Source: https://www.everycrsreport.com/files/20160229_RL31618_3302be2d8ff5dfe996a1ae1be948d336b2d7f496.html
Timestamp: 2020-02-18 21:29:12
Document Index: 211691182

Matched Legal Cases: ['§443', '§2753', '§311', '§501', '§316', '§317', '§323', '§326', '§415', '§489', '§1096']

February 29, 2016 (RL31618)
Award Procedures and Terms of Perkins Loans
Students Served and Average Aid Amounts
Figure 2. FSEOG: Number of Students Receiving Awards and Average Award Amounts
Figure 3. FWS: Number of Students Receiving Awards and Average Award Amounts
Figure 4. Perkins Loans: Number of Students Receiving Awards and Average Award Amounts
Table 3. Administrative Cost Allowances for the Campus-Based Programs
Table 4. Campus-Based Program Funding: Appropriations for FY2006-FY2016
Table 5. Perkins Loan Cohort Default Rates
Three Higher Education Act (HEA) student financial aid programs—the Federal Supplemental Educational Opportunity Grant (FSEOG) program, the Federal Work-Study (FWS) program, and the Federal Perkins Loan program—collectively are referred to as the campus-based programs. The campus-based programs were reauthorized under the Higher Education Opportunity Act (HEOA; P.L. 110-315), which amended and extended authorization for programs funded under the HEA. The campus-based programs' authorizations, along with many other provisions under the HEA, were set to expire at the end of FY2014 and were automatically extended through FY2015 under Section 422 of the General Education Provisions Act (GEPA). The FSEOG and FWS programs were then extended through FY2016 under the Consolidated Appropriations Act, 2016 (P.L. 114-113), and the Perkins Loan program was amended and its continued operation extended through FY2017 under the Federal Perkins Loan Program Extension Act of 2015 (P.L. 114-105).
Under the campus-based programs, federal funding is provided to institutions of higher education for the provision of need-based financial aid to students. Institutions participating in the programs are required to provide matching funds equal to approximately one-third of the federal funds they receive. The campus-based programs are unique among the need-based federal student aid programs in that the mix and amount of aid awarded to students are determined by each institution's financial aid administrator according to institution-specific award criteria (which must be consistent with federal program requirements), rather than according to nondiscretionary award criteria, such as those applicable for Pell Grants and Subsidized Stafford Loans.
Funding is provided to institutions separately for each program according to formulas that take into account both the allocation institutions received in past years (their base guarantee) and their proportionate share of eligible students' need that is in excess of their base guarantee (their fair share increase). From these funds, institutions' financial aid administrators award aid to eligible students who have financial need.
Three postsecondary student financial aid programs authorized under the Higher Education Act of 1965 (HEA) are collectively referred to as the campus-based programs—the Federal Supplemental Educational Opportunity Grant (FSEOG) program, the Federal Work-Study (FWS) program, and the Federal Perkins Loan program. The campus-based programs are unique among the need-based federal student aid programs in that federal funds are awarded to institutions of higher education (IHEs) according to formulas that take into account past institutional awards and the aggregate financial need of students attending the institutions. The mix and amount of aid students receive under the programs are determined by each institution's financial aid administrator according to institution-specific award criteria, rather than according to nondiscretionary award criteria, such as that applicable for Pell Grants and Subsidized Stafford Loans.1
The FSEOG and FWS programs were most recently amended and extended under the Higher Education Opportunity Act (HEOA; P.L. 110-315), which reauthorized the programs that are part of the HEA.2 Minor changes were made to these programs. The HEOA also amended and extended the Perkins Loan program, making several changes to it, including increases to loan limits and an expansion of loan cancellation benefits. The campus-based programs' authorizations, along with many other provisions under the HEA, expired at the end of FY2014. However, Section 422 of the General Education Provisions Act (GEPA)3 automatically extended the programs' authorizations through FY2015. The FSEOG and FWS programs were then extended through FY2016 under the Consolidated Appropriations Act, 2016 (P.L. 114-113), and the Perkins Loan program was amended and its continued operation extended through FY2017 under the Federal Perkins Loan Program Extension Act of 2015 (P.L. 114-105).4
After allocating institutions their adjusted base guarantee, any remaining FSEOG funds are allocated to institutions proportionately according to their eligible amount of need that is greater than their adjusted base guarantee. An institution's eligible amount of need, or fair share, is calculated by subtracting the sum of aid provided under the Pell Grant, Academic Competitiveness Grant (ACG), National Science and Mathematics Access to Retain Talent (SMART) Grant, and the Leveraging Educational Assistance Partnership (LEAP) program15 from the aggregate financial need of the institution's undergraduate students. Undergraduate student financial need is determined through a formula that takes into account the cost of attendance (COA) at the institution and the expected family contribution (EFC) of a representative sample of students.16 Institutions with a fair share amount of need that is greater than their FSEOG adjusted base guarantee are considered to have an excess eligible amount of need. These institutions receive an allocation greater than of their base guarantee, which is called their fair share increase. Institutions' total allotments are the sum of their adjusted base guarantee and their total fair share increase.17
Institutions are provided flexibility to carryover up to 10% of their allocation for use in a succeeding fiscal year to carry out the FSEOG program. They also may carry-back funds to make grants to students prior to the beginning of the fiscal year, but after the end of the prior academic year. The Secretary is authorized to reallocate any excess funds returned by institutions. An institution returning more than 10% of its allocation will have its next year's allocation reduced by the amount returned, unless the Secretary determines it would be contrary to the interest of the program. Finally, the Secretary is authorized to allocate up to 10% of funds appropriated in excess of $700 million for the programs under HEA Title IV, Part A,18 to institutions from which 50% or more of Pell Grant recipients either graduate or transfer to four-year institutions.
