Kenneth E. Redd


In recent years, some policy-makers in Washington have called for the elimination of federal funds for the Federal Perkins Loan program. Federal law requires the Perkins Loan funds to be provided to the neediest students. However, despite this provision, several Democratic and Republican presidential administrations have implied that the program is not as need based as other federal student aid programs. The Clinton Administration has said that reducing Perkins Loan contributions would allow for greater increases in federal student aid programs that are a "higher-priority" and "more strictly need-based" (U.S. Department of Education, 1994a). In the face of these criticisms, higher education leaders have fought to preserve federal funding for Perkins Loans. These advocates believe the program "provides a low-interest source of self-help assistance to very needy students" (Committee for Education Funding, 1994). The arguments for and against Perkins Loans raise some important questions for education policy analysts: Are Perkins Loans still necessary? Do financial aid administrators effectively target Perkins Loans to the most needy students? Do the characteristics of Perkins Loan borrowers differ substantially from those who receive subsidized and unsubsidized Stafford Loans? Are changes needed in the loan programs, particularly Perkins Loans, to serve students better? This paper addresses these questions by describing the recent trends in borrowing under the federal student loan programs and comparing the demographic characteristics, income levels, educational costs, and financial need levels of Perkins Loan and subsidized and unsubsidized Stafford Loan recipients. For purposes of this paper, the term "Stafford Loan" refers to student loans through both the Stafford Loan and the Direct Loan programs.