Bush budget drops loans

Helena Oh

President Bush proposed Monday to increase funding for federal grants by eliminating the Perkins Loan program. But the change may not be a great loss for Northwestern students.

The president plans to allot more money for Pell Grants by getting rid of Perkins Loans, which are distributed to more middle-income students than Pell Grants.

As NU is not entirely dependent on federal funding for financial aid, this cut may only affect a few students, said Rebecca Dixon, associate provost for university enrollment.

This academic year about 770 NU students shared $4 million in Pell Grants and federal supplemental educational opportunity grants. Dixon said NU annually has been awarding between $7 to $10 million in Perkins Loans to varying numbers of students for the past several years.

The Perkins Loan is a fixed low-interest, 5 percent loan, financed through federal contributions, university funding and repaid Perkins loans. The loans are awarded to middle- and low-income families, while Pell Grants tend to target only low-income households.

Pell Grants can be applied to any university, unlike Perkins Loans.

According to Bush’s proposal, cutting Perkins Loans would shrink the Pell Grant program’s $4.3 billion deficit and increase the maximum grant award from $4,050 to $4,550 over the next five years.

The president said that only 3 percent of students take out Perkins Loans. The number of institutions participating in the program has declined from 3,338 to 1,796 in the past 20 years. Pell Grants would be more effective for low-income students, according to Bush.

“The administration believes the federal share of funds held by this small group of institutions would better serve students if invested in Pell Grants, which serve all students regardless of institution,” the budget proposal reported.

If Congress passes the proposal, the federal government will recall its past allotments to participating universities.

Opponents of Bush’s plan said this is not feasible because it would be impossible to distinguish between the federal and university money that is used to fund Perkins Loans, said Stephanie Giesecke, director for budget and appropriations at the National Association of Independent Colleges and Universities.

“Institutions may have been in the program for 20 or 40 years,” Giesecke said. “How will they determine what the federal share is?”

Whether the proposal passes, elimination of Perkins Loans would not be detrimental to NU. Of the estimated $10 million available each year in the NU loan pool, only about $200,000 is federal money, Dixon said.

Since NU has a large revolving fund — funds from loans repaid by alumni — the university did not receive any federal contributions last year, she added.

NU funds make up the bulk of the grant pool because the university has to account for rises in tuition costs to fully meet financial need, Dixon said.

“Pell Grants are not going up that much,” Dixon said. “But Northwestern grants will go up by (future) increases in tuition.”

Nikki Drevich, a Weinberg sophomore, said if she does not receive Perkins Loans next year she will have to take out non-subsidized loans.

“We’d just end up with a culture of students who approach the gateway of higher education but end up with higher loans and no outlet to pay them off,” she said.

Reach Helena Oh at [email protected]