An institution's financial aid administrator is responsible for awarding FWS aid to eligible students. Unlike the FSEOG and Perkins Loan programs in which aid is required to be awarded first to students with exceptional financial need, FWS aid may be provided to any student demonstrating financial need. Awards typically are based on factors such as each student's financial need, the availability of FWS funds, and whether a student requests FWS employment and is willing to work.20 Students receive their award as compensation for the hours they have worked. Earnings from FWS employment are considered "excludable income" in determining a student's financial need for the subsequent year. Awards are based on a combination of factors such as a student's financial need, financial aid available from other sources, the wage rate, and how many hours per week the student can work. There is no maximum award amount.21
Determination by the Secretary that federal share in excess of 75% is necessary to further the purpose of the FWS program
Source: HEA, §§443, 444, 447, 448 (42 U.S.C. §§2753, 2754, 2756a, 2756b); and ED, 2015-2016 FSA Handbook, vol. 6—The Campus-Based Programs, pp. 6-17 through 6-18.
a. Applicable for schools designated as eligible schools under the Developing Hispanic Serving Institutions Program, the Strengthening Institutions Program, the Strengthening American Indian Tribally Controlled Colleges and Universities Program, the Strengthening Alaska Native and Native Hawaiian-Serving Institutions Program, the Strengthening Historically Black Colleges and Universities Program, and the Strengthening Historically Black Graduate Institution Programs.
The HEOA established an FWS Off-Campus Community Service Employment program with a separate authorization of appropriations. Under the program, the Secretary is authorized to make grants to IHEs otherwise participating in the FWS programs to supplement off-campus community service employment. Recipient institutions must use funds to recruit and compensate students and may use funds to compensate students for travel and training directly related to their community service employment. In awarding grants to institutions, the Secretary is required to give priority to institutions whose students would be employed in community service related to early childhood education and the preparation for emergencies and natural disasters.27
Institutions located in areas affected by a major disaster may continue to make FWS payments to students affected by the disaster. During the award year, the students must have earned FWS aid and, as a result of the disaster, became unable to fulfill their work-study obligation and were unable to be reassigned to another work-study job. Disaster-affected students may receive FWS compensation for no more than one academic year. Payments to disaster-affected students also must meet maximum federal matching requirements, unless waived by the Secretary.28
The Work Colleges program contains its own authorization of appropriations. Institutions also may transfer funds from their regular FWS program allocation and their Perkins Loan federal capital contributions allocation to the Work Colleges program. Authorized activities under the Work Colleges program include providing support to students participating in work-learning-service programs; promoting the work-learning-service experience in postsecondary education; carrying out traditional FWS and job location and development programs; developing, administering, and assessing comprehensive work-learning-service programs; coordinating and carrying out joint projects to promote work-learning-service; and carrying out comprehensive longitudinal studies of work-learning-service programs.30
Similar to the FSEOG program, FWS funds are allocated to IHEs according to statutorily prescribed procedures. Funds are allocated first to institutions based on previous years' allocations, with priority going to institutions that participated in the program in FY1999. These institutions are eligible to receive 100% of their FY1999 allocation as their base guarantee.31 Institutions that began participating after FY1999, but that are not first- or second-time participants, receive a base guarantee that is the greatest of 90% of the amount they received in their first year of participation, or $5,000. Institutions participating in the FWS program for their first or second year receive as their base guarantee, the greatest of $5,000, 90% of an amount proportional to that received by comparable institutions, or 90% of what the institution received in its first year of participation. However, if an institution began participating in FWS after FY1999 and received a larger allocation in its second year of participation than in its first, it is allocated 90% of the amount it received in its second year of participation. If sufficient funds are not appropriated, then institutions' awards are reduced proportionately, resulting in an amount called their adjusted base guarantee.
