The reign of the Federal Perkins Loan Program is over. After 60 years of providing financial aid to low-income students, it came to an end when it expired on Sept. 30, 2017, and Congress decided to vote against having it renewed.
The Perkins Loan Program began in 1957 and was the oldest federal loan program in existence.
While there are still a wide variety of loans designed to help students with financial aid, the Perkins Loan offered specialized differences from other loan providers.
It had a lower interest rate of just five percent. While the Direct Unsubsidized Loan accrues interest while the student is still in school, the Perkins Loan only accumulates interest after they have graduated.
Additonally, it has a longer grace period of no repayment to the loan servicer. While most federal student loans normally have a six-month grace period, the Perkins loan had nine months.
The Perkins Loan also added up to $5,500 every school year for undergraduates and could amount up to $27,500 throughout their four years of college. For graduates and professional students, it amounts to $8,500 annually.
The program technically expired in 2014, but received a one-year extension until Oct. 1, 2015. Then in 2015, the program received another two-year extension called the General Education Provisions Act. Recipients hoped in those two years, Congress would reauthorize the Higher Education Act, address all types of federal student loans and notify people of the loan ending.
While many, from both the House and Senate, supported the idea of extending the Perkins for another two years, many were still against it.
Sen. Lamar Alexander, a Tennessee Republican who is chairman of the Senate education committee said that keeping the Perkins Loan only maintained an overly complex financial aid system.
The Perkins Loan also differs from other loans due to colleges and universities acting as the lender as well as the servicer. Whenever a student received the Perkins Loan, the institution provided money to fill in remaining gaps from existing loans.
While students were primarily impacted by the loan withdrawal, universities and colleges also felt its effect. The University of San Francisco wonders if the end of the loan will allow them to admit more low-income students than years prior.
With such a big loan ending, the only available options are now direct loans and private loans.
“Right now, most schools are giving students [financial aid] and it is not meeting the cost of education,” said Pam Fowler, the executive director of financial aid at the University of Michigan. “What happens is they start to work more, their grades suffer and they end up taking fewer credit hours per semester – which means they’re in school longer and borrowing more.”