Responding to Comments from Senator Alexander About the Federal Perkins Loan Program

October 14, 2015 · by mlivolsi · Uncategorized

October 14, 2015

A note from: Harrison Wadsworth (

We have seen a copy of a letter that is being sent by Senator Lamar Alexander’s office to people that have written in support of the extension of the Perkins Loan Program. The letter repeats some of the problematic statements the senator made on Sept. 30th when he blocked the Senate from considering the bill that had been passed by the house to extend the Perkins Loan Program for one year. We thought it would be a good idea to send you rebuttals of the comments Alexander is making in these letters. Please let us know if you have any questions or comments.

Also know that COHEAO continues to fight for Perkins, as do other higher education associations and our many allies in Congress. The fight is far from over.

Here is a copy of the letter sent to a constituent in Tennessee:

From: “Senator Lamar Alexander” <>
Date: October 13, 2015 at 1:01:27 PM CDT
Subject: Correspondence from Senator Alexander
October 13, 2015

Dear ,

Thanks very much for getting in touch with me and letting me know what’s on your mind regarding the cost of higher education and the Perkins loan program.

When we last reauthorized the Higher Education Act in 2008, Congress agreed on a schedule to sunset the Perkins loan program and both President George W. Bush and President Barack Obama have previously proposed eliminating the program. Perkins loans have a higher interest rate than other undergraduate loans and do not let students participate in Public Service Loan Forgiveness or income-based repayment programs. According to the Congressional Budget Office, reauthorizing the Perkins loan would cost about $5 billion over 10 years.

As the Chairman of the Senate Committee on Education, we have held eight hearings this year on reauthorizing the Higher Education Act. Many witnesses have testified before our committee and said that $5 billion dollars would be better spent paying for more Pell grants and simplifying repayment programs.

Students who currently have Perkins loans will continue to receive them. I am one of a bipartisan group of senators who has proposed that we replace the Perkins loan program with student loans that are simpler, have lower interest rates, and more generous repayment opportunities.

I’m grateful you took the time to let me know where you stand. I will continue to work towards making college more affordable, while ensuring we keep the choice and competition that has created the best higher education system in the world. I’ll be sure to keep your comments in mind as these issues are discussed and debated in Washington and in Tennessee.



Here is our rebuttal:

1. When Congress reauthorized Perkins in 2008 as part of the Higher Education Opportunity Act, there was no “agreement” to sunset the program in 2015. Congress simply decided not to directly address the conflict between the sunset section and the authorization section, and instead the House and Senate reauthorized the program for the same amount of time as other higher education programs – five years. That bill actually included numerous improvements to Perkins and banned the Department of Education from requiring assignment of loans (“mandatory assignment”). In fact the sunset section of the Higher Education Act was later declared “outmoded” by the Department. The sunset section says the schools should start returning funds in 2003! Instead, the 2008 HEA reauthorization bill includes the following statement:

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.”

2. The interest rate comments leave much out. All Stafford loans have an origination fee of 1.07 percent. Perkins loans charge no fees. Two thirds of undergraduate loans are unsubsidized Stafford loans, which accumulate interest during the in school and grace periods while Perkins loans charge no interest during the in school and the nine month grace periods. Thus the great majority of Stafford loans are NOT cheaper when you factor in fees and accumulated interest charges (compare using the Annual Percentage Rate or APR). For graduate students, only unsubsidized Stafford loans are available at a higher rate of 5.84 now. Also, all Stafford loans have variable rates. When the Federal Reserve raises interest rates – which seems likely before next academic year — they will be higher. Undergraduate Stafford loan interest rates are 4.29 percent for loans borrowed this academic year. Perkins rates are fixed in statute at 5 percent. Also, left out is a reference to PLUS loans which undergraduate parents and graduate students will now have to turn to for more funding. PLUS loans are far more expensive than Perkins – their current interest rate, which is also highly likely to go up next year, is 6.84 percent, and there is a 4.27 percent origination fee charged.

3. Perkins loans can easily be consolidated into a Direct Loan if borrowers wish to go to income based repayment for their Perkins balances. It’s a quick, on-line process.

4. Current students are not all getting their expected Perkins Loans this year. Thousands around the country have had their loans suddenly cancelled because the loans were not disbursed by September 30th. These cases are documented. Usually, the student was not at fault as technical problems at the Department of Education or other factors led to the lost loans. Also, if a current Perkins borrower changes majors or changes schools they lose access to any future loans. ED reports that 80 percent of students change majors at least once.

5. Campuses have “skin in the game” with Perkins loans, a lot of it, since at least one-third of Perkins Loan funds are institutional contributions.

6. Cutting off funds now to low income kids may simplify their aid, but it doesn’t help them. Simplify the FAFSA and the horrendously complicated maze of Direct Loan repayment plans, but don’t simplify away aid that is needed now.

7. The bill passed by the House and blocked by Senator Alexander from consideration by the Senate was fully paid for. The comments about the cost of extending the Perkins Loan Program are not about the legislation in question but about a theoretical proposal that has not even been introduced in Congress.

We hope this helps – feel free to distribute.

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