Campus-Based Student Financial Aid Programs Under the Higher Education Act

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

Three Higher Education Act (HEA) programs—the Federal Supplemental Educational
Opportunity Grant (FSEOG) program, the Federal Work-Study (FWS) program, and the Federal
Perkins Loan program—collectively are referred to as the campus-based programs. Funding
authorization for the campus-based and other HEA programs is extended through July 31, 2008, ^th
under P.L. 110-256. The 110 Congress has considered bills to amend and extend the campus-
based programs as part of the debate over reauthorizing the Higher Education Act.
On July 24, 2007, the Senate passed S. 1642, the Higher Education Amendments of 2007. On
February 7, 2008, the House passed H.R. 4137, the College Opportunity and Affordability Act of
2008. On July 29, 2008, House and Senate conferees agreed to a conference report to accompany
H.R. 4137.
Under the campus-based programs, federal funding is provided to institutions of higher education
for the provision of need-based financial aid to students. Institutions participating in the programs
are required to provide a match of approximately one-third of the federal funds they receive. The
campus-based programs are unique among the need-based federal student aid programs in that the
mix and amount of aid awarded to students are determined by each institution’s financial aid
administrator according to institution-specific award criteria (which must be consistent with
federal program requirements), rather than according to non-discretionary award criteria, such as
that applicable for Pell Grants and subsidized Stafford Loans.
Each program provides students with a distinct type of aid. The FSEOG program provides grant
aid only to undergraduate students. The FWS program provides undergraduate, graduate, and
professional students the opportunity for paid employment in a field related to their course of
study or in community service. The Perkins Loan program provides low-interest loans with
favorable terms and conditions to undergraduate, graduate, and professional students.
Funding is provided to institutions separately for each program according to formulas that take
into account both the allocation institutions received in years past (their base guarantee) and their
proportionate share of eligible students’ need that is in excess of their base guarantee (their fair
share increase). From these funds, institutions’ financial aid administrators award aid to eligible
students having financial need.
The programs are among the oldest of the federal postsecondary aid programs; however, they
now operate amidst a host of other aid programs and tax benefits, some of which are not need-
based. At present, a relatively small proportion of all students receive campus-based financial aid.
Over the past decade, the number of institutions participating in the programs has also declined.

Introduc tion ..................................................................................................................................... 1
Current Program Descriptions.........................................................................................................2
Federal Supplemental Educational Opportunity Grants............................................................2
Allocation of Funds to Institutions.....................................................................................3
Federal Work-Study Programs..................................................................................................4
FWS Employment...............................................................................................................5
FWS Community Service Employment..............................................................................6
Job Location and Development Programs..........................................................................7
Federal and Non-Federal Shares of Compensation.............................................................7
Work-College s .................................................................................................................... 8
Allocation of Funds to Institutions.....................................................................................8
Federal Perkins Loans...............................................................................................................9
Award Procedures and Terms of Perkins Loans..................................................................9
Deferment ......................................................................................................................... 10
Forbearanc e ........................................................................................................................ 11
Cancellation ....................................................................................................................... 11
Loan Default.....................................................................................................................12
Allocation of Funds to Institutions...................................................................................13
Distribution of Assets from Perkins Loan Funds..............................................................14
Transfer of Funds Between Campus-Based Programs............................................................14
Administrative Costs...............................................................................................................15
Funding and Program Data............................................................................................................15
Funding for the Campus-Based Programs..............................................................................16
Institutional Participation........................................................................................................17
Students Served and Average Aid Amounts............................................................................18
FSEOG .......................................................................................................................... .... 18
FWS .................................................................................................................................. 19
Perkins Loans....................................................................................................................20
The Campus-Based Student Financial Aid Programs and Reauthorization of the Higher
Education Act.............................................................................................................................22
Backgr ound ............................................................................................................................. 22
FSEOG Program.....................................................................................................................23
Authorization of Appropriations.......................................................................................23
Allocation of Funds According to Pell Grant Recipient Graduation and Transfer
Rates .......................................................................................................................... .... 23
Allowance for Books and Supplies in Fair Share Allocation Procedures.........................23
FWS Program..........................................................................................................................24
Authorization of Appropriations.......................................................................................24
Allowance for Books and Supplies in Fair Share Allocation Procedures.........................25
Community Service Requirements...................................................................................25
Job Location and Development Programs........................................................................25
Work-College s .................................................................................................................. 25
Federal Perkins Loan Program................................................................................................26
Authorization of Appropriations.......................................................................................26
Allowance for Books and Supplies in Fair Share Allocation Procedures.........................26
Perkins Loan Assignment.................................................................................................26

Loan Limits.......................................................................................................................27
Forbearanc e ....................................................................................................................... 27
Rehabilitation of Defaulted Perkins Loans.......................................................................27
Discharge of Perkins Loans..............................................................................................27
Loan Cancellation for Public Service...............................................................................28
General Provisions..................................................................................................................28
Students with Intellectual Disabilities...............................................................................28
Statute of Limitations and Court Judgments.....................................................................29
Transfer of Allotments between Campus-Based Programs...............................................29
Figure 1. Institutions Participating in the Campus-Based Programs: AY1983-1984
through AY2007-2008................................................................................................................18
Figure 2. FSEOG: Number of Students Receiving Awards and Average Award Amounts,
AY1986-1987 through AY2005-2006........................................................................................19
Figure 3. FWS: Number of Students Receiving Awards and Average Award Amounts,
AY1986-1987 through AY2005-2006........................................................................................20
Figure 4. Perkins Loans: Number of Students Receiving Awards and Average Award
Amounts, AY1986-1987 through AY2005-2006........................................................................21
Table 1. FWS Requirements for Federal Share of Compensation...................................................7
Table 2. Perkins Loan Cancellation Rates by Type of Service......................................................12
Table 3. Administrative Cost Allowances for the Campus-Based Programs: AY 2005-
2006 ............................................................................................................................................ 15
Table 4. Campus-Based Program Funding: Appropriations for FY1999-FY2008........................16
Table 5. Perkins Loan Cohort Default Rates: AY1993-1994 through AY2004-2005....................21
Author Contact Information..........................................................................................................29

Three postsecondary student financial aid programs authorized under the Higher Education Act of

1965, as amended (HEA)—the Federal Supplemental Educational Opportunity Grant (FSEOG)

program, the Federal Work-Study (FWS) program, and the Federal Perkins Loan program—
collectively are referred to as the campus-based programs. The campus-based programs are
unique among the need-based federal student aid programs in that federal funds are awarded to
institutions of higher education (IHEs) according to formulas that take into account past
institutional awards and the aggregate financial need of students attending the institutions. The
mix and amount of aid students receive is determined by each institution’s financial aid
administrator according to institution-specific award criteria, rather than according to non-
discretionary award criteria, such as that applicable for Pell Grants and subsidized Stafford ¹
Loans.
The campus-based programs were last significantly amended under the Higher Education
Amendments of 1998 (P.L. 105-244), which reauthorized the programs that are part of the HEA.
While funding authorization for these programs expired at the end of FY2003, the General
Education Provisions Act (GEPA) provided for an automatic one-year extension through FY2004.
Authorization for the programs has been extended incrementally, and ultimately through July 31, ²
2008, under a series of Higher Education Extension Acts. Several HEA programs were amended
under the Higher Education Reconciliation Act of 2005 (HERA) and enacted as part of the Deficit ³
Reduction Act of 2006 (P.L. 109-171) and under the College Cost Reduction Act of 2007 (P.L. ⁴

110-84); however, the campus-based programs were largely unaffected.