Institutions are provided flexibility to carryover up to 10% of their FWS funds for use in a succeeding fiscal year to carry out the FWS program. If an institution neither uses funds in the year for which they were granted nor carries them over to the next fiscal year, the Secretary may, in the next succeeding fiscal year, reallocate them to other institutions within the same state. Up to 10% of an institution's allocation may be granted by the Secretary for the purpose of making grants to students prior to the beginning of the fiscal year, but after the end of the prior academic year. The Secretary also is required to reallocate any excess funds returned by institutions to eligible institutions that in the previous fiscal year used at least 5% of their FWS allocation to compensate students employed in tutoring in reading or family literacy activities. Reallocated funds must be distributed to such institutions according to their excess eligible need. Institutions returning more than 10% of their allocation may, at the discretion of the Secretary, be subject to having their next year's allocation reduced by the amount returned.32
The Federal Perkins Loan program authorizes IHEs to capitalize revolving loan funds for the purpose of making low-interest loans to students with exceptional financial need. The Federal Perkins Loan program is authorized under the HEA at Title IV, Part E. It supersedes Title II—Loans to Students in Institutions of Higher Education—of the National Defense Education Act of 1958 (P.L. 85-864), which was incorporated into the HEA through the Education Amendments of 1972 (P.L. 92-318). Previously, these loans were known as National Defense Student Loans (Defense Loans) and National Direct Student Loans (NDSLs).
The authorization of appropriations for the Secretary to make new FCCs to institutional revolving loan funds and for IHEs to award new Perkins Loans to students expired on October 1, 2015. The Federal Perkins Loan Extension Act of 2015 (the Extension Act; P.L. 114-105) extended IHEs' ability to make new Perkins Loans to eligible students through September 30, 2017, but prohibited additional appropriations beyond FY2015 for the purpose of making new Perkins Loans. It also prohibited an automatic extension of the program under the General Education Provisions Act (GEPA). In addition, the Extension Act amended several Perkins Loan program provisions relating to student eligibility to receive new Perkins Loans and the distribution of Perkins Loan fund assets upon the program's conclusion.33 At the same time, the Extension Act retained many program provisions. Where relevant, changes made to the Perkins Loan program by the Extension Act are discussed below.
Institutions are required to establish written selection procedures for awarding Perkins Loans to eligible students and to keep them on file at the institution. Loans must be made reasonably available to all eligible students, to the extent that funds are available, and IHEs are required to give priority to students with exceptional financial need.
Undergraduate students (including those seeking an additional undergraduate degree, if they are otherwise eligible), and graduate and professional students are eligible to borrow from the institutions they attend under the Perkins Loan program. Students studying abroad in programs approved for academic credit by participating institutions also may receive Perkins Loans. Under the terms of the program, the maximum amount a student may borrow per academic year is $5,500 for undergraduate students and $8,000 for graduate and professional students. The maximum aggregate amount that a student may borrow is limited to $27,500 in unpaid principal for undergraduate students who have completed two years of study, but who have not completed their baccalaureate degree; $60,000 for graduate and professional students; and $11,000 for any other students. Both the annual and aggregate loan limits may be increased by up to 20% for students studying abroad in approved programs. If the amount of an institution's FCC is based in part on independent students or those studying less than full-time, then these students must be provided with a reasonable portion of the Perkins Loans made by the institution.
The Extension Act neither amended nor repealed the basic Perkins Loan student eligibility criteria described above. However, it did limit IHEs' abilities to award new Perkins Loans to eligible students. Specifically, IHEs may award new Perkins Loans through the following time periods and in the following manner:
1. Through September 30, 2017: IHEs may award new Perkins Loans to new undergraduate Perkins Loan borrowers who, on the date of disbursement of the new Perkins Loan, have no outstanding balance of principal or interest on a Perkins Loan from the institution. IHEs must first award Direct Subsidized Loans and Direct Unsubsidized Loans to such students before awarding a new Perkins Loan.34
3. Through September 30, 2016: IHEs may award new Perkins Loans to certain graduate borrowers who received a Perkins Loan prior to October 1, 2015, from the institution. Only the IHE that has most recently made a Perkins Loan to a graduate student prior to October 1, 2015, may make a new Perkins Loan to the student to attend that institution to complete his or her academic program.
