The fight to save a federal loan program for the neediest college students failed Wednesday as the Senate blocked legislation to extend the Federal Perkins Loan Program.
A bipartisan coalition in Congress had rallied around the program, with the House unanimously voting in favor of a reauthorization bill introduced by Reps. Mike Bishop (R-Mich.) and Mark Pocan (D-Wis.) earlier this week. But all it took was one dissenting voice to effectively end the campaign.
Sen. Lamar Alexander (R-Tenn.), chair of the Senate Health, Education, Labor and Pensions Committee, objected to the extension of Perkins, a program he has long sought to eliminate in favor of consolidating all of the federal loan programs into one unsubsidized loan.
“Our goal is to simplify the system, make it easier for students to apply for grants and loans…and the Perkins loan is not as effective a loan in meeting those goals as the other loans that we have,” Alexander said on the Senate floor.
Sen. Tammy Baldwin (D-Wis.), who put forth a resolution last week supporting the continuation of Perkins, said she was “very disappointed” in Alexander’s decision.
“While I understand and frankly I share his desire to have a broader conversation about federal student aid…I just don’t think it is right or fair to end this program with nothing to replace it, to the detriment of thousands of students in need,” she said, on the Senate floor.
With the reauthorization bill dying in the Senate, colleges lost the authority to make new federal Perkins loans. Students currently enrolled in college who received a Perkins loan before June 30 will be still be able to take out another for up to five years..
About 540,000 students received Perkins loans, averaging about $2,172, for the 2013-14 academic year, according the U.S. Department of Education.
Perkins was created in 1958 to provide low-interest loans to needy students through a cost-sharing agreement between the federal government and colleges. Congress has not contributed money to the program for about a decade. Instead, the 1,500 schools that offer Perkins loans rely on their own contributions and repayment from prior recipients to fund the loans.
The loans carry a 5 percent interest rate and are subsidized, meaning the government pays the interest while the student is in school. But with interest rates on federal Stafford loans below 5 percent for the last few years, the rate on Perkins loans is not as favorable as it used to be.
The subsidy has been a point of contention for Alexander and other Republicans. During Wednesday’s vote, he pointed out that it will cost $5 billion over 10 years, money that could be better spent paying for Pell Grants for needy college students.
Lawmakers would have had a chance to revamp Perkins this fall as part of the reauthorization of the Higher Education Act. A Senate aide said the Democrats will likely bring the program back to the table during that process, but there are no concrete plans just yet.
“For many students, Perkins loans have been a critical tool, providing a low-cost, flexible option to help pay for college,” said Sen. Patty Murray (D-Wash.), the ranking member on the HELP committee, in a statement. “It is unfortunate that new students could face uncertainty this year by letting this program lapse.”
Perkins can be a critical lifeline for students who hit the borrowing limit on federal Stafford loans. Without Perkins, they would have to take out a private student loan, which do not offer the same consumer protections or benefits as federal loans.
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