The 110^th Congress is considering bills to amend and extend the campus-based programs as part
of the debate over reauthorizing the Higher Education Act. On July 24, 2007, the Senate passed S.

1642, the Higher Education Amendments of 2007. On February 7, 2008, the House passed H.R. ⁵

4137, the College Opportunity and Affordability Act of 2008. On July 29, 2008, House and
Senate conferees agreed to a conference report to accompany H.R. 4137.
This report begins by providing a brief description of each of the campus-based programs,
including the terms under which financial aid is awarded to students and the procedures under ⁶
which federal funds are allocated to institutions for that purpose. It then provides historical

¹^Instit^utio^{ns a}^r^e^re^qu^ire^d^t^o^e^s^ta^bl^ish^w^r^itte^{n pr}^oc^e^dure^s^f^o^{r se}^le^c^ting^re^cⁱ^pieⁿ^ts^of^c^a^m^pus-ba^s^e^d^fⁱ^na^nc^ia^{l a}ⁱ^{d. T}^h^e^s^e
^sel^ectⁱ^oⁿ^p^r^o^ced^u^r^{es m}^u^st^m^e^et^t^h^{e req}^uⁱ^rem^eⁿ^t^{s o}^f^each^ca^m^p^u^s^-b^ased^p^r^o^g^ram^,^an^d^m^u^st^b^e^kep^t^on^fⁱ^l^e^at^each
^ins^titu^tio^{n. C}^ons^is^teⁿ^t^w^{ith the}^a^v^a^ila^bility^of^f^unds^{, i}ⁿ^s^tit^utio^ns^m^u^s^t^m^a^k^e^cam^pus^-ba^s^e^d^aⁱ^{d re}^a^s^on^a^b^ly^av^a^ila^ble^to
^a^{ll e}^lig^ible^stu^d^eⁿ^{ts de}^m^onstra^tin^g^fⁱ^na^nc^ia^{l ne}^e^d^.
²^P^.^L^.¹⁰^8-³⁶⁶^,^P^.^L^.¹⁰^9-⁸¹^{, P.L}^.¹⁰⁹^-¹^50,^P^.^L^.¹^09-²¹^{2, P.L}^.¹⁰^9-²³⁸^{, P.L}^.¹⁰^9-²^92,^P^.^L^.¹^10-⁴⁴^{, P.L}^.^110-⁵¹^{, P}^.^L^.
¹¹⁰^-¹^09,^P^.^L^.¹^10-¹⁹^8,^P.L^.¹¹^0-²³⁰^,^P.L^.¹¹^0-²^38,^aⁿ^d^P^.^L^.¹^10-²⁵⁶^.
³^Forⁱⁿ^f^o^r^m^a^{tion on}^h^o^w^the^D^e^fⁱ^c^{it R}^e^duc^tio^{n A}^c^{t of}²⁰⁰^{6 a}^f^f^e^c^t^s^H^E^A^pr^og^r^a^m^s^{, s}^e^e^C^R^S^R^e^por^{t R}^S²²³⁰^8,^Stu^d^eⁿ^t
^Loaⁿ^{s a}ⁿ^d^FY²⁰^{06 B}^u^d^g^e^t^Re^c^oⁿ^c^iliati^on^,^by^A^d^am^Stoll.
⁴^Forⁱⁿ^f^o^r^m^a^{tion on}^h^o^w^the^C^o^ll^e^g^e^C^o^s^t^R^e^duc^tio^{n A}^c^{t of}²⁰⁰^{7 a}^f^f^e^c^t^s^H^E^A^pr^og^r^a^m^s^{, s}^e^e^C^R^S^R^e^por^{t R}^L³⁴⁰⁷^7,
^Stu^d^eⁿ^{t Lo}^ans^{, St}^ude^nt^Aid^,^aⁿ^d^FY20⁰⁸^Bu^dge^{t Re}^c^onc^ili^ati^oⁿ^,^by^A^d^a^m^S^t^o^l^l^,^Davi^d^P^.^S^m^o^l^e,^and^Ch^arm^aⁱⁿ^e
^M^e^rcer.
⁵^For^a^dditi^ona^l^inf^o^r^m^a^{tion o}ⁿ^H^E^A^r^e^a^u^thor^iz^a^tion^,^s^e^e^C^R^S^R^e^p^o^r^t^R^L³⁴²⁸^3,^Hⁱ^ghe^r^E^duc^at^ioⁿ^Ac^{t Re}^aut^hor^iz^atioⁿ
^{in t}^h^e¹¹⁰^th^C^oⁿ^g^r^e^s^s^:^{A C}^o^m^p^arⁱ^s^on^{of M}^a^j^o^r^Pr^o^pos^a^l^s^{, by}^B^l^a^k^{e A}^l^aⁿ^N^a^ug^{hton e}^t^a^l^.
⁶^T^h^{e al}^l^o^catⁱ^oⁿ^p^r^o^cedu^r^{es f}^o^{r each}^o^f^t^h^{e t}^h^{ree cam}^p^u^s^-b^ased^p^r^o^g^ra^m^s^{are d}^e^scri^b^e^dⁱⁿ^great^{er d}^e^t^aⁱ^lⁱⁿ^CR^S^Rep^o^r^t
^R^L³²⁷⁷^5,^T^h^e^C^a^m^pus^-^B^as^e^d^Fi^nancⁱ^a^{l A}ⁱ^d^Pr^ogr^am^s^:^{A Re}^vⁱ^e^w^and^An^aly^s^is^of^the^Alloc^a^tioⁿ^of^Fun^d^s^to
^Institutⁱ^oⁿ^{s a}^nd^the^Distrib^u^ti^on^o^f^Aid^to^St^ude^nts^,^by^D^a^vⁱ^{d P}^.^Sm^ole^.

information on federal funds appropriated for each of the programs, an analysis of the number
and types of students served, and selected program statistics. It concludes with a discussion of
amendments to the campus-based programs proposed in S. 1642 and H.R. 4137.

This part of the report provides a description of each of the three HEA campus-based financial aid
programs—the FSEOG program, the FWS program, and the Federal Perkins Loan program.
Program descriptions explain the purpose of each program and the terms under which aid is
provided to students. They also include a brief explanation of how federal funds are allocated to
institutions for the purpose of providing aid to students.
The FSEOG program authorizes the Secretary to grant funds to institutions of higher education
for the purpose of providing financial assistance to undergraduate students with exceptional
financial need to aid them in obtaining the benefits of postsecondary education. The FSEOG
program is authorized by Title IV, Part A, Subpart 3 of the HEA. It first was incorporated into the
HEA under the Education Amendments of 1972 (P.L. 92-318). Prior to authorization of the
FSEOG program, Education Opportunity Grants, authorized under the HEA of 1965 (P.L. 89-

329), served a similar purpose.