Interest on Perkins Loans is fixed at a rate of 5% per year.35 However, no interest accrues prior to a student beginning repayment, nor while repayment is suspended during deferment (described below). Borrowers must begin repaying Perkins Loans nine months after they no longer are enrolled at least half-time and must complete repayment within 10 years after beginning repayment. Institutions may establish incentive repayment programs in which they may reduce the interest rate by up to one percentage point in instances where a student makes 48 consecutive payments. In addition, if a student repays a Perkins Loan in full prior to the end of the repayment period, an institution may discount the loan balance owed by up to 5% at the time the repayment is made. However, institutions may not use either federal or institutional funds from the Perkins revolving loan fund to absorb the costs of incentive repayment programs and must reimburse the fund on a quarterly basis for any lost income.
In general, deferment is a period during which a borrower is not required to make payments on the loan balance and during which interest does not accrue. A Perkins Loan borrower is granted a deferment if the borrower:
is enrolled at least half-time at an eligible institution;
is pursuing a graduate fellowship or rehabilitation training program approved by the Secretary (excluding medical internship and residency programs);
is seeking, but unable to find, full-time employment (for up to three years);
is serving on active duty in the military or is performing qualifying National Guard duty during a war or other military operation or national emergency, and for 180 days following such service;
is experiencing an economic hardship (for up to three years);
is engaged in a type of service that makes the borrower eligible for loan cancellation (discussed later); or
is a member of the National Guard, of another reserve component of the Armed Forces, or of the Armed Forces in retired status, who was called to active duty service while enrolled, or within six months after being enrolled, at an eligible institution (for up to 13 months following the completion of such service or re-enrollment).36
Borrowers are not required to request deferment in writing but must provide the institution with information necessary to document their deferment status. They also are not required to resume making payments until six months following the completion of any of the periods described above for which they are exempted from making payments. Time in deferment does not count toward the 10-year repayment period.37
In general, forbearance is a temporary suspension or postponement of payments during which interest continues to accrue. A borrower may be granted forbearance from paying principal and interest or principal only if the borrower's debt burden, due to HEA student financial assistance loans, is greater than or equal to 20% of the borrower's gross income or if the institution determines that forbearance should be granted for other reasons. Examples include service in AmeriCorps or for reasons due to a "national military mobilization or other national emergency."38 Forbearance may be granted for a period of up to one year at a time and may be renewed for a total period of up to three years.39
Individuals who have engaged in the following types of public service are eligible to have part or all of their loans cancelled:40
full-time elementary or secondary school teacher employed at a public school, private nonprofit school, or location operated by an educational service agency, in which low-income students are more than 30% of the total enrollment;41
Peace Corps or AmeriCorps VISTA volunteer;42
full-time nurse or medical technician43 providing health care services;
The Secretary is required to reimburse institutions for Perkins Loans canceled for students engaged in public service. Funds for reimbursing institutions for loan cancellations may not come from the appropriation designated for FCCs. Rather, funds for the reimbursement of Perkins Loan cancellations are appropriated under a separate authorization from funds for Perkins Loan FCCs. Each year, the Secretary is required (to the extent feasible), to reimburse institutions within three months after they file their applications for reimbursement of campus-based funds.
Institutions must discharge a borrower's liability to repay Perkins Loans if the borrower dies; becomes permanently and totally disabled, as determined according to regulations issued by the Secretary; becomes unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that is expected to result in death or that has continuously lasted or can be expected to continuously last for 60 months; or is determined by the Secretary of Veterans Affairs (VA) to be unemployable due to a service-connected disability.44 Collections may be resumed if a borrower whose loan has been discharged subsequently receives a loan under HEA, Title IV, if the borrower earns income in excess of the poverty line, or if the Secretary determines the resumption of collections is necessary. Institutions are not reimbursed by the Secretary for losses due to the discharge of Perkins Loans.
In general, a Perkins Loan is considered to be in default if the borrower has failed to comply with the terms of the promissory note or failed to make payments on a loan for 240 days (for a loan repayable monthly) or 270 days (for a loan repayable quarterly). The cohort default rate for an institution is defined as the percentage of current and former students entering repayment in that award year on Perkins Loans received for attendance at that institution and who default on their loans before the end of the following award year.45 For institutions with less than 30 students entering repayment in any year, the cohort default rate is calculated over a three-year period.
Prior to the Extension Act's repeal of the authorization of appropriations for FCCs, FCCs were allocated to IHEs according to procedures using a two-stage process somewhat similar to that used for the FSEOG and FWS programs. Although the Extension Act neither amended nor repealed the allocation formula, new FCCs cannot be made without additional appropriations. The following paragraphs describe the HEA-prescribed Perkins Loan program allocation procedures.
