Universities could be forced to return funds

Thursday, Feb. 17, 2005 | 10:51 a.m.

Nevada's two universities could be forced to return $8.75 million in federal student loan money if one of President Bush's proposed education cuts goes through Congress, school officials said.

The administration's proposal would eliminate the federal Perkins student loan program and require institutions to pay back what the federal government has put into the program in the past 46 years.

That's about $5 million at UNLV and $3.75 million at UNR, officials said.

The $6 billion in savings and recalled Perkins money would help eliminate a $4.3 billion gap in the Pell Grant budget and extend the grant program to about 5.5 million more students in the next 10 years, Ed Walsh, spokesman for the U.S. Education Department, said.

"The president's goal is to make federal financial aid available to as wide of a group as possible," Walsh said.

But financial aid directors at UNLV and UNR and the state's congressional representatives said the plan would save one student aid program while decimating another.

"It's (the Pell Grant deficit) a problem that needs to be solved but it shouldn't be solved on the backs of the institutions," Peter Hurley, interim financial aid director at UNLV, said. "They are essentially asking any institution that has ever participated in the Perkins program to return the money."

The program, named after former Kentucky Sen. Carl D. Perkins, combines federal funds with state dollars to loan students money at a fixed interest rate of 5 percent, said Hurley and Nancee Langley, financial aid director at UNR.

Through the initial federal contributions, UNLV and UNR have established a revolving loan fund where the universities are able to use the money paid back each year to issue $1.8 million a year in new loans to about 700 students, Hurley and Langley said.

Under Bush's proposal, the institutions would have 10 years to return the federal contribution as students repay their loans.

Members of Nevada's congressional delegation all expressed concern over Bush's proposal to eliminate the Perkins loans. Rep. Shelley Berkley, D-Nev., and Senate Minority Leader Harry Reid, D-Nev., both called the elimination "outrageous."

"I'm extremely discouraged by this elimination of a loan program that has helped hundreds of thousands of students," Berkley said. "As a former university and community college regent, I am fully aware of how important the Perkins loan is to students at UNLV and UNR."

Berkley said Bush has promised to expand the Pell Grant in the past but nothing has ever been done.

"There's no guarantee that taking money out of Perkins will help the Pell grant," Berkley said.

Reid called Bush's proposal a "double blow to students who want to go to college" and called on both Democrats and Republicans to "stop the president's plan to zero out college loan programs."

Walsh, howevever, said the Bush administration is targeting the Perkins program because of its "limited reach." Because of the requirement for institutions to contribute their own money to the program, only about 1,800 nationwide are still participating, and Perkins recipients represented less than 3 percent of those receiving student aid, Walsh said.

Pell grants serve all institutions, Walsh said, and students do not have to pay the money back. Bush wants to raise the maximum grant from $4,050 to $4,550 in the next five years and increase limits on federal Stafford loans to offset the impact caused by eliminating the Perkins program.

The Perkins program serves about 300 students at UNLV compared with 4,300 students who are receiving Pell grants, Hurley said. But the students receiving the loans have typically already maxed out their other options such as Pell grants or Stafford loans.

Without the Perkins loans, those students will have to seek higher interest loans from private lenders, work more hours or drop courses to pay for their education, Hurley and Langley said.

The Perkins program has provided more than $14 million in loans to 7,200 students in the program's history at UNLV and more than $17 million in loans to 6,500 at UNR, university officials said.

The institutions relied primarily on loan repayments of $800,000 a year at UNLV and about $1 million a year at UNR to make new loans to students, but the program also received federal and state infusions up until this current school year.

UNLV was receiving about $90,000 to $95,000 a year in federal funds for the program and UNR was received about $35,000 to $40,000 in funds, Hurley and Langley said. Those contributions have already been cut.

"We were preparing to deal with loss of the federal contribution portion, but we didn't expect to get a bill from the government to return those seed dollars," Hurley said.