Following is the Education and Labor Committee’s explanation of its actions on the Perkins Loan program in its version of the Higher Education Act reauthorization bill, H.R. 4137. The final paragraph refers to mandatory assignment of defaulted loans to the Department.

“Part E--Perkins loans

The purpose of the Perkins loan program is to lend low-cost funds to borrowers with demonstrated financial need. Perkins loans make a significant difference for low-income borrowers who do not otherwise receive enough funds to pay for college. The Committee believes that, given this purpose and the need the Perkins loan program will be an essential of higher education financing for the foreseeable future.

Throughout the history of the Perkins Loan program, $7.9 billion in federal contributions has been leveraged to award over $24 billion in loans to financially needy students through almost 22 million aid awards, making it one of the most effective public-private partnerships in the federal government. Perkins loans offer financially needy students a long-term, fixed 5 percent interest rate loan. Without Perkins loans, the over 700,000 borrowers would be forced to borrow from high-cost alternative sources, such as private education loans.

H.R. 4137 reauthorizes the Perkins loan program and increases the annual maximum loan limits from $4,000 to $5,500 for undergraduates and from $6,000 to $8,000 for graduate or professional students. Additionally, the aggregate loan limits are increased from $20,000 to $27,500 for undergraduates and from $40,000 to $60,000 for graduate and professional students. H.R. 4137 emphasizes that collections of assigned loans should be returned to the revolving fund of the campus that assigned the loan, after deducting the Department's collection costs. The bill harmonizes certain requirements under the Perkins loan program with those of the FFEL and DL programs. In particular, Perkins borrowers would no longer be required to request forbearance in writing. In addition, in order to rehabilitate a defaulted loan, borrowers would be required to make nine consecutive monthly payments. H.R. 4137 also provides improved disclosure in the consolidation process regarding loss of Perkins benefits and allows for expanded cancellation opportunities for full-time firefighters, full-time faculty at tribal colleges, librarians, and speech-language pathologists.

The Committee notes that the Secretary lacks the authority to require assignment of defaulted Perkins loans and it is the intent of the Committee that any funds collected from defaulted Perkins loans, including loans that have been assigned to the Department of Education for additional collection activities, be returned to the program's revolving fund and available for new loans.

Back to News List | Back to Archives List