The Federal Perkins Loan program, which provided low-interest loans to college students with an exceptional financial need, expired on September 30. Members of the U.S. Senate did introduce a bill to extend the program. However, their efforts were blocked on the Senate floor.
Many low-income students depend on a Federal Perkins Loan to cover educational expenses. Without it, students may be forced to turn to more expensive financial aid options.
What are Perkins Loans?
Perkins Loans are available to low-income undergraduate, graduate, and professional students. The loans were designed to fill the gap for students to cover their total cost of attendance wherever financial aid fell short.
Attributes of Perkins Loans include:
- A lower interest rate — just 5.00% — compared to other federal student loans.
- Nine-month grace periods. These are longer than other federal student loans which typically have six-month grace periods.
- Loan amounts up to $5,500 a year for undergraduates, or $27,500 throughout their whole college careers.
- Loan amounts up to $8,000 per year for graduate or professional students, or up to $60,000, which includes amounts borrowed as an undergraduate.
The funds behind the Federal Perkins Loan initiative were limited, so competition for the loans was stiff. Not everyone who was eligible for a Perkins Loan received one.
Perkins Loans do differ significantly from other forms of aid. For instance:
- Perkins Loans have different repayment options and loan forgiveness opportunities than Direct Loans.
- Borrowers make payments on Perkins Loans directly to their college, rather than a federal loan servicer.
Why is the Federal Perkins Loan program ending?
The Perkins Loan program was scheduled to end September 30, 2017. However, there was bipartisan support to extend the program through 2019.
Democratic Senator Tammy Baldwin and Republican Senator Rob Portman introduced the bill to keep the program in place. The Senators attempted to pass the bill via a faster process that required unanimous consent.
However, Republican Senator Lamar Alexander objected, killing the bill.
“It is time for our country, through legislation by this Congress and attempted to pass it through an expedited process requiring unanimous consent, to move on to a simplified federal student aid program, that has only one federal loan for students, one federal grant for students and one work-study program for students,” said Alexander on the Senate floor.
Alexander and other members of the Senate stated that the Perkins Loan program added to an already overly complex federal loan system.
What happens now?
The expiration of the Federal Perkins Loan program might sound dire. However, it doesn’t necessarily mean that the program is gone for good.
Even though Alexander objected to the bill, he said he and Baldwin would work together to come up a long-term solution to make college more affordable.
It is likely that politicians on both sides of the aisle will work to introduce another bill that would reinstate and extend the program. But, they have not yet established a timeline. It could be weeks or even months before they introduce a new bill.
Alternatives to a Federal Perkins Loan
If you are a current student and rely on Federal Perkins Loans to cover your education costs, you don’t need to panic. Senator Alexander said that all students who have a Perkins Loan would keep it for the rest of the school year.
If you’re a new student or don’t already have a Perkins Loan, make sure you submit your Free Application for Federal Student Aid to access other federal grants and federal student loan options.
Finally, if you exhaust all federal student aid options and the Perkins Loan program is still unavailable, you can take out a small private student loan. Although private student loans tend to have higher interest rates, they can give you the money you need to stay in school. Keep in mind, private student loans do not have the same benefits as federal student loans.
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