins recipients. About 350 of 
those were undergraduates like me, and they received average Perkins 
loans of $2,688. Just like me, every one of those Perkins Loan students 
also received Georgetown Scholarships as well as other federal 
financial aid. There were also sixty graduate students, and over 200 
Perkins students in both the Law and Medical Schools. Again, those 
loans were part of the financial aid packages that are enabling all of 
us to pursue educations that will permit us to make a difference. I am 
confident that those are loans that will be repaid on time.
    I want to thank you again for inviting me to be here, and I hope 
that Congress will find a way to preserve and maintain the Perkins Loan 
Program. And I am pleased that Georgetown University and the 
Association of Jesuit Colleges and Universities of which we are a 
member are working to see that the Perkins loan program will continue 
to be a resource for students like me.
    As the U.S. continues to fall further behind other nations in the 
proportion of adults with college education--from first in the world to 
twelfth--we simply cannot afford to eliminate resources that open the 
doors of colleges and universities to talented young people of all 
backgrounds. I understand the daunting nature of our budget woes, but 
the Perkins loan program is an investment that has made a huge 
difference in my life, and serves as an affirmation of a core American 
value: that, in America, you can go as far as diligence and hard work 
will take you. I thank you for your time, and will respond to any 
questions the committee may have.
    Thank you.

