Loan program benefitting 4,000 students faces cuts

The future of the Federal Perkins Loan program will be uncertain until next week. The University fund will likely be able to help students despite the threat.

The higher education lobby will be holding its breath until Monday when President Clinton sends his proposed budget to Congress.

Included in this budget will be the allocation for the Federal Perkins Loan program, which some people suspect may be significantly reduced this year.

The Federal Perkins Loan program, which was begun in 1958 by the National Education Act, is the oldest federally supported student aid program in the country and focuses on assisting students from low-income families, according to the Federal Perkins Loan program fact sheet.

At the University, about 4,000 students benefit from the program each year, said Anna Griswold, assistant vice provost for financial aid. Undergraduate students can receive $500 a semester and graduate students can receive $750 a semester from the program at the University, according to the Office of Student Aid World Wide Web site.

The loan is subsidized through an annual federal contribution, one-third of which is matched by each university receiving the funds, said Ellin Nolan, consultant to the Coalition of Higher Education Assistance Organization, which supports the Federal Perkins Loan program. The contribution is added to a revolving fund at each university that is scheduled to receive them, she said. As students pay back the loans, the money goes into the revolving fund to use for future loans, Nolan added.

Fortunately, the University does not rely on the contribution alone because the revolving fund, which is sustained by students paying back the loan and the 5 percent interest rate, accounts for 90 percent of the program, said Ralph Hosterman, director of student loans and scholarships for the University.

Initially, people involved with higher education were concerned that the Clinton administration would completely eliminate the annual federal contribution, Griswold said.

"It appeared that the program was not going to be (federally) funded," she said.

Due to massive response from people within higher education, the federal contribution will not be eliminated, but it may by reduced, Griswold said.

"What we don't know is whether the administration is going to fund it at a comparable level (to previous years)," she said.

If the contribution had been eliminated, 600 students would be affected because of the existing revolving fund, Griswold said.

Nolan estimates the federal contribution will be reduced by one-half this year -- from about $158 million last year to about $75 million this year, although she said no one will know for sure until the budget is released Monday.

This would not be the first time the program would be cut significantly, said Hosterman. During former President Ronald Reagan's administration, the federal contribution to the University was reduced by more than 90 percent one year, he said.

"That (elimination) gets proposed every year," he said. "It's always been a political program."

Representatives from the White House Office of Public Liaison, which is the office that is handling the comments and concerns about the loan, did not want to comment on the status and funding of the program while the decision is still being made.