Less Financial Aid to Be Available to College Students Through Federal Perkins Loan Program

PHOENIX, AZ, Apr 10 (MARKET WIRE) --
Some 50,000 college students who obtained federal Perkins student loans last
year
won't be able to get one this fall, and those who do receive one will likely
see the size of their award shrink, according to recent U.S. News & World
Report estimates ("Why Perkins Loans Are Harder to Get This Year," March 25,
2008). This news comes as many students receive their financial aid award
letters for the upcoming academic year and begin determining how they'll be
paying for their college tuition come fall.

Perkins loans are federally subsidized student loans awarded to financially
needy
undergraduates to help pay for college. Perkins student loans provide
qualified students with up to $4,000 annually at a 5 percent fixed interest
rate. But because Perkins loans are subsidized by the federal government, the
government will pay any interest that accrues while a borrower is still enrolled
in school at least half time. Perkins borrowers are also granted a nine-month
grace period after leaving school before they must begin repayment; any
interest that accrues during the grace period will also be paid by the federal
government.

Perkins student loans offer one of the lowest rates and some of the most
attractive terms in student loans, but the amount of funds available in the
federal Perkins program hasn't kept pace with steadily increasing college
enrollment.

Moreover, each school is given only a fixed pool of Perkins funds from which
to lend. Unlike other federal student loans, which are paid back directly to
the government or to lenders in the federal education loan program, Perkins
funds are payable to the school, with schools dependent on that repayment
money to generate new Perkins loans for incoming and returning students.

But with rising interest rates over the last few years affecting
everythingfrom private student loans and federal consolidation loans to credit
cards and
homeloans, many graduates are steering away from paying off their Perkins
loansearly and opting instead to take the full 10-year Perkins repayment term,
directing their energies toward repaying their higher-interest debt. With less
Perkins repayment money coming in and no government funds being added to expand
the Perkins pool, schools are being forced to scale back their Perkins awards.

From 2000-2005, approximately 725,000 students nationwide received a
Perkins loan with an average award amount of $2,100, according to data
fromthe U.S. Department of Education. In the upcoming fall semester however,
college
financial aid officers predict that only about 670,000 students will receive a
Perkins loan with an average award amount of just $1,500.

Michigan State University, for example, will eliminate over 2,000 Perkins
awards
in the fall and cut the average award from $1,200 to $1,000. MSU has seen its
Perkins pool decline from $7 million to $5 million in the last year alone.

"This is a huge hit ... and it is happening across the country," said Rick
Shipman, financial aid director at MSU.

Also making deep cuts to its Perkins student loans is the University of
Maryland at College Park, where only half of last year's $2.3 million in
Perkins funds is available for the 2008-09 academic year.

For its part, Ohio University says that it will eliminate 100 Perkins
student
loans worth $2,100 each to students who received them last year, since the
school is so short on Perkins aid.

With less financial aid available to them in the form of Perkins loans,
students
may need to turn to higher-interest college loans.

Federal Stafford loans carry only a slightly higher fixed interest rate
(between 6 and 6.8 percent) than Perkins loans, but dependent undergraduates are
capped at a Stafford award between just $3,500 and $5,500, depending on their
year in school -- an award amount that may not be sufficient to cover the
cost of a public four-year school, which averages over $13,000, according to
the College Board.

Some parents of dependent undergraduates may be able to help with college
financing through the federal PLUS loan program. PLUS loans allow eligible
parents
to borrow up to their child's full cost of attendance, but PLUS loans carry a
fixed interest rate of 8.5 percent, almost one-and-a-half times the rate of a
Perkins
loan.

And unlike Perkins and Stafford student loans, which are awarded without
regard
to a student's credit history, PLUS loans are credit-based student loans
requiring an applicant to have no adverse credit items, including foreclosures,
within the last five years. With foreclosures on the rise as a result of the
collapse of the subprime mortgage industry and more stringent credit
restrictions on home refinances, fewer parents may be able to qualify for PLUS
loan aid.

Once they've exhausted their federal financial aid options, students may
still turn to non-federal private student loans. But unlike fixed-rate federal
college loans, private student loans tend to be variable-rate student loans, can
often carry higher interest rates, and may not have the same payment deferment
benefitsthat come with federal student loans.

And because private student loans are credit-based college loans, they're
also
being affected by tightening credit restrictions in the current credit crunch.
Students with little or no credit may find it increasingly difficult or
expensive to
obtain a private loan, with lenders tending to charge higher origination fees or
higherinterest rates for those they consider risky borrowers.

About NextStudent

NextStudent, Federal Lender Code 834051, is dedicated to helping students
and
their families find affordable ways to pay for college. NextStudent offers
one-on-one
education finance counseling and has a portfolio of highly competitive
education finance products and services, including a free online
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student loan consolidation programs, and college savings plans.

For more information about NextStudent and its student loan programs, please
visit
the website at www.nextstudent.com.

Contact:
Philip J. Tannenbaum
Email Contact

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