    Chairman Spratt. Mr. Hill, thank you very much. Excellent 
testimony.
    Now, Ms. Bauder, let me ask you a particular question. Kind 
of a provocative question which you have already in a way 
answered, but if Perkins loans weren't available to the 
neediest students at the University of Maryland, would that 
really affect your students? If Pell grants have increased, you 
have direct loans, you have other resources--why is it the 
Perkins loans are necessary as well?
    Ms. Bauder. Well, the Perkins loan, it is the uniqueness of 
the program and how it is awarded. It is for needy students, so 
there is a policy--we want to think of it in terms of there is 
a skin around it for how we have to award it--but it is at our 
discretion, and so that is what makes it unique. It is very 
flexible, it has robust and very generous repayment plans that 
go with it. And so that is why it is needed.
    I am working at the individual level, I am not working at 
the mass level. I am making sure that one student at a time 
stays at Maryland. In fact we have a vision above one of our 
doors that says ``no student will leave here due to lack of 
financial resources.'' It is each student. It is not 24,000 
undergraduates and 9,000 graduates, it is one student who walks 
into my office that I am working with every single day.
    Chairman Spratt. Mr. Perrin, can you describe the benefits 
of having loan servicers like yourself, either the private 
company or at the college itself, and what role they play in 
maintaining and administering this program and making it 
successful?
    Mr. Perrin. Yes, I can. In fact just as Sarah was sharing, 
this is a partnership between the private and the public sector 
unlike any other loan program.
    As a private servicer we are held accountable to the 
college and university and we must meet the expectations that 
they require of us We are an extension of the university, 
therefore we represent those universities and those colleges 
when we work with students.
    So the servicing that we do is just not ``here is the next 
account, here is the number,'' let me make a call, they don't 
pay, move onto the next account. It is actually determining 
what the needs of that student are, what their situation is, do 
they have the ability to repay, are they eligible for some of 
the entitlement benefits?
    Our role as a private servicer is that we are going to 
identify that and in those kinds of situations we are going to 
notify the institution and provide that information to them so 
the account can be returned.
    The same thing happens on the campus. It is a very personal 
type of a loan. And even when I worked at the university you 
got to know your students. At a large university like the 
University of South Carolina, and I am sure at the University 
of Maryland, you get to know the students, you get to know 
their situations, you have a better understanding as far as the 
educational process for what they need.
    For these students, traditionally this is their first 
experience that they have with credit, and if you don't take 
the time to explain the value of credit, if you don't take the 
time to explain how that will affect them down the road, if you 
don't take this time to explain budgets--with students when 
they enroll in school they have one focus in mind, they want to 
go to school and they want to get an education, and they will 
sign any paper, any document to provide the funds to do that. 
So at an institutional level, these professionals who work at 
the colleges, universities, and the servicers, take the time to 
educate them so they have a better understanding of their 
obligations.
    Chairman Spratt. Thank you, sir.
    One last question. Mr. Hill, the criteria and eligibility 
rules for student loans, Stafford loans, Pell grants, and 
Perkins loans, can get terribly complex and even arcane.
    Number one, how did you learn about the Perkins Loan, and 
number two, how did you navigate your way through the choices 
to come upon this situation you find yourself in today?
    Mr. Hill. Sure. Well, I don't remember the specific moment 
I found out about the Perkins Loan Program, but I can tell you 
that my mom and I spent a lot of time going to different 
financial aid workshops and seminars, including one at my 
church and a number of other community organizations that 
helped us out. Once I was accepted to Georgetown, the Financial 
Aid Office and the Admissions Office were really helpful with 
helping us go through the process and secure financial aid to 
support me through college.
    Chairman Spratt. Thank you, sir.
    Mr. Bishop?
    Mr. Bishop. Thank you, Mr. Chairman, thank you all for your 
testimony. I thought it was very helpful.
    Ms. Bauder, I wish that every member of Congress could have 
heard your testimony and your response just now to Mr. Spratt's 
question, because you hit on three points that I think are 
often overlooked and certainly misunderstood.
    The first point was the whole issue of appeals. When I was 
doing financial aid we didn't have a lot of appeals, but they 
have grown tremendously and the campus-based programs are one 
of the tools that you have to respond to those appeals, whereas 
the other programs are externally fixed and you don't have the 
capacity. So I think that you made a very valuable point and I 
want to come back to that in a second.
    The second is the very personal nature of the financial aid 
packaging process and the enrollment management process that is 
key to our ability to keep students in college and to get them 
with degrees.
    And then the third is the group of students who are just 
beyond Pell grant eligibility. They are not by any means 
affluent students, and they may remain highly needy students, 
but they don't have the eligibility for that basic piece of 
aid.
    I think all three of those are a very compelling argument 
for the continuation of Perkins, as well as both continuation 
and expansion of the campus-based programs.
    I sometimes think, and I don't mean to be engaged in 
hierarchy here, but I sometimes think that we focus too much on 
Pell and not enough on the campus-based programs to deal with 
the young men and women who fall into the gap beyond Pell 
eligibility.
    So if we didn't have Perkins loans, what tools would you 
have had at your disposal when that young man came in to you 
and said that it was either more aid or I have to go home?
    Ms. Bauder. That is a great question, and I like all your 
points. I like that you reiterated them.
    We would have found something. I am at a large institution, 
I probably would have found some type of aid--I would have 
worked with the bursar's office, we would have worked out some 
other payment plan, we would have worked out something. But I 
do have lots of friends in different colleges--the community 
colleges, if I can speak on their behalf, or at least a friend 
of mine--they have Pell grants and many of them are not even in 
the Stafford Loan Program, and so they have Pell grants and 
they have Perkins loans, and the Perkins loans are for those 
students who are right off Pell grant eligibility.
    And so if Perkins loans didn't exist I am not quite sure 
what some of the community colleges would do or what the 
students would do, because they wouldn't be awarded Pell 
grants.
    And so for our institution I will say that we would make 
sure that we found something for the student. It is nice to 
have something in my tool kit that I can pull out that is right 
there and it is coming back and coming back and coming back and 
being repaid, that helps me out a lot, but I would have found 
something.
    Mr. Bishop. Okay. Let us assume that we are successful in 
extending Perkins loans for a year, giving us more time to 
craft a program going forward that would have some permanence 
to it. And I will give this question to both Mr. Perrin and Ms. 
Bauder.
    How do you see the program going forward, let us say 2012 
and thereafter? Would you structure it precisely as it is now, 
assuming we can find the way to cover the cost? Would you 
modify the way it operates? What are your thoughts on going 
forward?
    Bob, why don't we start with you.
    Mr. Perrin. There are some key components that I believe 
are extremely important to preserving the Federal Perkins Loan 
Program: the interest subsidy that is provided, the low 
interest rate of five percent, and the cancellation benefits, 
which target specific careers, such as teaching and military 
service and things like that.
    If you think about what's happening right now in our 
country with the unemployment situation there are going to be a 
lot of people who are already in the process of returning back 
to school to get retrained, and these are also individuals that 
will need the benefit of the Perkins Loan Program, and they are 
going to needed beyond 2012. The same for our military as they 
come back.
    I also believe that we need to look at the allocation 
formula. I think that is something that needs to be addressed 
down the road. I think it is important.
    I believe the principles behind the Perkins Loan Program--
the campus-based servicing, the utilization of outside entities 
that contract directly with the campus--it is important to 
maintain that structure so there is that personal relationship 
that makes this program so unique and so different from the 
Direct Loan program and other programs where essentially you 
draw down the funds and you disburse some money and that is 
where it ends.
    I think I would recommend that to secure Perkins for the 
future that it would be good to develop a task force or a 
committee that is made up of students, higher education 
associates, as well as private entities such as the servicers, 
and other members of Congress and staff members, to work on 
this and find solutions that will make sure Perkins are here 
for the next generation of students and the generation after 
that.
    Mr. Perrin. Thank you.
    Ms. Bauder?
    Ms. Bauder. I was sitting here thinking about it. If I had 
the knowledge of what the budget looks like so--you have to 
balance budgets, which I just have a great respect for, and so 
this is just one of the----
    Mr. Bishop. You have seen what a fabulous job we've done 
with that.
    Ms. Bauder. Yes. If I could change it a little bit and say 
how would you rate the components of the Perkins Loan Program, 
what would you not change at all? And what if you had to change 
and save a little bit of money and what would you do?
    The structure of it having a revolving account that is at 
the discretion really of the campus is number one. I wouldn't 
change that at all. The back end repayments--loan cancellation 
for graduates going into work shortage areas--is key. Students 
love that.
    Whether it has to be a nine-month subsidized loan--I kind 
of feel like it is a little confusing. Subsidized Stafford 
loans are subsidized for six month after you graduate, why is 
Perkins subsidized for nine months?
    Does the interest rate have to be five percent? It should 
be subsidized, I like the subsidy, I like that it is a 
revolving account, I am not quite sure it has to be at five 
percent.
    So there is give and take in there, but there are things I 
would not budge on in terms of that.
    Mr. Bishop. Thank you.
    I just want to make one last comment. I think it is 
important for us to recognize for the record that we are 
providing $1 billion a year of financial assistance to students 
based on seed money that the federal government began providing 
in 1958, but has not provided a dime to since 2004. That is a 
very effective use of taxpayer resources, in my opinion, and I 
just want to make that point for the record.
    Thank you, Mr. Chairman, I yield back.
    Chairman Spratt. Thank you, Mr. Bishop.
    Mr. Doggett?
    Mr. Doggett. Thank you, Mr. Chairman, and thank you for 
holding this important hearing and the comments that you, Mr. 
Bishop, have made. It's very important testimony that we have 
heard today.
    I represent the students and many faculty members at Texas 
State University, at the University of Texas, at St. Edwards in 
Houston, and at Austin Community College, and whether it is 
this specific loan program or others, student financial 
assistance is really important to them. I think it is not only 
about individual opportunity for a student who has graduated 
high school and is entering college anew or for someone who 
finds that they have been downsized and now needs to go back in 
order to retool and have an opportunity to get a good job to 