From the funds allotted to them by the Secretary, institutions award FSEOG aid to eligible
students as part of their financial aid packages. Institutions are required to award FSEOG aid first ⁷
to students with exceptional financial need, according to the HEA need analysis provisions, with
priority going to students receiving Pell Grants. Institutions may establish categories of students
for purposes of packaging FSEOG awards. For example, “categories may be based on class ⁸
standing, enrollment status, program, date of application, or a combination of factors.”
Categorization of awards may not be used to arbitrarily deny FSEOG aid to students, for example
by establishing a policy of awarding aid on a first-come, first-served basis.
FSEOG aid consists of a federal share, not to exceed 75% (except if the Secretary determines that
a larger share is necessary to further the purpose of the program), and a non-federal share of at
least 25%. The non-federal share is required to be funded through the institution’s resources, such
as institutional grants and scholarships, tuition or fee waivers, state scholarships, and foundation
or other charitable organization funds. ED has determined that all state scholarships and grants
can be counted toward meeting the non-federal share, except for funds provided under the

⁷^P^e^{r HEA}^T^itle^IV^{, Su}^bpa^rt^F—^N^eed^Aⁿ^al^ysi^s^{, a}^s^t^ude^nt’^s^fⁱ^na^nc^ia^{l ne}^e^d^is^c^a^l^c^u^la^te^{d a}^s^t^h^e^c^o^s^t^of^a^tte^nda^nc^e^,^mⁱ^nus
^the^e^x^pe^c^t^e^d^f^a^mⁱ^l^y^c^ontrⁱ^buti^{on (}^E^FC⁾^—^the^a^m^ount^tha^t^a^s^t^ude^nt’^s^f^a^mⁱ^l^yⁱ^s^e^x^pe^c^t^e^d^{to c}^ontrⁱ^bu^te^tow^a^r^d^the
^st^u^d^eⁿ^t^{’s e}^d^u^catⁱ^oⁿ^,^aⁿ^d^mⁱⁿ^u^s^t^h^{e est}ⁱ^m^a^t^e^d^fⁱⁿ^aⁿ^cⁱ^a^l^assi^st^an^{ce (}^E^F^A^{) n}^o^t^recei^ved^uⁿ^d^e^{r HE}^A^Tⁱ^t^l^{e IV}^(t^hⁱ^{s i}ⁿ^cl^ud^es
^s^c^hola^r^s^h^ips^,^g^r^aⁿ^ts^{, l}^o^aⁿ^s^,^v^e^te^r^a^ns^’^e^duc^a^tⁱ^on^be^ne^f^its⁽^S^e^c^tion⁴⁸⁰⁽^c⁾⁾^,^na^ti^ona^{l s}^e^r^v^ic^e^e^duc^a^tio^na^l^a^w^a^r^ds^{, a}^nd^pos^t-
^s^e^rv^ic^e^be^nef^its^unde^{r T}^itle^I^of^the^N^a^tiona^{l a}ⁿ^{d Com}^m^unit^y^Se^rvⁱ^c^e^A^c^{t of}¹⁹⁹⁰^.
⁸^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^n,^F^e^de^r^a^{l St}^udeⁿ^t^Ai^{d H}^a^nd^bo^ok^,²⁰^07-²⁰⁰⁸^{, vo}^l^.³^—^C^a^lc^u^l^atiⁿ^g^Aw^ar^ds^&
^Pac^k^agi^ng^,^p^p^{. 3-1}^{05 thr}^oug^{h 3-1}^08,^a^t^htt^p^://w^w^w^.i^f^a^p.^e^d^.g^ov^/IFA^P^W^e^b^A^pp/^c^u^rre^ntSFA^H^a^ndbo^ok^s^P^a^g^.js^p^.
^(Herea^f^t^{er ci}^t^e^d^{as E}^D^,^{FSA H}^aⁿ^dbo^ok^.)

Leveraging Educational Assistance Partnership (LEAP) and the Special Leveraging Educational ⁹
Assistance Partnership (SLEAP) programs.
Unlike the other two campus-based programs, students are eligible to receive FSEOG aid only
during the period required to complete a first undergraduate baccalaureate course of study. The
maximum FSEOG award amount per academic year is the lesser of the student’s financial need or
$4,000. In the case of a student studying abroad, and if the cost of studying abroad exceeds the
cost of studying at the student’s home institution, the FSEOG award may be increased to a
maximum of $4,400. The minimum value of an FSEOG award is $100 per year. For students
enrolled for less than a full academic year, the value of FSEOG awards must be proportionately
reduced. Institutions are required to award a “reasonable proportion” of FSEOG aid to ¹⁰
independent students and to those who are enrolled less than full-time if the institution’s
allocation of FSEOG funds was based in part on the financial need of such students. (Students
enrolled less than half-time are eligible for aid under each of the campus-based programs.)
Students do not repay FSEOG awards.
The federal share of FSEOG funds are allocated to IHEs according to procedures prescribed in
the authorizing statute. Institutions first are allocated funds in proportion to the amount they
received in previous years, with priority going to institutions that participated in the program in
FY1999 or earlier. Next, funds are allocated to those institutions that began participating after
FY1999, but which are not first- or second-time participants. Following this, funds are allocated
to institutions that are first- or second-year participants.
Provided that sufficient funds are appropriated, institutions that participated in the FSEOG
program in FY1999 or earlier receive 100% of their FY1999 allocation. This is referred to as their
base guarantee. Institutions that began participating after FY1999, but which are not first- or
second-time participants receive a base guarantee that is the greater of 90% of the amount they
received in their second year of participation, or $5,000. Institutions participating in the FSEOG
program for their first or second year receive as their base guarantee, the greatest of $5,000, 90%
of an amount proportional to that received by comparable institutions, or 90% of what the
institution received in its first year of participation. However, if an institution began participating
in FSEOG after FY1999 and received a larger allocation in its second year of participation than in
its first, it is allocated 90% of the amount it received in its second year of participation.
Institutions’ base guarantees are adjusted to be proportional to the ratio of total funds available for
the FSEOG program to the national total of institutions’ base guarantees. This amount is called an ¹¹
institution’s adjusted base guarantee.
After allocating institutions their adjusted base guarantee, any remaining FSEOG funds are
allocated to institutions proportionately according to their eligible amount of need that is in
excess of their adjusted base guarantee. An institution’s eligible amount of need, or fair share, is
calculated by subtracting the sum of aid provided under the Pell Grant and LEAP/SLEAP

