President Bush's proposed 2006 budget calls for phasing out Perkins Loans for students.
Under the loan program, the federal government distributed funds to 800 colleges and universities until federal appropriations for the program were eliminated in the 2005 budget. In 2004, the participating colleges issued $1.3 billion in loans to 673,000 borrowers through the Perkins program.
These institutions match federal funds and administer the lending process for students.
The University is a major participant in the Perkins program, according to Henry Urick, assistant director of Student Financial Services. Approximately 3,200 UT students received Perkins loans this year - a collective value of $9.9 million.
"It's a good loan program," Urick said. "It offers an alternative for students who cannot meet the full costs of education through other avenues."
Urick also talked about the program's history, calling it the "grandson" of the National Defense Student Loan program, which was initiated in 1958 as a response to the Soviet Union's launching of the Sputnik satellite. The Perkins loan replaced the program in 1987.
"I think [the Perkins program] still serves a great need, and it would be a loss to students in higher education to lose it," Urick said.
If the proposed budget passes, colleges participating in the Perkins program will be required to return around $7 billion in federal funds over the next 10 years. Department of Education officials said the recalled funds will be used to pay for Bush's proposal to raise the maximum Pell Grant from $4,050 to $4,550.
"Only 1,800 schools participate in the Perkins Loan Program," a senior Department of Education official said in a conference call Monday. "The Pell program is a much broader program. The Perkins Loans are fixed at 5 percent. They are not as good of a deal as other loans available."
The elimination of the Perkins program is part of a larger effort by the Bush administration to reduce the federal budget deficit, and the president has proposed a budget that will have a net decrease of about $530 million in Department of Education spending.
"Right now we have to be aware of the broader picture," said Todd Jones, an associate deputy secretary at the department. "We are trying to strengthen our economy by reducing the deficit."
The program allows students entering certain high-need public service jobs such as teaching, law enforcement and nursing to cancel loan repayments. About 2 percent of the University's 14,727 total Perkins recipients have had their loans forgiven under this provision.
"The majority of cancellations are related to teachers," said Sally Stroup, assistant secretary for postsecondary education with the department. Bush will separately propose additional loan repayment cancellation plans for teachers, according to Stroup.
The Republican-controlled Congress will have to approve Bush's cuts in a lawmaking environment that has produced record deficits in the federal budget.
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