provide for their family, but it is also because these 
universities and our community colleges are really a spark plug 
for economic development and for job creation, that the student 
financial assistance is so very important.
    While I certainly share the view of the Ranking Member, Mr. 
Ryan, that we need to be ferreting out overspending and waste 
any time we can, and that we should be concerned about the size 
of our national debt, I have to say that I find very troubling 
his suggestion in his opening statement that maybe in response 
to proposals about the Perkins Program we instead ought to be 
looking at parents and states.
    I have heard that view echoed loudly by some in Texas who 
seem to be interested not only in taking America back, but 
taking it backward.
    If parents could shoulder all of these responsibilities we 
wouldn't have had these loan programs set up by President 
Eisenhower and others on a bipartisan basis back in the '50s.
    If states like Texas and South Carolina were fulfilling all 
their responsibilities for student financial assistance we 
wouldn't have this problem, and have had various federal 
student financial assistance programs set up.
    I want to ask you--each of you--your feelings about the 
wisdom of just terminating not only the Perkins Program, but 
all student financial assistance as some have suggested, what 
the effect of that will be if we eliminate the federal role and 
just leave it to the states and the parents?
    Mr. Perrin. Well, in the current economic condition, many 
states are already suffering huge budget deficits. In fact, 
most of the state institutions are facing budget cutbacks from 
the states. They are not receiving the same level of funding 
that they did in previous years, and that puts a great 
financial burden on the institutions themselves, and that 
indirectly affects the students of the future.
    Financial aid has been a cornerstone for 50 some years in 
this country and has created opportunities for disadvantaged 
students financially to have an education, to get an excellent 
job, provide an excellent salary, and those individuals pay 
taxes. As Congressman Spratt mentioned in his opening 
statement, there is a difference between those who don't have a 
college education and those who do, and obviously the more that 
you earn in income, the greater the tax base.
    I think the Perkins Loan Program and the other programs 
need to remain as a viable alternative. There are no longer 
these wells that these parents can tap into to help pay the 
tuition of their children.
    Years ago if they weren't eligible for financial aid, or to 
help support the financial aid process they would tap into 
their equity lines, they would tap into their 401K's.
    Most of the average American citizens right now, their 
401K's are down substantially, there is no equity in their 
homes anymore, so they really don't have the resources to pay 
the full cost of tuition.
    Mr. Doggett. So if we were to eliminate all this federal 
student financial assistance and say leave it to the parents at 
this time of downturn, leave it to the State of South Carolina 
to take care of all of them, wouldn't that be disastrous?
    Mr. Perrin. It would be disastrous for this country.
    The President has made a statement that education is 
important. That is one of the focuses of his term, and to 
revert back and not be able to support the students of today 
and the future would just be disastrous.
    Mr. Doggett. Vice President Bauder, what would the effect 
be in Maryland if we did that?
    Ms. Bauder. Well, the State of Maryland has cut back their 
state support significantly over the last three years in order 
to balance their budget, so it would definitely be disastrous.
    It is an investment in students and it is an investment in 
the economy. Students know that when they are entering the door 
and four or five years later when they graduate they are more 
than likely going to get a better job, they are going to have a 
higher income, they are going to spend more. And so education 
actually is an investment in the economy in the long run. I 
can't imagine if, there was no federal aid, the number of 
students who would not attend because they could not afford it.
    I mean right now we have over 1,100 auto zero EFC--poverty 
level students whose parents earn less than $30,000 a year--who 
are attending the University of Maryland, which is going to 
change their life. It is a pathway to a different lens than 
what they have had as a child.
    And so without that funding that they have they are not 
going to be going to college, they are not going to get the 
career that they have been looking for.
    Mr. Doggett. And I heard criticism also in the Ranking 
Member's opening statement of our successful efforts this year 
to see through the Direct Loan program that more money went to 
the students, as well as by the way to reduce the deficit, and 
less into the hands of the Wall Street banks.
    But when we talk about student financial assistance we are 
not just talking about people at the poverty level, though I 
know that may be the focus of this Perkins Program, through 
your office don't you handle student financial assistance and 
loans, and provide advice to many working families and middle 
class families seeking to attend the University of Maryland?
    Ms. Bauder. Oh, we do. I mean we have very robust financial 
literacy programs. We talk to all of the incoming freshman 
class through the University 100 Class. We talk to all of 
athletics. We give speeches nationwide. Absolutely.
    Mr. Doggett. You are trying to reach all of the people, and 
that is where I think Mr. Hill's testimony was so important, 
because you made the comment about seeing that you would go as 
far as your work would take you. And it does seem to me that 
that is also what student financial assistance and this program 
and the other programs that provide our network, our tool box, 
to people like you who are working with students of all ages, 
that we say we will use these tools so that every young person 
can get all of the education that they are willing to work for, 
and even the not so young person who may be coming back into 
the educational institutions, in order to achieve their full 
God-given potential.
    And I thank you, Mr. Hill, for your testimony and each of 
our witnesses. I think this is very important that we do more 
here and not less to have a responsible federal investment in 
our Nation's future through student financial assistance.
    Thank you, Mr. Chairman.
    Chairman Spratt. Thank you, Mr. Doggett.
    Mr. Etheridge?
    Mr. Etheridge. Thank you, Mr. Chairman, and thank you for 
holding this meeting. I am pleased to be here and I am enjoying 
your testimony.
    Let me in the fairness of a little public disclosure, I 
served as the State Superintendent of Schools for eight years 
in North Carolina before I came here.
    One of the reasons I ran for Congress was to make sure this 
very thing we are talking about didn't happen.
    Mr. Chairman, as you remember we had a group up here were 
going to shut down the Department of Ed, de-fund education--all 
the things that make a difference, give people an opportunity 
not only to get in the middle class, but to stay there.
    I have just seen a report in the last two weeks that jobs 
of the 21st Century, those that are going to allow people to be 
in the middle class and grow to middle class, are going to 
require education well beyond high school.
    So I mean just talking about Perkins is great, but we'd 
better be talking about broadening that opportunity and making 
that umbrella much bigger if we want to compete with a country 
that has got more people, like China--they have more people in 
school than we've got people, and they are building colleges.
    You know, this is a great opportunity today to really 
figure some of this out.
    It seems to me when we are talking about cutting back 
educational opportunities for young folks, it reminds me of 
being on the farm, and that is where I grew up. It is like 
eating your seed corn. I see some of you smiling, you're 
beginning to understand what I am talking about. Because if you 
don't make that opportunity available, you may miss the 
opportunity to get the next scientist or the next great 
engineer, or the person who is going to turn this country 
around, the next great leader.
    Education is the one thing that opens the door of 
opportunity. I have always said it is a great leveling device 
for everyone, and I think it is going to be the key to economic 
opportunity in the future, certainly in the 21st century.
    So, Mr. Chairman, I applaud you for the bill, for wanting 
to extend the Perkins. I don't think there is any question that 
we ought to do it. The real question is how do we make it 
better?
    Tough budgets means you have to make tough decisions, but 
the last time I checked education is not an expenditure, it is 
an investment. That means it is something you invest in today 
to get a return on down the road. And this country has 
benefitted from the Perkins Loan Program, it has benefitted 
from a lot of educational investments over the years that have 
allowed our economy to grow dramatically, and an awful lot of 
people to have a lot better life.
    That being said, I think that this proposal is common 
sense. It really ought to be drawing bipartisan support. There 
ought not to be anyone who really is not focused on it if they 
really believe in the United States of America and the 
challenges we face in the 21st century.
    Now that is not to stay that there are changes that ought 
not be made to make it better, but we ought not be trying to 
take the legs out from under it at a time when we are up and 
moving.
    So Mr. Perrin, let me ask you a question. Could you talk a 
little more about how colleges and universities match the 
federal funds we are providing? That is a real interest to me 
because within my district I have seven colleges and 
universities and four community colleges. That is a lot of 
folks to have an educational opportunity. I think it is 
important to stress that not only is this a smart, public/
private partnership, we sort of talk about how we match other 
stuff, but it is really a public/private partnership, because 
not all scholarships that you have received or you are handing 
out are all public money. A lot of those are private 
philanthropic dollars that are put in scholarship over the 
years. I believe one of the best features of the Perkins loan 
initiative, which used to be the Old National Defense--we need 
to give what its real name was before it was changed--is that 
it encouraged graduates to pursue public service jobs like 
teaching. That is a very honorable profession, as most of us 
who have a teacher we remember. Some of us have more than one 
that made a difference in our lives and gave us an opportunity, 
or the people who work in government or even those who go in 
the military.
    Do you have any statistics about how many of the Perkins 
loan recipients end up choosing these paths? Because I think 
either one of you may want to talk about that.
    I think we just heard from one of the great recipients, Mr. 
Hill has decided what he is going to do. And if we are going to 
encourage and validate what we are doing, we need more people 
training the next generation.
    While you are looking for your number I will add one more 
thing, because I know you are looking for it, because I do 
think it is important to get that on the record, and if you 
don't have it immediately I hope you would submit it for the 
record. I think these are the kinds of things that as people 
start to read these records they can reflect back. A lot of 
folks are numbers people, and they want to see what the numbers 
are, and I think that is important, because we have a great 
story to tell and we really need to tell it.
    Mr. Perrin. Thank you, Congressman, and I totally agree 
with you, there is no greater investment in this country than 
education.
    We will supply the information for the record. The 
information we have was received from the Department of 
Education and it is as of June of 2008. I have the dollar 
amounts that have been awarded. For loans prior to 1972 there 
was $505 million for the teacher and military cancellations.
    I think what I need to do, Congressman, is provide that for 
the record.
    Mr. Etheridge. Yes, I think we will need to have those 
accurate numbers in the record.
    Mr. Perrin. Yes.
    [The information follows:]