Under the statutorily prescribed procedures, funds are allocated according to institutions' previous year's allocations (base guarantee), and any remaining funds are allocated according to institutions' share of excess eligible amounts of student need (fair share increase). Unlike the formulas for the FSEOG and FWS programs, however, the Perkins Loan allocation formulas also include a default penalty applicable to institutions with large proportions of borrowers defaulting on their Perkins Loans. The default penalty is used to limit the awarding of Perkins Loan FCCs only to institutions with cohort default rates below a maximum threshold. Institutions with a cohort default rate of less than 25% are assigned a default penalty of "1" and those with a default rate of 25% or greater are assigned a default penalty of "0." The FCC for institutions with a "0" default penalty is reduced to $0 in the following cycle of allocations.
According to the allocation formulas, FCC funds first are allocated to IHEs according to their previous year's allocations with priority going to institutions that participated in the Perkins Loan program in FY1999. These institutions are eligible to receive 100% of their FY1999 allocation.46 Institutions that began participating in the Perkins Loan program after FY1999, but that are not first- or second-time participants, are eligible to receive 100% of the amount they received in their first year of participation. Those institutions that began participating after FY1999, and that are first or second time participants, generally are eligible to be awarded either 90% of the amount they received in the previous year or 90% of the amount awarded to comparable institutions on a per-student basis. However, if an institution began participating in the Perkins Loan program after FY1999 and received a larger allocation in its second year of participation than in its first, it is allocated 90% of the amount it received in its second year of participation if this is a larger amount than it would otherwise receive. The minimum grant amount is $5,000.
After allocating funds according to institutions' previous year's allocations, any remaining FCC funds are allocated based on each institution's fair share of excess eligible student need. This is the amount by which an institution's share of eligible self-help need exceeds the amount already allocated to it according to its base guarantee. Like the FWS program, self-help need is calculated separately for undergraduate students and for graduate and professional students according to formulas that take into account the institution's COA and the approximate EFCs of students attending the institution. However, for the Perkins Loan program, an institution's eligible amount of need is the amount of the institution's self-help need, minus the institution's collections (defined as the amount the institution collected in the second year prior to the award year, multiplied by 1.21), multiplied by its cohort default penalty (either 1 or 0).
The Secretary is authorized to reallocate any excess Perkins Loan funds returned by institutions. Eighty percent of these funds must be reallocated to institutions according to their excess eligible amounts of student need, while the remaining 20% can be reallocated according to regulations established by the Secretary. An institution returning more than 10% of its allocation will have its subsequent year's allocation reduced by the amount returned, unless waived by the Secretary as contrary to the interest of the program.
Distribution of Assets from Perkins Loan Funds
Upon ending participation in the Perkins Loan program, institutions are required to begin a distribution of assets from their revolving loan funds.47 In doing so, an institution must repay the Secretary a portion of the balance of its loan funds that is proportional to the amount of FCCs. In many instances, this percentage could range between 85% and 90% of an institution's Perkins Loan fund.48
The Extension Act amended numerous provisions related to the timing and distribution of assets of IHEs' Perkins Loan funds following the program's expiration. As amended by the Extension Act, HEA Section 466 specifies that IHEs will be required to return Perkins Loan fund assets in the following manner:
Distribution of Excess Capital. If prior to October 1, 2017, a participating IHE or the Secretary determines that the liquid assets in the IHE's Perkins Loan fund exceed the amount required for Perkins Loans or other purposes, in the foreseeable future, the IHE will be required to return to the Secretary the federal share of the excess capital.
Under each of these provisions, the Secretary's share to be returned is to equal an amount of the loan fund, late collections, or excess capital proportional to the amount of ED's overall FCCs, and IHEs are to retain the remaining amounts.
Institutions have flexibility to transfer funds between the campus-based programs in which they participate. They may transfer up to a total of 25% of their allotment under the Federal Perkins Loan program for use in the FSEOG or FWS programs, or both. Institutions may transfer up to 25% of their allotment under the FWS program for use in the FSEOG or Federal Perkins Loan program, or both. Institutions also may transfer up to 25% of their FSEOG allocation for use in the FWS programs. As noted earlier, work colleges also may transfer up to 100% of their Perkins Loan FCC or FWS allocation to their Work Colleges program.
