“Perkins borrowers fail again”: UW Withholds Debt Relief From Loan Holders Amid Pandemic
Last March, the adoption of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) provided for the suspension of loan repayments, halted collection of overdue loans and fixed an interest rate. 0% on federal student loans owned by the Department of Education. The measure has been extended three times during the COVID-19 pandemic, allowing much-needed relief for loan holders.
But not all graduates were equally fortunate.
“This university has had the voluntary authority to provide that kind of relief, but [hasn’t] did it, ”Brooke Evans interrupted. “How did they make this decision? Who was at the table? What is the approval process? “
Evans, a former student and UW activist, came to UW-Madison as a non-traditional transfer student. Banned in 2012 from the FASTrack program, Evans accepted a loan offered to her by the University as part of her financial aid. It was a Perkins loan – a federal loan excluded from the federal stimulus package.
“I was always trying to prove that I was good enough to invest and most people didn’t think I was. The university offered me scholarships; I was a Pell Grant student. And then they offered me loans, Perkins loans, ”she said.
Perkins Loans are low-interest, need-based student loans offered by the US Department of Education to help low-income US students. They had a fixed interest rate of 5% and, at nine months, a longer grace period than other student loans. What sets Perkins loans apart from other federal loans is that the school is the lender, not the government. Universities and colleges participating in the program would provide a portion of the loan and the borrower would reimburse the school directly.
The federal Perkins loan program ended in 2017 over fears that it was poorly structured and no longer as useful as other loans, even private ones, that may offer lower interest rates. Despite this, the Americans borrowed about $ 6 billion from the now defunct program.
The Department of Education announced to colleges and universities in April 2020 that they can voluntarily suspend payments and set interest rates at zero on Perkins loans until the end of September. The ministry also gave schools permission to stop collection of past due Perkins loan payments at the borrower’s request.
In August, the University of California suspended interest and payments on $ 140 million in education loans it held in an attempt to provide student debt relief during the pandemic. The effort reflected much of the student debt relief offered in the $ 2 trillion federal stimulus package through the Cares Act, but it also provided coverage for Perkins loans.
“We’re trying to level the playing field for students,” said Shawn Brick, director of student financial support at UC. Washington post. “We felt it was important to ensure that students with loans for which UC is the official lender received the same support.”
UW-Madison didn’t make the same choice.
Instead of suspending payments and interest, the university continued to collect loans despite the Education Ministry repeatedly extending its decision.
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Last month, Evan’s Perkins loan was put on administrative forbearance without his knowledge or consent. His payments had effectively been “suspended,” but as the forbearance stipulated, the loan would continue to accrue interest.
“I never accepted. I just received an email stating that they had been put on administrative forbearance and that the university was going to charge me interest every month. And I was horrified, ”Evans recalls. “All of these things have such devastating ripple effects. I really struggled and felt like Perkins borrowers [are] fail again.
On March 7, Evans and UW BIPOC Coalition Founders Tarah Stangler and Megan Spielbauer Sandate emailed Director of Financial Aid Helen Faith, Federal Awards Coordinator Vera Abing, Director of Accounts Students and Ginger Perkins Collections and Associate Director of Federal Awards Katy. Weisenburger asks to meet and discuss the University’s handling of Perkins loans and to ask questions about the decision to continue collecting payments.
“The Department of Education authorized higher education institutions to suspend interest and payments on Perkins loans held by the institution from March 13, 2020 until September 30, 2021,” the Coalition wrote. “We want to ask why UW-Madison continues to collect Perkins loan payments during the COVID-19 pandemic instead of providing relief to UW-Madison alumni and alumni? “
An additional question the group posed to the university staff was how exactly the payments for the Perkins loans were being used. Perkins Loans are a “revolving loan fund,” which means that student loans are replenished by pre-existing loan collections and Department of Education repayments for the cost of certain loan cancellations. If the payments are not pooled in the fund, where do they go?
“We are insisting on a meeting with all of you because we have tried to find information on the federal Perkins loan program from the Office of Student Financial Aid and the Office of the Bursar online and by phone; However, we have not received clear answers, ”the email concluded.
In her response, Director Faith did not acknowledge receipt of their invitation or respond to their questions.
“We sincerely appreciate your advocacy and share your commitment to students,” she wrote. “Our student loan management team is responsible for serving our borrowers (both graduates and those who had to quit or did not graduate) with an ethic of compassion.”
Instead, Faith presented a variety of other options that students in need of relief can pursue, including requesting a deferral, which would suspend payments and the accumulation of interest for 12 months, or abstention, which would suspend payments only for the same period.
“When she talks about students requesting and receiving deferrals, they use a handful of deferrals throughout their lives to get through the global pandemic when other borrowers haven’t had to,” Evans noted. “These are things people should use for the loss of a partner or family member, or if they lose their job, not for this.”
UW-Madison Director of Communications Meredith McGlone echoed Faith’s response, stating that the university had in fact “suspended” Perkins loan payments through deferral and delay. abstention. She also added that UW-Madison’s most recent Perkins loan cohort default rate is less than 1% to 0.73% and current borrowers have a high repayment rate.
The UW system did not respond to requests for comment.
With nearly 2 million Americans still in debt to the program, many graduates have a lot to gain. While the minimum monthly repayment rate set by law is $ 40 for Perkins loan holders, the United States Department of Education: A Guide to Federal Student Aid, 2009-10 estimates that a loan of $ 4,000, less than a semester of tuition in the state, would require a typical monthly payment of $ 42.43 and interest charges of $ 1,091.01. A loan of $ 5,000 would cost about $ 53.03 per month and $ 1,364.03 in interest. A Perkins loan of $ 15,000 will result in a monthly payment of $ 159.10 and a grand total of $ 4,091.73 in interest charges.
The impact of these payments, especially during the pandemic, can affect all areas of the life of loan holders.
Cliff Rob, associate professor of personal finance at the School of Human Ecology, pointed out that increasing student loan amounts and multiple lenders were a major factor in the financial decisions of loan holders after graduation. From homeownership to starting a family, some graduates have struggled to justify these expenses due to the stress and lack of financial satisfaction caused by debt.
“We are certainly seeing real inequalities, impacts on minority households, low-income households that incur a lot of student loan debt. It doesn’t equal, they struggle in the long run, ”said Rob.
Evans experienced homelessness while attending UW and still struggles with housing insecurity today. Before coming to live in a community center, Evans once again had to deal with homelessness as she worked to maintain her debt. Nonetheless, she hopes that the University will soon provide an explanation of why the choice was made to continue to repay the loans of low-income alumni.
“I think we, as borrowers of Perkins, need an explanation as to why the university has not offered a [suspend payments,]”said Evans.” I hope this sounds strange to the people the university is collecting and reporting on Perkins loan debt during a pandemic. These are students with exceptional financial aid. The university absolutely owes an explanation to the community.
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