   Bob Perrin's Response to Questions From Congressman Bob Etheridge

    Throughout the history of the Program, roughly $1.5 billion in 
Perkins loans have been cancelled for students pursuing careers in 
teaching, the military and other forms of public service, and this 
figure has grown since the most recent data we have available. Since 
1972, $902 million in Perkins loans have been forgiven for students 
pursuing careers in targeted public service professions. Of that $902 
million, roughly $650 million has been provided for teachers. Rewarding 
students who pursue the honorable fields of teaching and military 
service has been a longtime staple of the program. Before 1972, more 
than $500 million in loans were cancelled for Perkins borrowers in 
these professions. Additionally, the number of service professions 
eligible for forgiveness has increased over the years. For example, 
more than $66 million in loans have been cancelled for police officers 
and other professions in law enforcement and the Higher Education and 
Opportunity Act of 2008 made seven additional professions, including 
firefighters, well qualified librarians, and public defenders, eligible 
for Perkins Loan forgiveness. I have a document that provides Perkins 
Loan cancellation information on a state-by-state basis that I will 
submit for the record.


                              FEDERAL PERKINS LOAN PROGRAM CUMULATIVE CANCELLATIONS
                                              [As of June 30, 2007]
----------------------------------------------------------------------------------------------------------------
                                                                      Loans issued after 1972
                                   Loans issued  ---------------------------------------------------------------
                                    before 1972                      All other
                                     teacher/      For teaching     authorized
                                     military       in certain       teaching        Military          Total
                                                     subjects        services
----------------------------------------------------------------------------------------------------------------
Public 2 Year...................      $3,620,001        $183,263      $4,320,021         $52,365      $4,555,649
Public 4 Year...................     292,777,855      29,480,665     402,298,814         402,624     432,182,103
Private 2 Year..................         500,156         185,721         511,601             858         698,180
Private 4 Year..................     208,813,577      19,729,292     235,811,405         559,041     256,099,738
Proprietary.....................         441,060          70,774       1,243,582          27,986       1,342,342
                                 -------------------------------------------------------------------------------
      U.S. total................    $506,152,649     $49,649,715    $644,185,423      $1,042,874    $694,878,012
      Institutions..............           1,582           1,226           1,795             638  ..............
----------------------------------------------------------------------------------------------------------------
Note: Number of Institutions represents schools that reported these Federal Perkins Loan account transactions


                              FEDERAL PERKINS LOAN PROGRAM CUMULATIVE CANCELLATIONS
                                              [As of June 30, 2007]
----------------------------------------------------------------------------------------------------------------
                                                                      Loans issued after 1972
                                   Loans issued  ---------------------------------------------------------------
                                    before 1972                      All other
                                     teacher/      For teaching     authorized
                                     military       in certain       teaching        Military          Total
                                                     subjects        services
----------------------------------------------------------------------------------------------------------------
Alabama.........................      $8,024,766        $417,766     $10,604,647         $19,969     $11,042,382
Alaska..........................               0           1,000          36,892               0          37,892
Arizona.........................       5,012,343         195,011       7,070,637           2,585       7,268,233
Arkansas........................       6,765,767         641,013      15,380,434          15,285      16,036,732
California......................      39,913,765       4,114,953      59,539,525          48,039      63,702,517
Colorado........................       7,398,210         536,446       9,501,224           8,847      10,046,517
Connecticut.....................       6,548,719         186,269       3,961,584          12,943       4,160,796
Delaware........................         472,878         134,112       1,040,175             375       1,174,662
District of Columbia............       2,745,132         166,978       2,155,276           6,913       2,329,167
Florida.........................      10,424,525         773,960      12,846,181          17,268      13,637,409
Georgia.........................       6,979,575         686,892      11,228,756           8,022      11,923,670
Hawaii..........................         677,125          62,644       1,094,373             700       1,157,717
Idaho...........................       2,087,529         170,456       4,434,211           5,827       4,610,494
Illinois........................      24,774,631       1,709,832      22,443,534          23,657      24,177,023
Indiana.........................      17,126,646       1,753,134      12,698,129          16,722      14,467,985
Iowa............................      11,746,758       2,084,539      10,932,360           5,008      13,021,907
Kansas..........................      10,909,363       1,256,719      12,562,463          26,233      13,845,415
Kentucky........................      11,361,368         986,789      16,864,269          10,249      17,861,307
Louisiana.......................       7,205,709         823,385      13,611,107           9,264      14,443,756
Maine...........................       2,102,004         426,723       5,105,901           4,814       5,537,438
Maryland........................       4,873,397         291,514       6,102,973          10,463       6,404,950
Massachusetts...................      14,438,201       1,403,126      17,371,971          22,184      18,797,281
Michigan........................      22,470,480       2,740,503      21,211,675          28,234      23,980,412
Minnesota.......................      16,311,206       1,043,380      13,605,464           7,172      14,656,016
Mississippi.....................       8,031,470         389,988      16,650,290          39,388      17,079,666
Missouri........................      14,000,209       1,265,465      14,467,504          17,381      15,750,350
Montana.........................       2,769,806          85,171       3,675,741           3,007       3,763,919
Nebraska........................       5,625,569         523,919       5,534,572           7,578       6,066,069
Nevada..........................         506,310          24,500         617,559             188         642,247
New Hampshire...................       2,174,470         314,582       3,233,212           9,854       3,557,648
New Jersey......................       8,091,162         609,094       6,965,029          10,583       7,584,706
New Mexico......................       3,559,284         716,454      11,438,049           4,016      12,158,519
New York........................      42,885,553       3,577,830      47,538,409          61,620      51,177,859
North Carolina..................      12,837,274       1,000,833      16,031,637          22,422      17,054,892
North Dakota....................       3,472,079         476,452       4,140,581           7,656       4,624,689
Ohio............................      24,040,353       2,437,043      22,804,522          21,189      25,262,754
Oklahoma........................      11,261,650         923,131      14,972,452           7,467      15,903,050
Oregon..........................       6,763,051         848,421       9,713,006          16,926      10,578,353
Pennsylvania....................      25,265,484       1,910,251      18,357,317         108,838      20,376,406
Puerto Rico.....................       4,754,218         490,815       9,177,888          11,673       9,680,376
Rhode Island....................       3,114,266         171,746       3,112,619           8,110       3,292,475
South Carolina..................       5,418,876         483,488       8,150,827          11,710       8,646,025
South Dakota....................       3,825,055         598,357       9,977,748          27,432      10,603,537
Tennessee.......................      10,903,713       1,097,344      14,150,246          33,369      15,280,959
Texas...........................      23,470,593       2,422,504      50,995,325          29,285      53,447,114
Utah............................       2,863,659       1,389,023       5,307,332          25,106       6,721,461
Vermont.........................       1,604,131         403,599       2,315,330          14,577       2,733,506
Virginia........................       8,282,133         388,069       8,211,161         182,188       8,781,418
Washington......................      10,560,725       1,185,735      15,642,722          16,803      16,845,260
West Virginia...................       6,018,410         497,820       4,981,455          14,037       5,493,312
Wisconsin.......................      12,556,380       2,769,969      23,813,879          18,979      26,602,827
Wyoming.........................       1,118,049          39,120         721,542             719         761,381
Guam............................               0               0               0               0               0
Virgin Islands..................           8,620           1,848          83,708               0          85,556
Misc. Islands...................               0               0               0               0               0
                                 -------------------------------------------------------------------------------
      U.S. total................    $506,152,649     $49,649,715    $644,185,423      $1,042,874    $694,878,012
----------------------------------------------------------------------------------------------------------------