For award year (AY) 2013-2014, based on data reported to ED, 1,174 institutions transferred a total of approximately $74.8 million from the FWS to the FSEOG program; 350 institutions transferred a total of approximately $7.5 million from the FSEOG to the FWS program; and 14 institutions transferred a total of approximately $2.6 million from the FWS to the Perkins Loan program.49 In prior years when Perkins Loan FCCs were appropriated, some institutions also transferred funds from the Perkins Loan program to the FSEOG and FWS programs.
In calculating administrative costs, institutions include both federal and institutional expenditures.50 Institutions take their administrative cost allowances out of federal funds allocated for the FSEOG and FWS programs and from cash on hand in their revolving loan funds for the Perkins Loan program. Institutions have some discretion in determining how to allocate administrative costs across the three campus-based programs. Administrative cost allowances as claimed for the campus-based programs are shown in Table 3.
Table 3. Administrative Cost Allowances for the
(AY2013-2014)
$13,600,184
$46,003,385
$52,694,992
$112,298,561
Source: U.S. Department of Education, Office of Postsecondary Education, Federal Campus-Based Programs Data Book 2015.
This section presents budget information on past funding levels for the campus-based programs and program information including the number of institutions participating in each program, the number of students awarded aid and average award amounts, and the distribution of campus-based aid according to student and institutional characteristics.
Overall, funding for the FSEOG program has decreased slightly; however, in recent years, the program's funding increased slightly and then remained level. In FY2009, an additional $200 million was provided for the program under the American Recovery and Reinvestment Act (ARRA; P.L. 111-5). Funding for the FWS Off-Campus Community Service program, which was established under the HEOA, was only provided for FY2010. Discretionary appropriations were last provided for Perkins Loan FCCs in FY2004; and funding was last provided for Perkins Loan Cancellations in FY2009. Appropriation figures for the campus-based programs are presented in Table 4 for the past decade.
Table 4. Campus-Based Program Funding:
Appropriations for FY2006-FY2016
775,462
FY2009b
Sources: U.S. Department of Education, "Department of Education Fiscal Year 2016 Congressional Action Table" at http://www2.ed.gov/about/overview/budget/budget16/16action.pdf; and historical tables.
a. Amounts include a mandatory reappropriation of $28,429 million in expired FY2005 funds pursuant to the National Disaster Student Aid Fairness Act (P.L. 109-86): $4.5 million for FSEOG, $19.2 million for FWS, and $4.7 million for Perkins Loan FCCs.
b. FWS includes a $200 million appropriation under the American Recovery and Reinvestment Act (ARRA; P.L. 111-5).
c. The FY2013 appropriations reflect the final amount appropriated, including the spending reduction authorized by the Budget Control Act of 2011 (BCA; P.L. 112-25), commonly referred to as "sequestration."
d. The Federal Perkins Loan Program Extension Act of 2015 (P.L. 114-105) repealed the authorization of appropriations to enable the Secretary to make FCCs IHEs' Perkins Loan funds and explicitly prohibited additional appropriations under the HEA or any other act for making new Perkins Loans for any fiscal year beyond FY2015.
In AY2013-2014, 7,539 postsecondary institutions participated in HEA Title IV financial aid programs.51 Approximately 51% of Title IV institutions awarded FSEOG aid, while approximately 45% employed students in FWS. However, only approximately 21% of Title IV institutions advanced loans under the Perkins Loan program. While fewer institutions of all types participate in the Perkins Loan program than in either FSEOG or FWS, far fewer two-year and proprietary participate in the Perkins Loan program than the other two programs.52 It is possible that these lower levels of participation are due to factors such as the administrative burden of administering a revolving loan fund and the generally higher cohort default rates of students who attend these types of institutions.
Over the past decade, there has been a slight increase in the number of IHEs participating in the FSEOG and FWS programs. Institutional participation in the Perkins Loan program has, in general, continued a pattern of decline that has occurred over the past quarter century; however, it did experience a slight uptick in AY2013-2014. Figure 1 displays the number of institutions participating in each of the campus-based programs since AY1988-1989.
(AY1988-1989 through AY2013-2014)
Source: ED, Federal Campus-Based Programs Data Book 2015; and prior editions.
This section presents information on the number of students being served and the average award amounts for each of the three campus-based programs based on program data from ED. To facilitate comparison of student award amounts over time, these data have been adjusted to 2013 dollars according to the consumer price index for all urban consumers (CPI-U).
