The 2009 NASFAA Conference in San Antonio, Texas provided conference attendees an opportunity to hear the latest news on the "revamped" Perkins Loan program. Department of Education (ED) presenters, Dan Madzelan and Sue O'Flaherty, gave an overview of program objectives for the "new" Direct Perkins Loan program and also answered questions from the audience.
The Direct Perkins Loan program is just one of President Obama's Fiscal Year 2010 Budget proposals for higher education. By restructuring the current Perkins Loan program, the Obama Administration hopes to redirect students away from high cost private loans by providing a low-cost loan alternative, serviced by ED and awarded by participating schools.
Highlights from this session revealed interesting aspects of the proposed program. Some of the more notable fundamentals of the new Direct Perkins Loan program include:
- An allocation formula for funding which is made available to participating schools. The allocation formula contains incentives for those schools, such as providing more need-based aid to students and maintaining reasonable student costs relative to other schools in their sector.
- An interest rate of five percent. Direct Perkins Loans would be need-based, unsubsidized loans which will not replace the expected family contribution (EFC).
- Availability to both undergraduate and graduate level students.
- A prescribed packaging procedure. ED is considering implementing a packaging policy for participating schools to follow, which organizes the sequence for awarding federal loans. Schools would be expected to award both subsidized and unsubsidized Stafford Loans first, and then Direct Perkins Loan.
- Close-outs of master promissory notes (MPNs) under the current Federal Perkins Loan program by 7/1/2010.
Questions and answers during this session:
Q. Will ED eliminate the Perkins report portion from the FISAP?
A. No.
Q. Is there an origination fee for the new Direct Perkins Loan program?
A. No.
Q. Is there an Administrative Cost Allowance?
A. No.
Q. If a school underutilizes funds for the current year, will this reduce the school's allocation for the following year?
A. This has not been determined as of yet.
Q. Is participation in the new Direct Perkins Loan program mandatory?
A. No. Currently, participation is not required However, all participating schools must be eligible to participate in the Federal Direct Loan program.
Handouts for this session may be downloaded from the NASFAA Conference Web site.
By Eunice Powell
Associate Director for Professional Assessment, Training, and Regulatory Assistance
Posted 08/18/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.