                              FEDERAL PERKINS LOAN PROGRAM CUMULATIVE CANCELLATIONS
                                              [As of June 30, 2007]
----------------------------------------------------------------------------------------------------------------
                                                     Volunteer          Law            Early       Nurse/medical
                                                      service       enforcement    intervention     technician
----------------------------------------------------------------------------------------------------------------
Public 2 Year...................................         $17,363         826,963        $624,458      $9,538,820
Public 4 Year...................................       2,784,435      35,672,418      43,860,044     102,926,380
Private 2 Year..................................         128,231         170,051          57,648         883,810
Private 4 Year..................................       5,854,335      29,055,718      32,710,697      92,496,696
Proprietary.....................................           7,109         316,746         194,440         940,413
                                                 ---------------------------------------------------------------
      U.S. total................................      $8,791,473     $66,041,896     $77,447,287    $206,786,119
      Institutions..............................             878           1,392           1,418           1,498
----------------------------------------------------------------------------------------------------------------
Note: Number of Institutions represents schools that reported these Federal Perkins Loan account transactions


                              FEDERAL PERKINS LOAN PROGRAM CUMULATIVE CANCELLATIONS
                                              [As of June 30, 2007]
----------------------------------------------------------------------------------------------------------------
                                                     Volunteer          Law            Early       Nurse/medical
                                                      service       enforcement    intervention     technician
----------------------------------------------------------------------------------------------------------------
Alabama.........................................         $29,390        $878,524        $780,801      $3,740,091
Alaska..........................................             884           3,539           5,798          10,074
Arizona.........................................          45,525         342,540         308,007       1,236,860
Arkansas........................................          14,471         352,657         892,478       6,324,985
California......................................         787,906       7,479,432       8,579,285      11,150,847
Colorado........................................         248,112       1,582,506       1,642,828       2,499,384
Connecticut.....................................         225,246         537,362         828,889       5,120,263
Delaware........................................          26,908         162,862         135,435       1,273,715
District of Columbia............................         153,183         526,591         296,096         422,701
Florida.........................................          91,188       1,566,256       1,155,007       2,689,929
Georgia.........................................         197,933         786,332         826,979       4,721,184
Hawaii..........................................          17,223         174,890         255,049         283,891
Idaho...........................................          21,104         373,369         338,841       1,091,547
Illinois........................................         368,553       2,527,009       3,744,754       8,038,534
Indiana.........................................         342,741       2,288,212       2,731,014       6,270,635
Iowa............................................         207,227       1,045,529       1,580,641       3,827,574
Kansas..........................................          93,079       1,228,197       1,531,984       5,608,240
Kentucky........................................          25,470         788,502       1,790,233       5,100,670
Louisiana.......................................         102,366         814,023         807,346       4,266,986
Maine...........................................         139,348         478,504       1,416,263       3,425,760
Maryland........................................         106,243         948,983       1,416,044       4,093,649
Massachusetts...................................         638,013       2,158,999       4,190,038       4,878,193
Michigan........................................         321,622       2,832,132       3,135,383       4,845,388
Minnesota.......................................         336,162       1,701,931       1,731,185       4,823,533
Mississippi.....................................          10,236         618,964       1,031,318       3,922,822
Missouri........................................         132,516       2,598,356       2,333,855       6,463,549
Montana.........................................          40,594         331,499         415,570         819,149
Nebraska........................................          98,439         813,697         864,292       6,590,354
Nevada..........................................           1,053          23,352          56,464         210,512
New Hampshire...................................         171,202         446,123         600,645       1,362,340
New Jersey......................................          97,018       1,432,089       1,073,994         854,215
New Mexico......................................          33,780         588,961         708,706       1,778,543
New York........................................         515,632       4,725,104       4,051,215       9,353,254
North Carolina..................................         213,679       2,150,579       1,889,214       7,636,751
North Dakota....................................          26,210         513,913         627,415       4,021,092
Ohio............................................         361,368       2,630,545       3,058,148       6,059,870
Oklahoma........................................          39,344       1,023,862       1,670,778       2,729,919
Oregon..........................................         337,773       1,272,916       1,550,141       6,293,174
Pennsylvania....................................         410,754       2,578,551       4,343,325      11,429,239
Puerto Rico.....................................          10,504         890,867         114,542       2,382,730
Rhode Island....................................         256,888         204,926         387,269         339,542
South Carolina..................................          30,202         646,342         633,341       1,909,446
South Dakota....................................          22,798         525,235         720,314       3,488,315
Tennessee.......................................          58,252         966,476       1,262,393       3,267,396
Texas...........................................         186,464       2,143,709       1,535,721       8,649,740
Utah............................................          29,648       1,297,667       1,135,647       4,819,322
Vermont.........................................         166,214         488,050         367,668         947,585
Virginia........................................         135,384         711,917         678,983       1,429,345
Washington......................................         355,909       1,246,981       2,243,687       4,554,793
West Virginia...................................          19,018         462,183         695,577       2,039,401
Wisconsin.......................................         484,617       3,042,158       3,219,991       7,511,019
Wyoming.........................................           6,080          86,818          56,696         175,848
Guam............................................               0               0               0               0
Virgin Islands..................................               0           1,175               0           2,221
Misc. Islands...................................               0               0               0               0
                                                 ---------------------------------------------------------------
      U.S. total................................      $8,791,473     $66,041,896     $77,447,287    $206,786,119
----------------------------------------------------------------------------------------------------------------