Federal Supplemental Education Opportunity Grant program data on the number of students granted awards and the average award amount since AY1993-1994 (in constant 2013 dollars and nominal dollars) are presented in Figure 2. Once the smallest of the three campus-based programs in terms of the number of students served, the FSEOG program has grown steadily since its inception in AY1967-1968 to become the largest today. Since AY1991-1992, it has served more students annually than either of the other two campus-based programs. The number of students receiving FSEOG awards increased considerably during the 1990s. Since AY2004-2005, more than 1.4 million students annually have received awards. The average amount of aid provided per student under the FSEOG program is the lowest among the three campus-based programs. Over the past two decades, increasing numbers of students have been served through the FSEOG program, and the average award amount had increased slightly (in nominal dollars) from $705 in AY1993-1994 to $778 in AY2001-2002. Beginning in AY2002-2003, however, the average award amount steadily decreased, to $598 by AY2013-2014. In constant dollars, average award amounts have declined by approximately 47% since AY1993-1994.
(AY1993-1994 through AY2013-2014)
Source: ED, Federal Campus-Based Data Book 2015; and prior editions.
Federal Work Study program data are presented in Figure 3. For most of the past two decades, between 670,000 and 750,000 students were served annually through FWS, although more than 810,000 students received FWS aid in AY2004-2005. Over the past two decades, the average FWS award has increased (in nominal dollars) from $1,084 in AY1993-1994 to $1,669 in AY2013-2014; however, in constant dollars, compensation amounts have remained level.
From AY1994-1995 through AY1999-2000, institutions participating in the FWS program were required to expend at least 5% of their initial and supplemental FWS allocations to compensate students employed in community service jobs. Beginning with AY2000-2001, institutions must expend 7% of their FWS allotment on community service and operate at least one tutoring or family literacy project. Since the community service requirements have been in place, ED reports that the number of students employed in community service increased from 58,596 in AY1994-1995 to 117,468 in AY2013-2014. The darkly shaded portion of the bars in Figure 3 indicates the number of students employed in community service.
Success in meeting the community service requirements is determined by dividing the total funds used to compensate students employed in community service jobs by the institution's total FWS allocation; and by determining whether the institution expended part of its allocation to compensate students for community service employment as reading tutors or for family literacy activities. Institutions may apply to the Secretary for a waiver from either or both of the FWS community service requirements. There is no explicit penalty for failing to meet the requirement. Information on the expenditure of FWS funds for community service, by IHE for AY2009-2010, has been reported by the U.S. Department of Education and is available from the Corporation for National and Community Service. Overall, participating IHEs spent 19% of their allocations to compensate students employed in community service jobs.53
Historical data on the Perkins Loan program are provided in Figure 4. Between AY1993-1994 and AY2007-2008, the annual number of students served ranged from approximately 640,000 to 760,000. By AY2012-2013, the number of Perkins Loan borrowers had dropped to approximately 502,000. However, between AY2012-2013 and AY2013-2014, the number of students served increased by approximately 7.5%, to approximately 540,000. Average Perkins Loan amounts, measured in constant dollars, have fluctuated over the past two decades. By AY2003-2004, average Perkins Loan amounts reached a maximum (in constant dollars) of $2,742. However, by AY2010-2011, average Perkins Loan amounts had decreased to a low of $1,987. In more recent years, average Perkins Loan amounts have increased slightly.
During AY2013-2014, about $1.2 billion in Perkins Loans were made to approximately 540,000 students. Some IHEs continue to service previously made Perkins Loans, but have stopped making new loans.
Perkins Loans cohort default rates (see previous discussion of Perkins Loans default and rehabilitation) declined from a high of 12.95% for the AY1995-1996 cohort to 7.81% for the AY2005-2006 cohort, before increasing again beginning with the AY2006-2007 cohort (see Table 5). Four-year institutions typically have the lowest cohort default rates, while those of two-year and proprietary institutions are much higher.
(AY1995-1996 through AY2012-2013)
Sources: ED, Federal Campus-Based Programs Data Book 2015; and prior editions.
For additional information on the HEOA and the reauthorization of the HEA, including amendments to the campus-based programs, see CRS Report RL34654, The Higher Education Opportunity Act: Reauthorization of the Higher Education Act, by [author name scrubbed] et al.
For additional information on GEPA, see CRS Report R41119, General Education Provisions Act (GEPA): Overview and Issues, by [author name scrubbed] and [author name scrubbed].
For additional information on the extension of other HEA programs, see CRS Report R44206, FY2016 Extension of the Higher Education Act: An Overview, by [author name scrubbed] and [author name scrubbed].
The allocation procedures for each of the three campus-based programs are described in greater detail in CRS Report RL32775, The Campus-Based Financial Aid Programs: A Review and Analysis of the Allocation of Funds to Institutions and the Distribution of Aid to Students, by [author name scrubbed].
U.S. Department of Education, 2015-2016 Federal Student Aid Handbook, vol. 3—Calculating Awards & Packaging, p. 3-133. (Hereinafter cited as ED, 2015-2016 FSA Handbook).
