If Congress approves President George W. Bush’s 2007 budget proposal, approximately 3,100 undergraduate and graduate students at Cornell – and about 62,000 college students in the state of New York – will lose thousands of dollars in federally funded student loans.
The budget calls for the elimination of Perkins loans, which annually supply up to $4,000 for undergraduate and $6,000 for graduate students from lower-income families. Perkins loans have a set interest rate of five percent, which does not accumulate while students are in school; the program operates through institutional revolving funds. College financial aid offices determine who is eligible to receive the loan and calculate the amount on an individual basis.
The proposal also calls for the freezing of Pell Grants at $4,050 for the fifth consecutive year. Pell Grants are also given to lower-income students.
Cornell distributes $8.9 million in Perkins loans per year to 2,800 undergraduate and 300 graduate students, according to Thomas Keane, director of financial aid for scholarships and policy analysis.
“If the program were to be eliminated completely, we would have almost a $9 million gap in our financial aid programs,” Keane said. “We would have to identify another loan program to help fill the gap. Cornell does not have a $9 million program poised to take over.”
Keane said that until this academic year, Cornell annually received $700,000 in Federal Capital Contribution funds to help finance the program. While not a sizeable fraction of the University’s total funding amount, its withdrawal still “meant a hit to the program.”
Now, money will be even tighter.
Most likely, Cornell will encourage students to take out loans from private lenders, Keane said. But, he added, the interest rate runs higher on such loans and would build up while students are still in school.
Moreover, Perkins loans can be forgiven if the borrower enters a public service profession; private loans would have no such provision.
In 2005-2006, tuition increased at an average rate of 7.1 percent for public institutions, where the average cost is $12,000, and 5.9 percent at private ones, where the average cost is $29,000.
Such tuition hikes have occurred in the face of Congress’s recent Budget Reconciliation Bill, which will raise interest rates for Stafford loans from 4.7 percent to 6.5 percent starting July 1st and for the Parent Loans for Undergraduate Student (PLUS) program from 6.1 percent to 8.5 percent.
The rising premium on a college education and tuition increases suggest that more and more students will be relying on student loans. Federal education loans comprise almost half of student aid.
Keane jettisoned the notion that such budget cuts would affect the number of students who apply to Cornell.
“[But] I think it will affect people’s decision to come,” he said.
Keane felt that the elimination of Perkins loans would have a weightier impact than the interest rate increases for Stafford and PLUS loans.
Given the hefty cost of attending Cornell, a few thousand dollars seems almost paltry. Students at Cornell’s endowed colleges pay $31,300, New York residents in Cornell’s contract colleges pay $17,200,and out-of-state students in contract colleges pay between $29,000 and $30,200, depending on their year.
Yet the amount of money offered through a Perkins loan can mean the difference between working long hours at a campus job versus devoting more time to schoolwork and other activities that enhance students’ college experience, according to Keane.
“Every little bit helps for me,” said Diane Embrey ’07, who receives an annual Perkins loan of $1,350.
Embrey, who is from Maryland, could have attended the University of Maryland for free through a number of state scholarships. She said she was able to attend Cornell because her financial aid package made it feasible.
“I know people who take it week by week here,” said Tim Lim ’06, president of the Student Assembly. “Four thousand dollars may not sound like a lot but I know people who pretty much need every bit of assistance they can get