    Mr. Etheridge. Mr. Chairman, I think that would be helpful 
for us.
    Let me ask you one other question. You talked a little bit 
about it, you and Ms. Bauder, about some of the improvements. 
Are there other improvements that you have not shared that you 
think we ought to be paying attention to, to make this program 
expand and reach more of our young folks?
    Because I will guarantee you if you sit in the Financial 
Aid Office a lot of times you are saying no because you don't 
have the resources to help a very capable, deserving young 
person that can make a difference.
    Mr. Perrin. Yes, Congressman, of course first it would be 
fantastic if we could get some additional appropriations.
    As was mentioned in the record there hasn't been any new 
money in this program for approximately five years, and it has 
been a year since we have had any appropriation for 
cancellations that have been awarded. And right now just 
currently the loan funds are approximately about $130 million 
short from cancellation benefits. So the program continues to 
become smaller and smaller on the campuses and there are less 
funds available to lend. The matching structure that we have in 
place, every dollar of appropriations is matched by one-third.
    So just by the federal government and the partnerships with 
the institutions you are going to grow the program 
substantially.
    There is a need out there in the community for additional 
aid as Sarah and others have mentioned.
    I do think there are ways that we can modernize the 
program, but I would encourage, as I mentioned earlier in my 
statement, that a committee be developed among the higher 
education community, the servicers that are involved, students, 
as well as congressional staff members or congressional 
members, and really sit down and say how can we make this 
program here 10 years from now, 15 years from now, and 20 years 
from now?
    Mr. Etheridge. Any other comment? Sarah?
    Ms. Bauder. No, I would just echo what he said.
    Mr. Etheridge. Thank you. Let me thank all three of your 
testimony.
    Mr. Chairman, thank you for this, because I think this is 
very healthy.
    Chairman Spratt. I think it has been a great hearing and it 
is because we got excellent presentations from different 
perspectives from the three of you. Excellent testimony, well 
delivered, and we really appreciate your coming and sharing 
your thoughts with us and your experience, and we look forward 
to working with you towards a solution--a long-run solution, a 
permanent solution to that issue in the weeks ahead.
    Thank you again for your participation and we look forward 
to working with you.
    Before concluding I want to ask unanimous consent that 
members who did not have the opportunity to ask questions be 
given that opportunity with seven days on the record today.
    Without objection, so ordered.
    And I want to ask unanimous consent to include in the 
hearing record the testimony submitted today to the Committee 
by other education entities interested in maintaining the 
Perkins Program but not able to be a witness at that hearing.
    Without objection, so ordered.
    Thank you once again for your participation. The hearing is 
adjourned.
    [The prepared statement of Maria Livolsi follows:]

             Prepared Statement of Maria Livolsi, Director,
        State University of New York Student Loan Service Center

    Chairman Spratt, Ranking Member Ryan, and members of the House of 
Representatives Committee on the Budget, thank you for allowing me the 
opportunity to submit my written testimony in support of the Federal 
Perkins Loan Program. I am cognizant of the fact that colleagues of 
mine are also providing testimony today that will provide you with an 
historical background on the Perkins Program. Rather than restating 
that information, I would like to begin by giving you my background and 
providing information on the critical role that the Perkins Loan 
Program plays at the State University of New York.
    I have been employed by the State University of New York (SUNY), 
Student Loan Service Center (SLSC) for close to 21 years, serving as 
director for the past 14 years. I have a staff of 36 employees 
dedicated to providing services related to the Perkins Loan Program for 
the 29 SUNY state campuses and their borrowers. My office is 
responsible for all aspects of the loan process beginning with the 
creation and signing of the promissory note, the disbursement of funds, 
and all related servicing of the loan throughout enrollment and 
repayment.
    My staff works very closely with the borrowers to ensure that they 
are aware of their benefits and responsibilities throughout the 
repayment process. We are pleased that our SUNY-wide cohort default 
rate is almost always below the national average, with most of the SUNY 
campuses achieving rates that are far below the national average. This 
is a tribute to the dedicated professionals within the SLSC and at each 
SUNY campus that work closely with each student throughout the awarding 
and repayment process--a relationship that is both unique to Perkins 
and critical to the students who are incurring higher levels of student 
loan debt to meet the increasing cost of higher education today.
    Even at a public university such as SUNY, where the cost of 
attendance is modest in comparison to similar colleges across the 
country, our students still have funding gaps after awarding the 
Federal grants and Stafford loans available. Without the flexibility 
and benefits that the Perkins Program affords, many of these students 
would be unable to continue their education or would have to do so at a 
much higher cost. That additional cost, for the most part, is due to 
the higher interest rates charged for private loans in comparison to 
the low, fixed interest rate of 5% that is available to Perkins 
borrowers. In addition, Perkins loans do not begin accruing interest 
until nine months after the student separates from college--a benefit 
that saves the borrowers thousands of dollars over the course of their 
enrollment and repayment period.
    The SUNY Perkins portfolio is one of the largest in the country, 
with a current value of $153 million. We currently have loans 
outstanding to more than 64,000 borrowers. On an annual basis, SUNY 
campuses award $15 million in Perkins loans to more than 13,000 
students who, without this additional funding, would be extremely 
challenged in meeting their financial responsibilities without 
incurring much higher debt levels from private loan sources.
    The State University of New York has been awarding Perkins loans 
for close to 50 years. In that time period, SUNY has awarded $720 
million to more than 445,000 students. This was made possible by a 
combined cumulative investment of $150 million in federal capital 
contribution and institutional match. The fact that the revolving fund 
has turned over almost 5 times is just one of the remarkable attributes 
that makes this program so valuable and unique. With a modest capital 
investment, and minimum operational cost to the Federal government, the 
Perkins Program has been able to sustain itself, remain viable and 
provide financial aid administrators unmatched flexibility in helping 
their students meet their financial responsibilities at a reasonable 
cost.
    The fact that interest does not accrue on the loans while students 
are enrolled, coupled with the availability of cancellation 
opportunities for students who choose careers in public service, are 
two vital benefits of this program that make it instrumental. Over the 
life of our program, SUNY students have had $33 million in loan 
principal forgiven due to serving in one of the many public service 
professions that are eligible for cancellation. These are students who 
have entered professions such as teaching in low-income schools, 
working in underprivileged communities, or in choosing professions that 
are dedicated to serving the public such as law enforcement, nursing, 
firefighting, and the military. Such professions often cannot compete 
with the salaries afforded to those who work in the private sector, but 
are attractive to students because of the opportunity to have all or 
part of their Perkins Student Loan cancelled--in most cases over a 5-
year period.
    The Perkins Loan Program is a program that has long-term 
sustainability and proven success. Since the inception of the federal 
Perkins Loan Program in 1958, over $28.8 billion in loans have been 
made to students through almost 26 million aid awards, enabling them to 
pursue their higher education goals. The Perkins Loan Program provides 
immeasurable benefits to students and critical flexibility to aid 
administrators at a low cost to the Federal government.
    I recognize the challenges that the House Budget Committee is 
facing in determining the future of the Perkins Loan Program due to the 
impending sunset provision and the current difficult fiscal environment 
we are facing as a nation. However, on behalf of the thousands of 
students seeking access to a college degree that rely on this unique 
and low-cost loan as a critical component of their Federal aid package, 
I ask that you extend the Perkins Program and remove the sunset 
provision.
    I want to once again thank the committee for the allowing me to 
submit this written testimony today. I am available to answer any 
questions you may have or provide any additional information that might 
be helpful as you move forward with your decision.

