Perkins loans may be down for the count

Democratic and Republican lawmakers are criticizing President Bush’s proposed education budget, which calls for vast cuts in higher education spending and an end to the Perkins Loan program.

Education Secretary Margaret Spellings appeared before the U.S. House of Representative’s appropriations subcommittee Mar. 9 to discuss the president’s proposal for the 2007 fiscal year budget, which includes $3.1 billion in cuts to federal education spending – a 5.5 percent decrease.

“There is a lot of angst with the president proposing to eliminate the program,” Harrison Wadsworth, executive director of the Coalition of Higher Education Assistance Organization, told the online magazine Forbes.com.

Spellings said that the administration is seeking a way “to reduce the federal budget deficit in a time of war,” but many representatives said that increasing competition from countries like China and India should make education spending a priority.

Perkins loan money is currently a combination of government funds matched by contributions from participating universities and money repaid by prior loan holders.

If the Higher Education Act is not reauthorized before Mar. 31, when it is set to expire, money repaid to the program will go to the U.S. Treasury instead of new loan applicants, according to Forbes. About $6 billion could accumulate there over six years.

Perkins loans are favorable to its borrowers because of their low fixed-interest rate of 5 percent. Other loan programs carry rates ranging between 6.8 percent and 8.5 percent, Forbes said.

The elimination of the program, Wadsworth said, may “prevent some low-income student from being able to attend school.”

In alternative loan programs such as Stafford, “interest rates are high, the repayment provisions aren’t as lenient, and there aren’t any cancellation provisions,” Pamela Fowler, director of financial aid at University of Michigan, Ann Arbor, told Forbes.

In place of Perkins, President Bush emphasized Pell Grants, whose annual awards to low-income students range between $450 and $4050. The emphasis received criticism from Democrats who wanted to see the maximum payment raised, according to The Chronicle of Higher Education.

Some lawmakers said that the Bush administration’s budget also aims to eliminate the Upward Bound and Talent Search programs, which are designed to help students prepare for higher education. Both programs have been criticized by administration officials.

They are “among the best,” Rep. Michael K. Simpson, R-Idaho, said.

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