NASFAA's latest quick scan survey shows financial aid offices want improvements to Perkins Loan Program, but not the changes proposed by Obama and Democrats in Congress

Washington, DC - August 19, 2009 - Nearly 80 percent of National Association of Student Financial Aid Administrators (NASFAA) member schools would prefer expanding the current Perkins Loan program rather than replacing it with the Direct Perkins Loan program as proposed by the Obama administration and House Democrats, according to a recent survey of more than 2,600 NASFAA member schools. More than half (57 percent) of survey respondents said that new requirements being proposed could prevent their institution from participating in the updated Perkins program.

Four out of five (80 percent) financial aid administrators said they would prefer increasing unsubsidized Stafford Loan limits and 83 percent said they would prefer to lower the interest rate on unsubsidized Stafford Loans rather than make the changes in reconciliation legislation (H.R. 3221) recently approved by the House education committee. Schools that currently participate in the Perkins Loan program are most opposed to the changes proposed by Congress (only 15 percent favored the new program), while non-Perkins schools tended to be split (45 percent of non-Perkins schools preferred the current program).

NASFAA members said that provisions in the House bill would eliminate Perkins Loan borrower benefits, prevent institutions from participating by requiring schools to match federal funds, further complicate the already complicated student loan program, and be an ineffective way to accomplish the Obama administration's goal of reducing dependence on more expensive "private" or "alternative" education loans.

"House education committee leaders and the Obama administration should be commended for their efforts to reduce students' dependence on private loans, which are difficult to qualify for and usually more expensive," said Joan Crissman, NASFAA's interim President and CEO. "However, this survey raises some serious questions about how effective the current proposal to overhaul the Perkins program will be. I encourage lawmakers and the administration to use the expertise of financial aid administrators to modify the proposal as it makes its way through Congress, to ensure that the Perkins program is improved through this process."

College financial aid administrators that responded to the survey expressed concerns about:

• Loan Benefits
  • 55 percent were "opposed" or "strongly opposed" to the proposal to eliminate the in-school interest subsidy currently offered to Perkins Loan borrowers -- 23 percent were in favor of eliminating the subsidy and 21 percent were neutral
  • Graduate schools were especially critical of the proposal to eliminate the in-school interest subsidy because it is one of the few sources of need-based, subsidized funds for their graduate students

• Matching Funds
  • 73 percent "strongly opposed," and 12 percent "opposed" the proposal to require matching funds. Only 2 percent "favored" or "strongly favored" the matching requirement
  • 57 percent said that the matching funds requirement would "probably" or "definitely" prohibit their institution from participating in the Perkins program and 22 percent were "unsure" if their school would be able to participate -- 21 percent said the match would "probably" (19 percent) or "definitely" (2 percent) not prohibit the school from participating
  • Among non-Perkins schools -- schools Congress and the Obama administration hope to bring into the new program -- 78 percent said that a matching funds requirement would "probably" (33 percent) or "definitely" (45 percent) keep them from participating
  • Many schools responded that any matching program would need to offer a waiver for schools that serve high numbers of low-income students

• Borrower Benefits
  • When asked which three borrower benefits should be provided through the matching fund requirement, 63 percent selected reduced interest rates, 61 percent selected loan forgiveness, and 60 percent selected interest subsidy during deferment
  • The least favorite borrower benefit options were extended payment periods (26 percent), reduced payment amounts (23 percent) and extended grace periods (17 percent)

• Perkins Allocation
  • 48 percent said they are "opposed" or "strongly opposed" to the provision in the House Bill to allocate funds based on a formula based on a combination of needy students at the institution, the institution's ability to keep tuition low, and the percentage of Pell Grant recipients that graduate from the institution compared to other institutions -- 16 percent were "in favor" or "strongly in favor of" the allocation proposal and 36 percent were undecided
  • However, 76 percent said they support allocating Perkins Loan funds to institutions based on the number of needy students at the institution

Results from the survey are available online in PDF Format.

Media Coverage

Perkins Loan Changes Trouble Many Financial Aid Officers Inside Higher Ed

Most Financial-Aid Administrators Disagree With Proposed Perkins Loan Changes The Chronicle of Higher Education

Posted 08/20/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.