A r c h i v e d  I n f o r m a t i o n

Chapter 504

I. Program Profile

Purpose: To help financially needy undergraduate and graduate students meet the costs of education by providing low-interest, long-term loans through postsecondary education institutions.

Funding History

II. Program Information and Analysis

Performance Indicators

1/ Income categories are defined by income quartiles: low-income students fall in the lowest quartile of the income distribution, high-income students fall in the top quartile, and middle-income students fall in the middle two quartiles of the income distribution.

Percentage than in the high-or middle-income categories. Further, while the percentage of middle-income and high-income students receiving Perkins Loans remained steady between 1987 and 1990, the percentage of low-income recipients increased over the period. Among independent students, the picture is slightly different. As shown in the bottom panel, a higher percentage of low-income independent students received Perkins Loans in 1990 than did middle-and higher-income students. However, the percentage of low-and middle-income students receiving Perkins Loans fell between 1987 and 1990, while it rose significantly among high-income independent students.

Population Targeting and Services

The Federal Perkins Loan Program, with the Federal Supplemental Educational Opportunity Grant Program and the Federal Work-Study Program are collectively referred to as "Campus-Based Programs" because the institution determines which eligible students receive awards and how much they receive.

Participation: In the 1992-93 award year, the most recent year for which student information is available, 668,771 students received Federal Perkins Loans which averaged $1,333. The total amount lent was $868 million--an amount over five times greater than the appropriation. The Federal Perkins Loan funds go into a revolving fund. Loan repayments (and interest) are used to make new loans. In 1992-93, the amount of Federal Perkins loans received by students increased over the previous year when 654,214 students received Federal Perkins loans averaging $1,326 per loan.

Distribution by Sector: Institutional participation in the program has decreased slightly: In 1992-93, 2,565 institutions received program funds, while 2,826 participated in 1991-92. Of the 2,565 institutions receiving funds, 808 were public, 1,105 were private non-profit and 652 were proprietary (private for-profit) institutions (III.1).

Table 2 displays the distribution of Federal Perkins Loan funding by type of institution since 1983-84, when these data were first collected.

• The distribution of program funds across different sectors of postsecondary education has remained fairly stable over time.

• Public and private nonprofit and proprietary schools received 49.7, 44.1, and 5.6 percent of program funds, respectively, for 1992-93.

Source: III.1.

Distribution by Dependency Status and Educational Level: Table 3 shows the distribution of Federal Perkins Loans by students' dependency status and level of education. In 1992-93, dependent and independent undergraduate students and graduate students comprised 57.5, 29.4, and 13.1 percent, respectively, of all Federal Perkins Loans during that year. The percentage of Federal Perkins Loans received by graduate students has decreased since 1988-89.

2\ Numbers may not add to 100.0 due to rounding.

Source: III.l.

Distribution by Income: Tables 4 and 5 show the percentage distribution of Federal Perkins Loans in 1989-90 by the dependency status of the student and level of family income:

• Over 50 percent of dependent Perkins Loan recipients have family incomes of at least $30,000.

• Independent undergraduates and graduate students account for 29.4 percent and 13.1 percent of all Federal Perkins Loan recipients, respectively.

• Average awards do not vary much by income level. Graduate students, however, have a much higher average loan amount than undergraduate students, probably because of their higher costs and their independent status.

Source III.1.

Source: III.1

Program Administration

To receive a Federal Perkins Loan, students must meet certain categorical eligibility criteria and demonstrate financial need (the cost of their attendance must exceed their expected family contribution, Pell Grant, and other financial aid received). Institutions determine the distribution of loans among eligible applicants and must give priority to those with exceptional financial need.

Beginning with the 1993-94 award year, the maximum annual loan limit is $3,000 for an undergraduate and $5,000 for a graduate or professional student, with aggregate limits of $15,000 and $30,000 respectively. These represent an increase over the prior aggregate limits of $9,000 for undergraduate students and $18,000 for undergraduate and graduate students combined. For borrowers attending an institution participating in the Expanding Lending Option (institutions with default rates less than 7.5 percent and which match the Federal Capital Contribution dollar for dollar), the maximum annual loan limit is $4,000 for an undergraduate and $6,000 for a graduate or professional student with aggregate limits of $20,000 and $40,000, respectively.

Borrowers do not pay any interest while in school and during the grace period, but pay a 5 percent annual rate of interest while the loan is in repayment.

Loans can be canceled (forgiven) for statutory reasons such as loans to borrowers serving in the military or teaching low-income or handicapped children.

Source: III.3.

Outcomes

The Federal Perkins program is set up as a revolving fund: borrowers' payments replenish the school's loan funds, making capital available for loans to other students. The GAO found that 87 percent of participating institutions had operating expenses and losses, including loan cancellations (forgiveness), that exceeded their Perkins funds' income (III.3.). GAO found that, through June 1989, cumulative operating costs (including cancellations and defaults) exceeded income by about $1.05 billion. Federal and school capital contributions have been used, in part, to make up for operating losses as well as to increase funds available for loans.

Analyses from the National Postsecondary Student Aid Study, by the Department's Planning and Evaluation Service, presented in Table 7, found that:

• 4.3 percent of all postsecondary students received Federal Perkins Loans and 7.4 percent of full-time students did so. The percent of student participation in the program varies by income and institution type. Participation is highest, almost 22 percent, among dependent students with income between $10,000 and $30,000 attending private institutions. Almost 10 percent of all students attending private institutions received Federal Perkins Loans. Less than 1 percent of students enrolled in 2-year public institutions received Federal Perkins Loans.

• A larger percentage of full-time graduate students (9.9 percent) received Federal Perkins loans than the percentage of full-time undergraduate students (7.2 percent).

• Less than 1 percent of part-time students received Federal Perkins Loans.

3/A percentage of participation is for each grouping of students described by the intersecting row and column descriptors (e.g., 3.4% of graduate students attending a 4-year public institution).

4/Undergraduates only

Source: III.2

The institutional default rate is calculated by dividing the principal amount outstanding on loans in default by the principal amount of all loans that have entered repayment status. This rate excludes those loans which were assigned to the Department of Education. Loans which have not yet entered into repayment status are those in student status and first grace period. Default rate by institutional type is shown in Table 8.

Source: III.1.

Beginning in award year 1992-93, the Federal Perkins default rate will be calculated for cohorts instead of cumulatively.

Management Improvement Strategies

III. Sources of Information

1. Fiscal Operations Report 1992-93, unpublished tables from Campus-Based Programs Branch, Analysis Section, Office of Student Financial Assistance, U.S. Department of Education.

2. National Postsecondary Student Aid Study. (Washington, DC: U.S. Department of Education, National Center for Education Statistics, 1990).

3. Perkins Student Loans: Options That Could make the Program More Financially Independent (Washington, DC: U.S. General Accounting Office, December 1991).

IV. Planned Studies

V. Contacts for Further Information

Program Policy:

Susan Morgan, (202) 708-8242

Program Analysis:

Blanca Rosa Rodriquez (202) 708-8963

Program Studies:

Steve Zwillinger, (202) 401-0182

[Federal Supplemental Educational Opportunity Grant Program]

[Federal Work-Study Program]