"The Bush administration’s budget for 2006, due out on Monday, could mean the end of the Perkins loan program. In that budget, the president will ask Congress to recall the federal share of institutions’ revolving loan funds, according to a top Education Department official. The funds, which are made up of federal ‘capital contributions,’ institutional matches, and repaid Perkins loans, are used to make new loans to students from low-income and middle-income families.
The recalled money would be used to increase the maximum Pell Grant, to eliminate a $4.3-billion shortfall in the Pell Grant program, and to increase loan limits for students in their first two years of college, said Sally L. Stroup, the assistant secretary of postsecondary education.
Ms. Stroup said the department had taken aim at the Perkins program because of its limited reach — it serves only 3 percent of students and 800 institutions — and because of its ‘ineffective’ ratings in recent budget analyses.
‘For us to run a program that serves only a handful is not cost-effective,’ Ms. Stroup said. ‘This is one where we think we can invest the money better.’
Colleges made $1.263-billion in loans averaging $1,875 to 673,000 borrowers through the Perkins program in 2004. The recall of the federal share, which amounts to more than $7-billion, would be phased in over 10 years, Ms. Stroup said.
Defenders of the program said the Bush plan could mean serious trouble for the program. Under the Bush plan, ‘there would be no [federal] money to lend out,’ said Thomas E. Schmidt, associate director of the office of student finance at the University of Minnesota-Twin Cities, which awarded $6.4-million in Perkins loans to 3,300 students last year. ‘We would have nothing to give to our students.’"