    [The prepared statement of Justin Draeger follows:]

 Prepared Statement of Justin Draeger, President, National Association 
            of Student Financial Aid Administrators (NASFAA)

    We appreciate the opportunity to submit comment on the role of the 
Perkins Loan Program. The unique characteristics of Perkins loans are 
of great value to students and schools. As conversations on the role 
and future of this and other student aid programs continue, we hope 
there will be a focus on the founding principles of the student aid 
programs. Those principles include a commitment to need-based aid and 
the promotion of policies focused on meeting the needs of disadvantaged 
students with an eye towards simplicity, equity, and flexibility.
    NASFAA represents more than 18,000 financial aid professionals who 
serve 16 million students each year at 2,800 colleges and universities 
throughout the country. Our members are on the front line when it comes 
to helping underserved and underrepresented student populations 
overcome financial barriers to attain a higher education. They are 
intimately familiar with the student aid programs and work daily to 
create financial aid packages that address financial need, exhausting 
the most consumer-friendly funds first to keep debt levels as low as 
possible.
    Half a century ago, Congress introduced the National Defense 
Student Loan Program. Authorized under the National Defense Education 
Act of 1958, this simple, campus-based loan program--which eventually 
became the Perkins Loan Program--allowed schools to leverage their own 
funds to meet students' financial need. Support for campus-based 
programs increased over the next few decades, but has since dwindled. 
Today, the underfunded program needs attention.
    When Perkins was first introduced, the loan program was funded by 
schools and amplified by the federal government. For each $1 put up by 
schools, the federal government contributed another $9 into a fund used 
by schools to make loans to low-income students. In the program's first 
year, 1,100 schools disbursed nearly $10 million dollars to about 
25,000 students. Schools determined which of their eligible students 
had the most need and awarded the funds accordingly. The loan 
originally had a 3 percent interest rate and borrowers who went into 
certain fields, such as teaching, could eliminate large portions of 
their debt--up to 50 percent in some cases. Schools used the money 
repaid by current borrowers--along with the federal contribution--to 
make loans to more low-income students.
    Over time however, the Perkins Loan Program has waned in magnitude. 
As college costs and students' financial needs increased, the federal 
student aid programs became more reliant on other federal student loans 
to meet students' needs. Today, the Perkins Program is a small fraction 
of the entire federal student loan portfolio. According to the College 
Board, Perkins loans aided 504,000 students in 2008-09, down from 
669,000 in 1998-99. By contrast, 8.7 million students utilized 
subsidized and unsubsidized Stafford Loans in the 2008-09 academic 
year.
    But even as the Perkins Program has waned, its unique 
characteristics have made it an important tool for many schools that 
are trying to meet students' financial need. As a subsidized loan 
program, students receiving Perkins funds do not have to pay interest 
while they are in school or during periods of deferment. The fixed, 5 
percent interest rate and generous loan forgiveness provisions make 
this loan especially attractive to students who might otherwise 
struggle with loan debt.
    In addition, like other campus-based aid programs (e.g., the 
Federal Supplemental Educational Opportunity Grant and the Federal Work 
Study Program), institutions have the flexibility to transfer funds 
between programs and to carry-forward and carry-back funds across 
program years, a feature that many aid administrators appreciate as 
they try to fill funding gaps for their students for special purposes, 
such as awarding student aid for summer sessions.
    Lastly, the Perkins Loan Program is particularly unique because 
funds are distributed through a revolving account that is made up of 
both university and federal funds. As students pay back their loans, 
the schools re-award those funds to other students. Colleges and 
universities therefore have a vested interest in making sure students 
repay their loans so that they can continue to serve other students.
    Today, the Perkins Loan Program finds itself in a very precarious 
position. In FY 2009, Perkins borrowers received $65.5 million in loan 
cancelation benefits, but no funds were appropriated for new Federal 
Capital Contributions. The revolving fund that schools have relied on 
to make new loans dwindles every year through loan default and 
forgiveness programs. In addition, more students are enrolling in 
college, forcing existing dollars to be spread thinner and thinner. It 
is clear that measures must be taken to appropriately address the 
future of this program.
    Whatever the future of the Perkins Loan Program, or other student 
aid programs for that matter, it is vital that we remember the core 
principles upon which student aid is predicated; namely, that we 
promote the primacy of need-based aid and policies that address the 
needs of disadvantaged students with an eye towards simplicity, equity, 
and flexibility. We look forward to working with Congress and the 
Administration on ensuring students and families receive the funds they 
need to attend college.