⁹^ED^{, FSA}^H^a^ndb^ook^{, v}^o^l^.^6—^C^a^m^pus^-^B^as^e^d^Pr^o^g^r^a^m^s^,^pp.^6-^{13 t}^h^r^o^ug^{h 6-}¹⁵^.
¹⁰^Aⁿ^inde^peⁿ^d^eⁿ^t^s^t^ude^{nt is}^one^w^{ho is}^no^{t c}^o^ns^ide^r^e^d^de^peⁿ^d^eⁿ^t^up^on^his^or^he^r^pa^r^e^nts^’ⁱⁿ^c^o^m^e^f^o^r^fⁱ^na^nc^ia^{l a}ⁱ^d
^pur^pos^e^s^.
¹¹^Iⁿⁱⁿ^s^t^aⁿ^c^e^s^w^h^e^r^e^tota^{l f}^unds^a^v^a^ila^ble^is^g^r^e^a^t^e^r^thaⁿ^or^e^qua^l^{to t}^h^e^na^tio^na^{l t}^o^ta^l^of^ba^s^e^g^u^a^r^aⁿ^te^e^s^{, the}ⁿ^t^h^e^ba^s^e
^gu^aran^t^{ee an}^d^t^h^{e a}^d^j^u^st^{ed b}^a^{se gu}^aran^t^{ee w}^o^u^l^d^b^e^e^q^u^a^l^.

programs from the aggregate financial need of the institution’s undergraduate students.
Undergraduate student financial need is determined through a formula that takes into account the
cost of attendance (COA) at the institution and the expected family contribution (EFC) of a ¹²
representative sample of students. Institutions with a fair share amount of need that is greater
than their FSEOG adjusted base guarantee are considered to have an excess eligible amount of
need. These institutions receive an allocation in excess of their base guarantee, which is called
their fair share increase. Institutions’ total allotments are the sum of their adjusted base guarantee ¹³
and their total fair share increase.
Institutions are provided flexibility to carryover up to 10% of their allocation for use in a
succeeding fiscal year to carry out the FSEOG program. They also may carry-back funds to make
grants to students prior to the beginning of the fiscal year, but after the end of the prior academic
year. The Secretary is authorized to reallocate any excess funds returned by institutions. An
institution returning more than 10% of its allocation will have its next year’s allocation reduced
by the amount returned, unless the Secretary determines it would be contrary to the interest of the
program. Finally, the Secretary is authorized under FSEOG to allocate up to 10% of funds ¹⁴
appropriated in excess of $700 million for the programs authorized under HEA Title IV, Part A,
to institutions from which 50% or more of Pell Grant recipients either graduate or transfer to four-
year institutions.

The purpose of FWS is to provide part-time employment to undergraduate, graduate, and
professional students in need of earnings to pursue their course of study; and to encourage student
participation in community service activities. FWS programs are authorized under the HEA at
Title IV, Part C. They first were authorized under the Economic Opportunity Act of 1964 (P.L. 88-
452) and administered by the U.S. Department of Labor’s Office of Economic Opportunity. In
1968, under P.L. 90-575, authority for the Work-Study Programs was transferred to Title IV of the
HEA.

¹²^ED^ha^s^c^a^l^c^u^la^te^{d a}^ta^b^l^e^of^EFC^s^us^e^dⁱⁿ^the^c^a^m^pus^-^b^a^s^e^d^f^undi^ng^pr^oc^e^s^s^.^T^h^e^ta^bleⁱⁿ^c^l^ude^s^a^v^e^r^a^g^e^EFC^s
^w^{ithin 1}⁴^inc^o^m^e^ba^nds^f^o^r^de^peⁿ^d^eⁿ^{t a}ⁿ^{d i}^nde^pe^nde^nt^u^nde^r^g^r^a^du^a^t^e^s^{, a}^{nd f}^o^r^g^r^a^dua^te^aⁿ^d^fⁱ^r^s^t-^pr^of^e^s^sⁱ^ona^l
^s^t^ude^nts^.^T^h^e^EFC^f^o^r^s^t^u^d^eⁿ^ts^is^ba^s^e^{d on}^inf^o^r^m^a^{tion f}^r^om^the^s^e^c^ond^pr^ecedⁱⁿ^{g f}ⁱ^scal^y^ear.^E^F^{Cs f}^r^o^m^t^hⁱ^s^t^a^b^l^e,
^ra^the^r^thaⁿ^the^a^c^t^ua^{l E}^F^{Cs of}^stu^d^eⁿ^{ts a}^t^a^pa^rt^ic^ula^rⁱⁿ^s^titu^tio^{n, a}^r^e^eⁿ^te^re^{d int}^o^t^h^e^a^lloc^a^tio^{n f}^o^rm^ula^.^T^h^e^ta^ble^of
^E^F^{Cs f}^o^{r t}^h^{e 20}⁰⁷^-20⁰⁸^aw^ard^ye^{ar i}^s^avai^l^a^b^l^{e f}^r^o^m^{ED a}^t^http://^www^.i^f^a^p.e^d^.g^ov^/^dpc^le^tte^rs/^a^tta^c^h^m^e^nts/
^EFC^A^ve^r^a^ge^s^.^x^l^s^.
¹³^Instit^utio^{ns m}^a^y^re^c^eⁱ^v^e^{both a}ⁿⁱⁿ^itia^{l f}^a^{ir sha}^r^e^inc^r^e^a^s^e^a^{nd a}ⁿ^a^dditi^ona^l^f^a^{ir sha}^r^e^inc^r^e^a^s^e^,^the^la^tte^{r be}^ing^ba^se^d
^oⁿ^t^h^{e real}^l^o^catⁱ^oⁿ^o^f^exc^e^ss^f^uⁿ^d^{s ret}^u^rn^ed^b^y^o^t^h^e^{r i}ⁿ^stⁱ^t^u^tⁱ^on^{s (descri}^b^edⁱⁿ^t^h^{e n}^e^xt^sectⁱ^oⁿ⁾^.
¹⁴^HEA^T^itle^IV^,^P^a^{rt A}^—^G^r^aⁿ^{ts to}^Stu^d^eⁿ^{ts i}ⁿ^A^tte^nda^nc^e^a^t^Inst^itutⁱ^ons^of^Hig^h^e^r^Educ^a^tio^n,^inc^l^u^d^e^s^the^f^o^llowⁱ^ng
^prog^ra^m^s^{: P}^e^{ll G}^r^aⁿ^{ts, the}^T^R^{IO prog}^ra^m^s^,^G^E^A^R^-UP^,^A^cad^e^mⁱ^c^A^c^hⁱ^e^v^e^m^en^t^In^cen^tⁱ^v^{e S}^c^ho^l^a^rshi^p^s^,^F^S^E^O^G^,
^L^E^A^P^{, Mig}^r^aⁿ^t^aⁿ^d^Se^a^s^ona^{l Fa}^r^m^w^o^r^k^e^r^P^r^og^r^a^m^s^{, the}^R^obe^r^t^C^.^B^y^r^d^H^onor^s^Sc^h^o^la^r^s^hi^p^P^r^og^r^a^m^,^C^h^{ild C}^a^r^e
^A^c^c^e^s^s^Me^aⁿ^s^P^a^r^e^ntsⁱⁿ^Sc^ho^ol,^L^e^a^r^ning^Aⁿ^y^tⁱ^m^e^Aⁿ^y^w^he^r^e^P^a^r^t^ne^r^s^hips^,^a^{nd T}^E^A^C^H^G^r^aⁿ^ts^.
¹⁵^T^h^is^r^e^por^{t c}^o^v^e^r^s^only^FW^{S pr}^o^g^r^am^s^a^u^thor^iz^e^d^u^nde^r^P^a^r^t^C^of^the^H^E^A^.^T^h^e^L^E^A^P^pr^og^r^a^m^pr^o^vⁱ^de^s^f^e^de^r^a^l
^f^unds^tha^t^c^aⁿ^be^us^e^d^by^s^t^a^t^e^s^{to s}^u^p^por^{t s}^t^a^t^e^w^o^r^k^-^s^tudy^pr^og^r^a^m^s^{. T}^h^e^D^e^pa^r^t^m^e^{nt of}^Ve^te^r^a^ns^A^f^f^a^ir^s^a^l^s^o
^a^d^mⁱ^nis^t^e^r^s^the^Ve^te^r^a^ns^A^d^mⁱ^nistr^a^tion^Stu^d^eⁿ^t^W^o^r^k^-^S^tudy^A^llow^a^nce^P^r^og^r^a^m⁽^V^A^S^W^S^A^P⁾^f^o^r^v^e^te^r^a^ns^a^nd
^e^lig^ible^pe^r^s^ons^.^A^u^thor^iz^a^tⁱ^{on f}^o^r^this^pr^og^r^a^m^is^c^odifⁱ^e^d^a^t^{38 U}^.^S.C^.^§^§³⁴^{85 a}^nd³⁵³⁷^.

