[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.]