    [The prepared statement of Judith Flink follows:]

  Prepared Statement of Judith Flink, Executive Director, University 
 Student Financial Services, University of Illinois; Former President, 
    Coalition of Higher Education Assistance Organizations (COHEAO)

    My name is Judith Flink. I am the Executive Director of University 
Student Financial Services at the University of Illinois (UI), and 
former President of the Coalition of Higher Education Assistance 
Organizations (COHEAO). I appreciate the opportunity to submit my 
testimony regarding the importance of continued federal support for the 
Federal Perkins Loan Program.
    UI has participated in the Perkins Loan Program since its 
establishment in 1958 and has remained an active participant and strong 
advocate ever since. For thousands of needy students, Perkins loans 
represent the difference between continuing towards a diploma and 
dropping out. Perkins loans provide crucial low interest, school 
originated, subsidized loans to cover the gap in funding that can exist 
between tuition and federal loan limits. Attached are three charts 
depicting the financial situation of actual students enrolled at the 
University of Illinois fall semester 2010.
    I will not belabor the Committee by reviewing all three charts but 
allow me to briefly explain the first one.
    As you will note, this student received a maximum Pell Grant award 
of $5,350, along with the maximum subsidized and unsubsidized federal 
direct loan of $10,500. Taking into account University grants and 
loans, she is still short of the necessary funds to cover her tuition 
and books for the year. Filling the ``gap'' between federal loan limits 
and tuition is often the critical role played by the Perkins Loan 
Program. In this example, she was awarded $2,550 in Perkins funding. 
Without it, this student may have had to decide between: obtaining a 
higher cost alternative loan (if eligible); working, or increase 
working, to avoid assuming additional debt or leaving school due to the 
lack of financial resources or the fear of increasing loan debt burden. 
This chart depicts the situation faced by one student but it represents 
the situation of hundreds of other students on campus.
    The student body at the three campuses of the UI is rich in ethnic 
and cultural diversity. Over one third of our Chicago Campus' fall 
enrollment is comprised of Chicago Public Schools graduates, many of 
whom are the first in their family to attend college. The financial aid 
administrators at our Chicago Campus awarded 2,451 students a Perkins 
loan in FY 2010, for a total of $2,992,863.00. That comes out to an 
average loan of just over $1,200. Perhaps, $1,200 does not sound like a 
deal breaker for some. But for the students who come from families with 
incomes at or below the poverty line--which the majority of Perkins 
loan recipients do--it makes a great deal of difference.
    Perkins loans provide more than just a way to bridge a funding gap. 
Perkins loans offer students in-school interest subsidies and a low 5% 
interest rate during repayment. Furthermore, upon graduation, Perkins 
loans are forgiven if a student works in one of 16 different public 
service professions such as teaching, nursing, the military or law 
enforcement. And, this program is administered at the campus level 
which allows critical one-on-one counseling, debt management and 
financial planning opportunities between the student and school 
personnel.
    As with the call by Presidents in the past, we are in our own 
unique ``Post- Sputnik'' era. Today, President Obama has challenged us 
to strengthen our global edge by increasing higher education access and 
completion rates. Universities have heard and heeded the call, reaching 
out to non-traditional and first generation students, improving support 
systems in school and renewing efforts to better match students with 
degrees. This call includes the longstanding commitment by schools 
participating in the Perkins Program to contribute towards a matching 
requirement. Today, for each dollar appropriated in federal funds, 
colleges contribute at least one-third in matching monies. It is 
important to note, however, that no federal funds in the form of 
capital contributions have been appropriated to the Perkins Program for 
years. The lack of federal funds has been offset by increased 
institutional contributions as well as the fact that the Perkins loan 
program is a revolving fund meaning that each dollar that comes in 
repayment goes back out the door in a loan for another needy student. 
This unique structure has leveraged thousands of dollars in student 
aid.
    The Perkins Program has had a long and successful history of 
serving needy students. Unfortunately, the program is due to expire in 
2012 effectively halting any new loans. Chairman Spratt has introduced 
legislation to extend that deadline for a year. Those of us at 
participating institutions commend you for your commitment and urge 
Members to support you in your efforts.
    Furthermore, we stand ready to engage in conversations to improve 
the program and eliminate the expiration date altogether. For example, 
lawmakers have proposed new programs offering student loan forgiveness 
in exchange for teaching. The Perkins Program is the logical program to 
serve as the basis for such an initiative. Additional funding for the 
Perkins Program would serve students' needs and would prove more cost 
effective than the creation of a new program or new benefits in 
existing programs. Most importantly, it would revitalize the original 
purpose behind the enactment of the Perkins Loan Program which is to 
provide low cost loans and a cancellation incentive to future teachers.
    The Perkins Program has worked well and has a proven record of 
success. Perkins has successfully leveraged institutional dollars, 
established a strong revolving loan fund, encouraged and enabled low 
income students to complete college and engage in social service 
careers and it has provided a human touch to loan counseling and 
financial management. For these reasons, we urge you to maintain this 
program in our arsenal of critical student financial aid funding.
    Again, I appreciate having the opportunity to submit testimony on 
the importance of the Federal Perkins Loan Program. Keeping the Federal 
Perkins Loan Program strong is an important way to promote access to 
and eliminate the financial barriers that discourage low-income 
students from attending higher education.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    [Letter, dated September 22, 2010, to Secretary Duncan 
follows:]

                                             U.S. Congress,
                                Washington, DC, September 22, 2010.
Hon. Arne Duncan, Secretary,
U.S. Department of Education, 400 Maryland Avenue, SW, Washington, DC 
        20202
    Dear Secretary Duncan: I am writing to encourage you to work with 
Congress to maintain the Perkins loan program. As you know, more than 
1,700 colleges provide Perkins loans to about 500,000 needy college 
students each year, but the entire Perkins loan program is scheduled to 
end in 2012. Letting the program expire would not only jeopardize 
college access for low-income students, it would also put at risk the 
jobs of the thousands of people who administer Perkins loans at 
colleges and at private servicing companies across the country. In my 
congressional district of South Carolina alone there are close to 300 
jobs dependent on servicing Perkins loans--jobs we cannot afford to 
lose any more than we can give up the access to higher education that 
Perkins loans provide.
    The economy is just now rebounding from recession, but jobs are 
still too hard to come by for many Americans. A college degree is 
increasingly important in obtaining and keeping a job, and I will do 
all I can to ensure that everyone has the opportunity to attend college 
regardless of their income. For low-income students a Perkins loan 
often makes the difference between affording college or not.
    Congress has provided short-term extensions for the Perkins loan 
program in the past, and I have introduced legislation to extend the 
existing program for another year. That year would give us more time to 
enact a long-term solution, it would provide colleges and universities 
the assurance that the federal government is committed to continuing to 
the Perkins loan program, and would ensure that loan servicing jobs are 
not eliminated.
    You have worked tirelessly to improve education in America, and I 
know you share my dedication to continuing the successful Perkins loan 
program--a program important to both students and those employed 
administering the loans. I look forward to working with you to find a 
way to extend the Perkins loan program.
            Sincerely,
                                       John M. Spratt, Jr.,
                                                          Chairman.

    [Whereupon, at 3:03 p.m., the Committee was adjourned.]

                                  
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