An institution’s financial aid administrator is responsible for awarding FWS aid to eligible
students. Unlike the FSEOG and Perkins Loan programs in which aid is required to be awarded
first to students with exceptional financial need, FWS aid may be provided to any student
demonstrating financial need. Awards typically are based on factors such as each student’s
financial need, the availability of FWS funds, and whether a student requests FWS employment ¹⁶
and is willing to work. Students receive their award as compensation for the hours they have
worked. Earnings from FWS employment are considered “excludable income” in determining a
student’s financial need for the subsequent year. Awards are based on a combination of factors
such as a student’s financial need, financial aid available from other sources, the wage rate, and
how many hours per week the student can work. There is no maximum award amount.
FWS employment may consist of work for the higher education institution a student attends, for a
private non-profit organization, for a federal, state, or local public agency, or for a private for-
profit organization. Conditions applicable to all types of FWS employment include that it:
^(A⁾^wⁱ^l^lⁿ^o^{t res}^u^{lt i}ⁿ^t^h^{e dis}^p^la^ce^m^e^{nt of e}^m^plo^y^ed^w^o^r^k^ers^o^rⁱ^m^{pair exis}^ti^ng^con^t^ract^s^f^o^r
^s^e^rv^ices^;
⁽^B⁾^w^{ill b}^e^g^o^v^e^rⁿ^ed^b^y^su^ch^coⁿ^d^itioⁿ^s^o^f^e^m^p^l^o^y^m^eⁿ^t^as^wⁱ^{ll b}^e^ap^p^r^o^p^r^{iate an}^d
^reas^on^abl^eⁱⁿ^lⁱ^gh^t^o^f^su^{ch f}^a^ct^ors^as^t^y^{pe o}^f^w^o^r^k^perf^or^m^e^{d, g}^e^og^raphⁱ^cal^regi^on^s^,^aⁿ^d
^p^r^o^f^icien^c^y^o^f^th^{e e}^m^p^l^o^y^ee;
⁽^C⁾^d^o^e^{s n}^o^{t in}^v^o^lv^{e t}^h^{e co}ⁿ^s^tr^u^c^tioⁿ^,^o^p^e^r^a^tioⁿ^,^o^r^m^aⁱⁿ^ten^aⁿ^{ce o}^f^so^m^u^c^h^o^f^aⁿ^y^f^aci^lit^y
^as^is^us^{ed or is}^{to be u}^s^{ed f}^o^{r s}^ectarianⁱⁿ^s^t^ru^c^tion^{or as}^{a place f}^o^{r relig}^iou^s^w^o^rs^hⁱ^{p; an}^d
^(D)^wⁱ^llⁿ^o^{t pa}^y^aⁿ^y^w^a^g^e^to^s^t^u^d^en^t^s^e^m^plo^y^{ed ... [t}^h^r^oug^h^th^e^{FWS prog}^ra^m^]^th^a^tⁱ^s^le^s^s
^th^an^th^e^cu^r^r^en^t^f^e^d^e^r^a^l^mⁱⁿⁱ^m^u^m^w^a^g^e^a^s^m^aⁿ^d^{ated b}^y^S^ection^{6(a) of}^t^h^{e Fair}^L^a^bor¹⁷
^S^t^an^dards^A^c^t^of^1938.
Students working for private for-profit organizations must be employed in jobs that are
academically relevant to their pursuits. Furthermore, such students cannot be employed under
FWS if they otherwise would have been employed by the organization. Students employed by
proprietary institutions that they also attend either must be employed on-campus in jobs that, in
addition to the abovementioned requirements, also provide student services directly related to the
student’s education; or in community service jobs. Proprietary institutions cannot employ FWS
students in jobs that involve the solicitation of other students to attend the institution.
Employment by private for-profit organizations must be arranged between the sponsoring
institution and the for-profit organization.

¹⁶^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^{n, O}^f^fⁱ^c^e^o^f^the^U^nde^r^Se^c^r^e^t^a^r^y^,^P^l^aⁿ^ning^aⁿ^{d Ev}^a^l^ua^tio^{n Se}^r^v^ic^e^,^Pos^t^s^e^c^onda^r^y^,
^A^{dult, a}ⁿ^d^Voc^a^tio^na^{l Ed}^uc^a^tioⁿ^Divⁱ^sion,^T^h^e^N^a^tⁱ^o^nal^St^udy^{of t}^h^e^O^p^e^r^ati^on^{of t}^h^e^Fe^de^r^a^l^W^o^r^k^-^S^tu^dy^Pr^o^g^r^a^m^:
^S^u^mma^{ry F}ⁱⁿ^dⁱⁿ^g^s^f^r^o^m^t^h^{e S}^t^u^d^en^t^an^d^Iⁿ^stⁱ^t^u^tⁱ^oⁿ^a^l^Su^rveys⁽^W^as^hing^to^{n, D}^C^:²⁰⁰⁰⁾^{, p}^.⁵⁷^.
¹⁷^H^E^A^,^{§ 44}³⁽^b)⁽¹⁾⁽^{42 U}^.^S.C^.^§²⁷⁵³⁽^b⁾⁽¹⁾⁾^.

