WASHINGTON, DC – U.S. Senator Jack Reed is calling on Senate Republicans to reconsider their blockade of a vital federal student loan program that is utilized by more than 9,000 students in Rhode Island to help them afford their college education.  The popular Perkins Federal Loan Program, which expired on October 1, 2015 after Senate Republicans blocked legislation to extend it, is the nation’s oldest federal loan program and is a critical financial aid tool that helps low-income students finance their education.

Created in 1958, Perkins provides a low-interest rate of 5% to help undergraduate, graduate, or professional students with exceptional financial need afford their education.  No interest accrues until the student enters repayment, which starts after a nine-month grace period, giving the recent graduate time to get on his or her feet.  The Perkins Loan Program also encourages public service, offering generous loan forgiveness for many public sector careers, including for school librarians, something that Reed has long-championed.

There are approximately 1,500 colleges that participate in the program, including nine schools in Rhode Island that currently offer Perkins loans.  For the 2013-14 school year, the program lent over $1.2 billion to 539,000 students – including over $18 million to more than 9,000 Rhode Island students.  The U.S. House of Representatives unanimously approved an extension of the Perkins Program at the end of September, but it was blocked in the Senate on Wednesday.

“Perkins is a cost-effective program that has helped thousands of deserving students in Rhode Island finance their education.  Without this assistance, students and families will face a gap in their ability to pay for college, and could be forced into risky, higher-cost private loans.  Instead of discontinuing Perkins and making it more difficult for hardworking students to afford college, Republicans should work with Democrats to address college affordability and accessibility,” said Reed. 

A compelling feature of the Perkins Loan Program is that participating institutions must contribute their own resources – one dollar for every two federal dollars.  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.  Many institutions, including colleges and universities in Rhode Island, have invested more than their legal obligation.  As students repay their loans, institutions are able to make new loans.  In other words, participating colleges and universities have a real stake in students being able to repay their loans, something that is missing from our other federal student loan programs, and something that Reed has argued should be more commonplace.

Now that the program has expired, participating colleges have 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.  The average Perkins loan is approximately $2,172, according to the U.S. Department of Education.

Earlier this year, Reed introduced the Protect Student Borrowers Act of 2015 (S.1102), which seeks to make institutions of higher education more accountable for student indebtedness by requiring institutions to assume some of the financial risk of student loan default based on the percentage of their graduates and former students who default on their loans.  He has also co-authored the Bank on Students Emergency Loan Refinancing Act, legislation that would allow those with outstanding student loan debt to refinance at the significantly lower interest rates that new borrowers receive.

Senator Reed said he will continue working to renew the Perkins Program this fall as part of the pending reauthorization of the Higher Education Act, but he noted the Republican blockade of this extension means Congress will not help the students and families looking for loans while the program has lapsed.