Institutions designated as eligible under the Strengthening Institutions Program (HEA §311), Developing Hispanic Serving Institutions Program (HEA §501), Strengthening American Indian Tribally-Controlled Colleges and Universities Program, Strengthening (HEA §316), Strengthening Alaska Native and Native Hawaiian-Serving Institutions Program (HEA §317), Strengthening Historically Black Colleges and Universities Program (HEA §323), or the Strengthening Historically Black Graduate Institutions Program (HEA §326) are exempt from the matching requirement. Institutions must reapply for the exemption annually; 2015-2016 FSA Handbook, vol. 6—The Campus-Based Programs, p. 6-21.
ED, 2015-2016 FSA Handbook, vol. 6—The Campus-Based Programs, pp. 6-19 through 6-20. For instance, prior to FY2014-FY2015, the Grants for Access and Persistence (GAP) program provided federal matching funds to states to provide need-based grants to low-income students, among other activities. HEA §415E. The amount of state or institutional grants attributable to this source of funding would not be considered as part of the nonfederal share under FSEOG.
The ACG, SMART Grant, and LEAP programs have not been funded in several years.
ED has calculated a table of EFCs used in the campus-based funding process. The table includes average EFCs within 14 income bands for dependent and independent undergraduates, and for graduate and first-professional students. The EFC for students is based on information from the second preceding fiscal year. EFCs from this table, rather than the actual EFCs of students at a particular institution, are entered into the allocation formula. See ED, EFC Procedures 2016-2017, at http://ifap.ed.gov/eannouncements/attachments/20162017EFCProceduresStdEFCs.pdf.
ED, 2015-2016 FSA Handbook, vol. 6—The Campus-Based Programs, pp. 6-59 through 6-71.
For additional information on the Federal Perkins Loan Extension Act of 2015 (P.L. 114-105), see CRS Report R44343, The Federal Perkins Loan Program Extension Act of 2015: In Brief, by [author name scrubbed].
Prior to the Extension Act, IHEs had the discretion to award Perkins Loans to eligible students before or after they awarded Direct Subsidized Loans. IHEs were required to award Perkins Loans to eligible students before they awarded Direct Unsubsidized Loans. See U.S. Department of Education, Office of Federal Student Aid, 2015-2016 Federal Student Aid Handbook, vol. 3, pp. 141-142.
Other types of deferments may be available to borrowers of Perkins Loans made before July 1, 1993. See ED, 2015-2016 FSA Handbook, vol. 6—The Campus-Based Programs, pp. 6-133 through 6-137.
ED, 2015-2016 FSA Handbook, vol. 6—The Campus-Based Programs, p. 6-130.
For additional information on the discharge of Perkins Loans, see ED, 2015-2016 FSA Handbook, vol. 6—The Campus-Based Programs, pp. 6-155 through 6-157.
According to the Department of Education's Explanation of Tentative Funding Level Worksheets: 2016-2017 Award Period for the campus-based programs, this is equal to the institution's award year 1999-2000 conditional guarantee, multiplied by its award year 1999-2000 cohort default penalty factor, multiplied by a 60.77% reduction factor.
ED, 2015-2016 FSA Handbook, vol. 6—The Campus-Based Programs, p. 6-110.
U.S. Department of Education, Office of Postsecondary Education, Dear Colleague Letter CB-00-05, Enclosure 1. Institutions participating in the Perkins Loan program typically have received FCCs throughout the duration of their participation in the program. From the inception of the program through the 1992-1993 award year, the federal share was 90%. In the 1993-1994 award year, the federal share was 70%. Since the 1994-1995 award year the federal share has been 75%.
U.S. Department of Education, Office of Postsecondary Education, Federal Campus-Based Programs Data Book 2015, http://www2.ed.gov/finaid/prof/resources/data/databook2015/databook2015.html (Hereinafter cited as ED, Federal Campus-Based Programs Data Book, 2015).
HEA, §489 (20 U.S.C. §1096); ED, 2015-2016 FSA Handbook, vol. 6—Campus-Based Programs, pp. 6-23 through 6-24.
National Center for Education Statistics, Integrated Postsecondary Education Data System, http://nces.ed.gov/ipeds/.
ED, Federal Campus-Based Programs Data Book 2015.
Corporation for National and Community Service, Annual Financial Report: Fiscal Year 2010, Table 3, http://www.nationalservice.gov/sites/default/files/documents/11_1115_final_fy_10_afr_0.pdf.
Note: data are not reported on tutoring and family literacy projects.