Since FY2000, institutions participating in FWS have been required to use at least 7% of their
FWS allocation to compensate students employed in community service jobs, including 100% of
any excess FWS funds they receive through reallocation of other institutions’ unspent FWS ¹⁸
funds. In meeting the 7% requirement, institutions are required to ensure that they are operating
at least one tutoring or family literacy project in service to the community. Institutions may use
up to 10% of the funds they receive for administrative expenses under section 489 of the HEA for
the operation of their FWS community service programs. The HEA defines community service as
follows:
^C^O^MMU^N^I^T^Y^S^E^R^V^IC^E^S^.—^F^o^{r pu}^rpos^es^of^t^hⁱ^s^part^{, t}^h^{e t}^e^r^m^“^c^o^m^m^uni^t^y^s^e^rvⁱ^c^e^s^”
^m^eans^s^e^rvices^w^h^ich^{are iden}^tⁱ^fⁱ^{ed b}^y^an^ins^tⁱ^t^utⁱ^o^{n o}^f^hi^ghe^r^e^d^uc^a^tⁱ^o^n,^t^h^r^o^u^gh^fo^r^m^a^l^o^r
ⁱⁿ^f^o^r^m^{al co}ⁿ^s^u^l^tatioⁿ^wⁱ^th^lo^{cal n}^oⁿ^p^r^o^f^{it, g}^o^v^e^rⁿ^m^eⁿ^t^{al, an}^d^co^m^m^uⁿⁱ^t^y^-^b^ase^d
^org^aⁿⁱ^zatⁱ^oⁿ^s^{, as}^desⁱ^gⁿ^e^{d t}^oⁱ^m^prov^{e t}^h^{e qu}^alⁱ^t^y^of^lⁱ^f^e^f^o^{r co}^m^m^uⁿⁱ^t^y^resⁱ^deⁿ^t^s^,
^p^a^r^ticu^l^ar^l^y^lo^w^-ⁱⁿ^co^m^eⁱⁿ^dⁱ^vⁱ^d^u^{als, o}^r^to^so^lv^{e p}^a^r^tic^u^l^ar^p^r^o^b^l^em^{s r}^e^lated^to^th^eⁱ^rⁿ^eed^s,
ⁱⁿ^cl^u^dⁱⁿ^g^:
^{(1) s}^u^ch^fⁱ^e^l^ds^as^h^eal^th^{care, ch}^{ild care (in}^c^lu^diⁿ^g^c^h^{ild care s}^e^rv^ices^prov^{ided on}^ca^m^pus
^th^{at are o}^p^eⁿ^an^d^acces^sib^l^{e to}^th^{e co}^m^m^uⁿⁱ^t^y^{), literac}^y^t^r^ainⁱⁿ^g^{, ed}^u^catioⁿ⁽ⁱⁿ^c^l^u^dⁱⁿ^g
^t^u^t^o^ri^al^s^e^rvⁱ^c^e^s^),^w^e^l^f^{are, soci}^al^s^e^rvⁱ^ces^{, t}^r^ans^port^a^tⁱ^oⁿ^,^h^o^u^sⁱⁿ^g^aⁿ^{d n}^eⁱ^g^h^borh^ood
ⁱ^m^p^r^o^v^e^m^eⁿ^t^,^p^u^b^lⁱ^c^s^a^fe^t^y^,^c^rⁱ^m^e^p^r^ev^en^tⁱ^on^an^{d con}^t^{rol, recreation}^,^ru^{ral dev}^e^lopm^eⁿ^{t, and}
^com^m^uni^t^yⁱ^m^prov^e^m^eⁿ^t^;
^{(2) w}^o^rkⁱⁿ^{a proj}^ect^{, as}^defⁱⁿ^e^{d i}ⁿ^S^ectⁱ^oⁿ^101(20)^of^t^h^{e N}^a^tⁱ^on^al^an^{d C}^o^mm^unⁱ^t^y^S^e^r^vⁱ^c^e
^A^c^t^o^f^{1990 (}^{42 U}^.^S^.^C^.^{§ 1}²⁵¹¹⁽²⁰^));
^{(3) s}^u^pport^s^e^rv^ices^{to s}^t^u^d^eⁿ^ts^wⁱ^t^h^di^s^a^bilitie^s^,ⁱⁿ^cl^u^d^ing^s^t^uden^t^s^wⁱ^t^h^dis^a^bi^{lities w}^h^o^ar^e
^en^r^o^lled^{at th}^{e in}^stit^u^tioⁿ^;^an^d
⁽⁴⁾^activ^{ities i}ⁿ^w^h^ic^h^{a st}^u^d^eⁿ^{t ser}^v^{es as a}^m^eⁿ^t^o^r^f^o^r^s^u^c^h^p^u^r^p^o^s^{es as—}
^(A^{) t}^u^t^o^riⁿ^g^;
^(B^{) s}^u^pportin^g^edu^cation^a^{l a}^{nd recreation}^a^{l activ}^ities^;^an^d
⁽^C⁾^c^o^unse^lⁱⁿ^g,ⁱⁿ^c^l^udⁱ^{ng c}^a^r^e^e^r^c^o^unse^lⁱⁿ^g.¹⁹
Tutoring and family literacy projects include those that employ students as reading tutors of
children who are of preschool age or who are in elementary school, or in family literacy projects.
In many instances, FWS jobs in tutoring and family literacy projects count toward an institution’s
7% community service requirement. However, this may not always be the case. For instance, ED
has determined that if FWS students are employed as tutors in an institution’s daycare center and
the center is not open and accessible to the community, then the job could not be counted toward ²⁰
satisfying the institution’s 7% community service requirement.

¹⁸^From^FY19^{94 t}^h^ro^ug^h^FY19⁹⁹^{, i}ⁿ^stitutⁱ^oⁿ^{s w}^e^re^sta^t^utorily^re^quire^{d to}^use^5%^of^theⁱ^r^FW^{S a}^lloc^a^t^ion^to
^c^o^m^p^eⁿ^s^a^te^s^t^ude^nts^e^m^ploy^e^dⁱⁿ^c^o^m^m^unity^se^r^v^ice^jobs^.
¹⁹^H^E^A^,^{§ 44}¹⁽^c⁾⁽⁴^{2 U}^.^S^.^C^.^{§ 2}⁷⁵¹⁽^c⁾⁾^.
²⁰^ED^,^FS^{A H}^a^nd^bo^ok^{, v}^o^l.^6—^C^a^m^pus^-^B^as^e^d^Pr^o^g^r^a^m^s^,^pp.^6-^{27 t}^h^r^o^ug^{h 6-}⁵⁵^.

