ED Clarifies Status of Perkins Loan Program

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February 23, 2011

The Department of Education, seeking to resolve a conflict between two sections of the Higher Education Act, as amended (HEA), has determined that the Federal Perkins Loan program is authorized to continue operating through September 30, 2014, with a possible one-year extension to 2015.

A Dear Colleague letter (GEN-11-02) published on February 17 explains that ED views Section 461(b) of the HEA, which authorizes appropriations for the Perkins Loan program in 2009 and the following five years, as governing the duration of the program. The letter labels Section 466(b) of the HEA, which states that institutions would have to return the federal share of their revolving funds to ED after October 1, 2012, as outdated.

Obama administration plans to expand and transform the Perkins Loan program were dropped from the final version of the Student Aid and Fiscal Responsibility Act passed in spring 2010. The President’s budget for FY2012 puts forth a similar proposal to redesign and grow the program from 1,700 to 2,700 participating institutions and providing additional funds to provide more than two million loans in 2012 (up from 500,000 annually now). The interest rate paid by borrowers would increase to 6.8 percent from the current 5 percentand the in-school interest subsidywould be eliminated. Program administration would be structured with responsibility for most functions moving to ED. Institutions would make decisions on the award of loan funds, but would no longer maintain revolving funds, and would not be responsible for collections. Perkins loans would be administered in the same way as Federal Direct loans.