Federal Perkins Loan Program

Federal Perkins Loan Program. It was a need-based financial aid program providing low-interest loans to undergraduate and graduate students with exceptional financial need. Administered by participating institutions with funding from the Department of Education and the schools themselves, it was one of the oldest federal student aid programs. The program ceased making new loans after September 30, 2017, following a decision by the Congress.

History

The program originated with the passage of the National Defense Education Act of 1958, signed into law by President Dwight D. Eisenhower, where it was initially known as the National Defense Student Loan Program. It was later renamed in honor of Carl D. Perkins, a longtime Congressman from Kentucky and chairman of the House Committee on Education and Labor, who was a staunch advocate for vocational and higher education. Throughout its history, the program was reauthorized and amended under various acts, including the Higher Education Act of 1965 and its subsequent renewals. For decades, it served as a critical resource for low-income students attending a wide range of institutions, from public universities to historically black colleges and work colleges.

Program details

Under the program's structure, the Department of Education provided capital contributions to participating colleges and universities, which were then required to contribute a matching share. The institution itself acted as the lender, using a revolving fund where repaid loans were recycled to finance new loans for future students. The loans carried a fixed 5% interest rate, which was significantly below market rates for private student loans. Borrowers were not charged any interest during periods of at least half-time enrollment, and they received a nine-month grace period after leaving school before repayment obligations began. Key administrative guidance for the program was issued by the Office of Federal Student Aid.

Eligibility and application

Eligibility was determined by the financial aid office at each participating school, based on the federal methodology used for the Free Application for Federal Student Aid (FAFSA). To qualify, a student had to demonstrate exceptional financial need, which was defined as the highest need among those eligible for federal aid. Applicants were required to be enrolled at least half-time in a degree or certificate program at an eligible institution. Priority was often given to students who were also recipients of the Federal Pell Grant. The determination of a student's loan amount was at the discretion of the school's financial aid administrator, within annual and aggregate limits set by law.

Repayment and cancellation

Repayment terms were set by the individual institution, though standard repayment periods were up to ten years. The program offered extensive cancellation provisions for borrowers entering specific public service professions. For example, full cancellation was available for teachers serving in low-income schools or in fields like special education, as well as for full-time AmeriCorps or Peace Corps volunteers. Other eligible professions for partial or full cancellation included military service in hostile areas, certain law enforcement officers, public defenders, nurses, and medical technicians. These generous discharge benefits were a hallmark and made it distinct from other federal loan programs like the William D. Ford Federal Direct Loan Program.

Program expiration and wind-down

Authorization for the program expired on September 30, 2017, as part of the Bipartisan Budget Act of 2015. No new loans have been disbursed since that date. Schools were required to return any unexpended federal capital contributions to the Treasury. Existing loans remain active, and borrowers continue to repay their institutions or the designated servicers handling the portfolios. The wind-down process has been managed by the Office of Federal Student Aid, with many schools transferring their loan portfolios to the Department of Education for centralized servicing. The program's end was a significant policy shift debated within the Congress and among higher education advocacy groups.

Category:Student financial aid in the United States Category:United States Department of Education Category:1958 establishments in the United States