Institutions may use up to the lesser of 10% of their FWS allocation or $50,000 to establish or
expand a job location and development program operated either by the institution or jointly with
another institution. The program must locate and develop jobs, including community service jobs,
for currently enrolled students. Jobs located and developed should be compatible with students’
scheduling needs and compliment their educational and vocational goals. The federal share of
funds used to operate the program cannot exceed 80%. Job location and development programs
cannot be used to find jobs at the institution, nor should they be used to find jobs for students
after graduation.
Under the FWS program, students are compensated with a combination of federal funding and a
matching amount provided either by the institution or the employer. The share of compensation
that may be provided through federal funding varies according to the type of FWS employment.
For most FWS jobs, the maximum federal share of compensation is 75%; however, in certain
instances, the federal share may be higher (see Table 1). For employment in the private for-profit
sector, the federal share of compensation is limited to 50%. An institution’s matching share of
compensation may come from any source (other than FWS), and may be paid in the form of
services, such as tuition, room, board, or books provided by the institution. Table 1 highlights the
maximum federal share of compensation for the various types of FWS employment.
Table 1. FWS Requirements for Federal Share of Compensation
^{Type of FWS}^Maximum^{Specific Requirements}
^Employment^{Federal Share}
^{FWS—In general}^75%^{General re}^quire^ment
^{Private non-profit or}^{May exc}^{eed 7}^{5%, b}^ut^{Employer selected for s}^tudent^on^case-by-case^{basis and}
^government^agency^other^{not exceed}^90%,^{otherwise would be u}^{nable to aff}^{ord cost of employment; and}
^{than t}^{he institution}^{consistent with}^{no more tha}^{n 1}^{0% of t}^{he instituti}^{on’s FWS students are}
^regulations^{employed in jobs for which t}^{he f}^e^{deral share e}^{xceeds 7}^5%
^{Regulatory exception}^a¹⁰⁰^%^{Determination by t}^{he Secretar}^{y t}^{hat federal sha}^{re in e}^{xcess of}
^{75% is}^necessa^{ry to f}^urthe^{r the}^p^{urpose of t}^{he FWS program}
^{Private for-profit sector}^50%^{Employing for-profit organization must}^{provide non-federal}
^{share of com}^pensation
^{Tutoring and Literacy}¹⁰⁰^%^{Priority given to employment of s}^{tudents in}^{projects f}^unded
^Projects^{under t}^he^Elementary^{and Secon}^{dary Education Act (}^ESEA)
^Work-Col^leges^50%^{Separate fu}^{nding aut}^{horization; institution must matc}^{h dollar-}
^for-dol^{lar with non-federal fu}^nds
^Source:^H^{EA, §§ 443, 4}^{44, 4}^47,⁴⁴⁸⁽⁴²^U.S.C.^{§§ 2753, 2}⁷⁵^{4, 2}⁷^{56a, 2}⁷⁵^{6b); and}^ED,^{FSA Handbo}^ok^{, vol. 6—}
^{Campus-Based Programs}^{, p}^{p. 6-9}^t^hrough^6-1^1.
^a.^{Applicable for sc}^{hools designated as eligible schools under the Dev}^{eloping Hispanic Serving I}^nstituti^ons
^{Program, the Strengt}^hening^Instit^{utions Program, the Ame}^{rican I}ⁿ^{dian Tribally Control}^{led Col}^leges^and
^{Universities Program, the Alaska}^{Native and Native}^{Hawaiian-Serving In}^{stitutions Program, the}
^Strengthe^{ning Historically Black Colleges and Universities Program.}

FWS authorizes funding to support comprehensive work-learning programs at select institutions
called “work-colleges.” Work-colleges are institutions that make work-learning an integral part of
their educational programs. For an institution to qualify for the Work-Colleges program, all
resident students must be required by the institution to participate in a work-learning program that
is an integral part of its educational philosophy. For purposes of the program, work-colleges can
only be public or private nonprofit institutions and must have a commitment of service to the
community. Activities authorized under the Work-Colleges program include those generally
authorized under FWS grants, including job location and development. In addition, Work-
Colleges program funds may be used to provide payments or credits to students participating in
work-learning programs, to promote and administer work-learning, and for the study of work-
learning programs. Funding for the Work-Colleges program is authorized separately from the
remainder of the FWS program. Institutions also may transfer funds from their FWS and Perkins
Loan FCC allocations to the Work-Colleges program.
Similar to the FSEOG program, FWS funds are allocated to IHEs according to statutorily
prescribed procedures. Funds first are allocated to institutions based on previous years’
allocations, with priority going to institutions that participated in the program in FY1999. These ²¹
institutions are eligible to receive 100% of their FY1999 allocation as their base guarantee.
Institutions that began participating after FY1999, but which are not first- or second-time
participants receive a base guarantee that is the greater of 90% of the amount they received in
their first year of participation, or $5,000. Institutions participating in the FWS program for their
first or second year receive as their base guarantee, the greatest of $5,000, 90% of an amount
proportional to that received by comparable institutions, or 90% of what the institution received
in its first year of participation. However, if an institution began participating in FWS after
FY1999 and received a larger allocation in its second year of participation than in its first, it is
allocated 90% of the amount it received in its second year of participation. If sufficient funds are
not appropriated, then institutions’ awards are reduced proportionately, resulting in an amount
called their adjusted base guarantee.
Funds in excess of the amount required to meet institutions’ base guarantee are allocated
according to institutions’ proportionate share of excess eligible need. For the FWS program,
excess eligible need is the amount by which an institution’s share of self-help need (fair share)
exceeds its base guarantee. Self-help need is calculated separately for undergraduate students and
graduate and professional students according to formulas that take into account the cost of
attendance at the institution and the approximate EFCs of students attending the institution.
Institutions whose grants are based in part on the need of independent students or those attending
less than full-time are required to assist these students through FWS employment with a
reasonable portion of the FWS grant. The Secretary is authorized to allocate up to 10% of funds
appropriated for FWS that are in excess of $700 million to institutions from which 50% or more
of Pell Grant recipients either graduate or transfer to four-year institutions.

²¹^T^h^is^is^e^qua^{l t}^o^t^h^e^s^u^m^of^its^FY¹⁹⁹^{9 (}^a^w^a^r^d^y^e^a^r^1999-²⁰⁰⁰⁾^ba^s^e^g^u^a^r^aⁿ^te^e^,^plusⁱ^t^sⁱⁿⁱ^tia^{l a}^w^a^r^{d y}^e^a^r^1999-²⁰⁰⁰
^{pro ra}^taⁱⁿ^c^r^e^a^s^e^,^plus^t^h^e^a^d^d^itio^na^{l FW}^{S f}^unds^t^h^e^ins^t^itutⁱ^oⁿ^r^eceiv^e^d^f^r^o^m^th^{e $}¹⁷^m^illioⁿ^{set asi}^d^{e th}^{at y}^ear^f^o^r
^a^lloc^a^tion^to^instit^uti^{ons t}^h^a^t^c^e^r^ti^fⁱ^e^d^tha^t^the^y^g^r^a^dua^te^d^o^r^t^r^an^sf^erred^at^l^east⁵⁰^%^o^f^t^h^ei^r^P^e^l^l^G^r^an^t^reci^pⁱ^ent^s^.

