The elimination of the federal Perkins Loan program highlights again the uncoordinated effort to stabilize college costs and expand access.
Perkins loans, used by more than 15,000 students in Washington last year, are designed to help the neediest students. It’s a comparatively small program, totaling $1.2 billion out of the $150 billion in loans and grants given out by the federal government last year.
The program had to be reauthorized by both houses of Congress by Thursday. The House did so on Tuesday, but the Senate did not act. Sen. Lamar Alexander, R-Tenn., successfully urged his colleagues to let the Perkins program lapse in a bid to simplify student financial aid programs.
Under the program, low-income students get low-interest loans. The government pays the interest while students are in school. Alexander says the cost amounts to $5 billion over 10 years, and that this money would be better used to expand Pell Grants, a direct financial aid program that requires no payback.
Problem is, the ongoing rewrite of the Higher Education Act contains no such stipulation. If it doesn’t occur, Congress will have “simplified” this vital loan program out of existence, with no upside for students who struggle to gain access to higher education.
True reformers want to temper college costs by placing the emphasis on value. Historically, institutions haven’t been required to demonstrate outcomes. The availability of financial aid has been seen by some colleges as a signal to boost tuition.
To combat this, reformers want more transparency from colleges and universities. The newly instituted College ScoreCard is a part of that strategy. This online tool provides information on the salaries of graduates and how much debt students incur. The loan default rate is also listed.
The hope is that education shoppers will become more selective, and institutions will become savvier about handing out financial aid. As a result, tax dollars would be spent more efficiently.
The irony of letting the Perkins program lapse is that it already has a “skin-in-the-game” component. One-third of the risk of such loans is borne by colleges and universities, a stake that exposes them to some of the risk of loan default.
Congress should be looking at programs that don’t hold institutions accountable. For instance, the loan default rates at for-profit colleges are high and the graduation rates are low. A study by the Brookings Papers on Economic Activity found that in 2011 “borrowers at these institutions and community colleges represented almost half of all federal loan borrowers leaving school and starting to repay their loans, but they accounted for 70 percent of defaults.”
The bang for the tax buck at these schools is a faint whisper. That’s where smart reforms would begin.
To respond to this editorial online, go to www.spokesman.com and click on Opinion under the Topics menu.
Subscribe to the Morning Review newsletter
Get the day’s top headlines delivered to your inbox every morning by subscribing to our newsletter.