Seriously, What is up with Perkins for 2015-2016?

Seriously, What Is Up with Perkins for 2015-16?

By NASFAA Policy & Federal Relations Staff

Confusion about the future of the Perkins Loan Program is at an all-time high. And for good reason! Answers from Congressional offices and the U.S. Department of Education range from noncommittal to downright conflicting. Besides advocating on behalf of financial aid administrators, part of NASFAA’s job is to help predict possible programmatic outcomes. Here’s what we know and don’t know about the continuation of Perkins.

Q1: Wasn’t Perkins supposed to expire this year? Yet the program persists… what gives? 

A: The Perkins Loan Program was authorized through September 30, 2014 under 461(b) of the Higher Education Act (HEA), just like all other student aid programs. Effective October 1, 2014, all student aid programs received an automatic one-year extension through the General Education Provisions Act. In February 2011, ED specifically stated that according to its interpretation, the Perkins Loan Program would be authorized through the 2014-15 year along with all other student aid programs.

Q2: So if Congress, as it often does, provides another extension for all of the student aid programs next year, wouldn’t Perkins simply continue?

A: Yes, if Congress extends authorization for all of the student aid programs, Perkins would automatically be extended as well. Congress would need to expressly hold Perkins out of a reauthorization extension or expressly end the program.

Q3: We know that in past years Congress simply extended the HEA and federal student aid programs year after year until they finally passed a full reauthorization bill. Assuming Congress doesn’t pass a full reauthorization next year, why wouldn’t Congress simply extend the Perkins program, along with the other programs, as they’ve done so many times before? 

A: Herein lies the crux of the issue: Section 466(b) of the HEA contains language, now outdated, that requires schools to return Federal funds from the Perkins Loan Program to the government after Oct. 1, 2012.

The outstanding budgetary question is whether the Congressional Budget Office (CBO) – the legislative agency that provides all budget estimates to Congress – is expecting and estimating federal funds to return to Treasury based on those dates. If so, continuing the program would create a “cost” in the program that Congress would need to address. We have received conflicting answers from Congressional offices on the validity of this cost.

Q4: If the Perkins program hasn’t received any funding – from federal contributions or even reimbursements for cancellations – for several years, how can there be a cost to the program? 

A: Imagine that when you’re creating your own annual budget, you know you’re going to be getting a $2,000 inheritance check from your late grandmother’s estate. But unexpectedly, that $2,000 inheritance never materializes because of unplanned estate expenses. In effect, that unexpected loss of that inheritance results in a $2,000 cost because you had built it into your expected income for the year.

Likewise, if CBO expects that a certain amount of the federal share of Perkins money is supposed to come back to federal coffers – even if that estimate was based on outdated legislative language – that creates a “cost” or loss of revenue for the federal government.

Q5: But this is maddening! Even if there is a projected cost, there still isn’t any real outlay in funds from the federal government. How could this cost issue end the Perkins Loan Program? 

A: An unexpected Perkins Program cost creates a decision point for Congress. For example, if CBO determines there is an additional “cost” to continuing the program and Congress adheres to self-imposed “Pay-Go” rules, whereby any additional federal costs must be paid for by an equal amount of other spending cuts or revenues, then we find ourselves in the same situation we’ve faced countless times in the last five years, most infamously with the Pell Grant Program: making some sort of student aid changes to offset “costs.”

Q6: In simple terms, what are the different scenarios for Perkins in the 2015-16 year? 

A: Trying to predict all of the potential scenarios spread across so many different branches of government is nearly impossible, so we won’t attempt it here.

But the first question is whether CBO believes there is an actual cost to continuing the program. If there is no estimated cost to continuing the program, Congress could extend all of the student aid programs through an HEA extension, including Perkins.

If CBO determines there is a “cost” to continuing the program, Congress would need to determine how to deal with that cost. One of the possible outcomes could be the simple expiration or discontinuance of that program.

Q7: Which scenario is most likely? 

A: I don’t think we can say at this point, and while momentum continues to build around continuing the program, NASFAA does not believe the continuation of the Perkins Loan Program is guaranteed based on our conversations with Congressional offices.

Senate Republicans have already stated their intention to pursue a simplified student aid system that consists of one grant and one loan program, which does not include Perkins. The Senate Republican proposal may be a starting point, but it would gain standing if the Republicans end up in control of the Senate. While not as explicit, House Republicans have also stated their preference for a “simplified” student aid system.

President Obama has also proposed reforming the Perkins Loan Program as we know it today and replacing it with an unsubsidized Stafford loan add-on.

However, despite the existing opposition, Perkins continues to have strong supporters in Congress. Whether this program continues may come down to the amount of support schools, students, and advocates can muster. Based on NASFAA’s reauthorization proposals, and in a coalition consisting of schools, financial aid administrators, college presidents, and many others, we continue to press for the continuation of all campus-based programs, including Perkins.

Q8: When will we know the fate of the Perkins Loan Program? 

A: Trying to predict the timing of Congressional action in a normal year is difficult, but in an election year with a lame-duck Congress is nearly impossible. We continue to stress the urgency of this issue to Congress, letting them know that schools and students cannot wait for a resolution next summer and need a resolution before packaging season, which begins in just a few short months.

While we anxiously wait for this to be sorted out, and while our main focus continues to be on preserving the benefits of this program, we are pressing ED for details on what a phase-out of the Perkins Loan Program would actually look like so schools can attempt to make some reasonable decisions about how to package for next year. At the very least, NASFAA’s contention is that HEA Section 461(b)(2) would allow existing borrowers to continue to receive Perkins funds for another five years even if the program were to end. NASFAA – and others – have been pushing for confirmations and answers from ED by the FSA Conference.

NASFAA’s advocacy on this issue will remain ongoing and we will continue to report to schools information as it becomes available.

Information provided to CAASLAR by Karen Reddick – COHEAO Membership Chair

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