Institutions are provided flexibility to carryover up to 10% of their FWS funds for use in a
succeeding fiscal year to carry out the FWS program. If an institution neither uses funds in the
year for which they were granted, nor carries them over to the next fiscal year, the Secretary may,
in the next succeeding fiscal year, reallocate them to other institutions within the same state. Up
to 10% of an institution’s allocation may be granted by the Secretary for the purpose of making
grants to students prior to the beginning of the fiscal year, but after the end of the prior academic
year. The Secretary also is required to reallocate any excess funds returned by institutions to
eligible institutions that in the previous fiscal year used at least 5% of their FWS allocation to
compensate students employed in tutoring in reading or family literacy activities. Reallocated
funds must be distributed to such institutions according to their excess eligible need. Institutions
returning more than 10% of their allocation may, at the discretion of the Secretary, have their next
year’s allocation reduced by the amount returned.
The Federal Perkins Loan program authorizes the allocation of federal funds to IHEs to assist
them in capitalizing revolving loan funds for the purpose of making low-interest loans to students
with exceptional financial need. The Federal Perkins Loan program is authorized under the HEA
at Title IV, Part E. It supersedes Title II—Loans to Students in Institutions of Higher Education,
of the National Defense Education Act of 1958 (P.L. 85-864), which was incorporated into the
HEA through the Education Amendments of 1972 (P.L. 92-318). Previously, these loans were
known as National Defense Student Loans (Defense Loans) and National Direct Student Loans
(NDSLs).
Institutions capitalize revolving loan funds created under the Federal Perkins Loan program with
a combination of federal and institutional capital contributions (FCCs and ICCs, respectively).
Institutions apply to ED for FCC funds which are allocated according to procedures similar to
those used for the FSEOG and FWS programs. Each institution’s ICC must be equal to one-third
of the FCC. After making loans, institutions recapitalize their loan funds by depositing the
principal and interest repaid by students who borrowed under the program, as well as any other
charges or earnings associated with the operation of the program.
Institutions are required to establish written selection procedures for awarding Perkins Loans to
eligible students and to keep these on file at the institution. Loans must be made reasonably
available to all eligible students, to the extent that funds are available, and priority must be given
to students with exceptional financial need. Institutions’ selection procedures may include
individuals’ willingness to repay the loan.
Undergraduate students (including those seeking an additional undergraduate degree, if they are
otherwise eligible), and graduate and professional students are eligible to borrow from the
institutions they attend under the Perkins Loan program. Students studying abroad in programs
approved for academic credit by participating institutions also may receive Perkins Loans. Under
the terms of the program, the maximum amount a student may borrow per academic year is
$4,000 for undergraduate students and $6,000 for graduate and professional students. The
maximum aggregate amount that a student may borrow is limited to $20,000 in unpaid principal
for undergraduate students who have completed two years of study, but who have not completed
their baccalaureate degree; $40,000 for graduate and professional students; and $8,000 for any

other students. Both the annual and aggregate loan limits may be increased by up to 20% for
students studying abroad in approved programs. If the amount of an institution’s FCC is based in
part on independent students or those studying less than full-time, then these students must be
provided with a reasonable portion of the Perkins Loans made by the institution.
Interest on Perkins Loans is fixed at a rate of 5% per year.²² However, no interest accrues prior to
a student beginning repayment, nor while repayment is suspended during deferment (described
below). Borrowers must begin repaying Perkins Loans nine months after they no longer are
enrolled at least half-time, and must complete repayment within 10 years after beginning
repayment. Institutions may establish incentive repayment programs in which they may reduce
the interest rate by up to one percentage point in instances where a student makes 48 consecutive
payments. In addition, if a student repays a Perkins Loan in full prior to the end of the repayment
period, an institution may discount the loan balance owed by up to 5% at the time the repayment
is made. However, institutions may not use either federal or institutional funds from the Perkins
revolving loan fund to absorb the costs of incentive repayment programs and must reimburse the
fund on a quarterly basis for any lost income.
In general, deferment is a period during which a borrower is not required to make payments on
the loan balance and during which interest does not accrue. A Perkins Loan borrower is granted a
deferment if the borrower:
• is enrolled at least half-time at an eligible institution;
• is pursuing a graduate fellowship or rehabilitation training program approved by
the Secretary (excluding medical internship and residency programs);
• is seeking, but unable to find, full-time employment (for up to three years);
• is serving on active duty in the military or is performing qualifying National
Guard duty during a war or other military operation of national emergency, and
for 180 days following such service;
• is experiencing economic hardship (for up to three years);
• is engaged in a type of service that makes the borrower eligible for loan
cancellation (discussed later); or
• is a member of the National Guard or other reserve component of the armed
forces, or a member of the armed forces in retired status, who was called to
active duty service while enrolled, or within six months after being enrolled, at
an eligible institution (for up to 13 months following the completion of such
service or re-enrollment).
Borrowers are not required to request deferment in writing, but must provide the institution with
information necessary to document their deferment status. They also are not required to resume
making payments until six months following the completion of any of the periods described

²²^L^o^aⁿ^s^m^a^de^pr^ior^{to J}^u^ly^{1, 1}⁹⁸¹^w^e^r^e^a^t^3%^{; loa}ⁿ^s^m^a^de^be^tw^e^eⁿ^J^u^ly^{1, 19}^{81 a}^nd^Se^pte^m^be^r^30,¹⁹⁸¹^w^e^r^e^a^t^4%^;
^a^{nd l}^o^aⁿ^s^m^a^de^{on or}^a^f^te^r^O^c^tobe^r^{1, 1}⁹⁸¹^a^r^e^a^t^5%^.

above for which they are exempted from making payments. Time in deferment does not count
toward the 10-year repayment period.
In general, forbearance is a temporary suspension or postponement of payments during which
interest continues to accrue. A borrower may be granted forbearance from paying principal and
interest or of principal only if the borrower’s debt burden due to HEA student financial assistance
loans is greater than or equal to 20% of the borrower’s gross income, or if the institution
determines that forbearance should be granted for other reasons. Examples include services in
AmeriCorps or for reasons due to a “national military mobilization or other national ²³
emergency.” Borrowers are required to request forbearance in writing. Forbearance may be
granted for a period of up to one year at a time, and may be renewed for a total period of up to
three years.
Individuals who have engaged in the following types of public service are eligible to have part or ²⁴
all of their loans canceled:
• elementary or secondary school teacher at a public or private school located
within the school district of a local educational agency (LEA) eligible for federal
aid under Title I-A of the ESEA and in which low-income students are more than ²⁵

30% of the school’s enrollment;

• full-time staff member in a Head Start program;
• full-time special education teacher or a professional provider of Individuals with
Disabilities Education Act (IDEA) early intervention services;
• member of the U.S. Armed Forces in an area of hostilities;
• Peace Corps or Americorps*VISTA volunteer;²⁶
• full-time federal, state, or local law enforcement or corrections officer (including
prosecuting attorneys, but not public defenders);
• full-time teacher of mathematics, science, foreign languages, bilingual education,
or other shortage subject area;
• full-time nurse or medical technician; or
• full-time employee of a public or private nonprofit agency serving high-risk
children from low-income communities and their families.

²³^ED^,^FS^{A H}^a^nd^bo^ok^{, v}^o^l.^6—^C^a^m^pus^-^B^as^e^d^Pr^o^g^r^a^m^s^{, pp.}^6-^81.
²⁴^H^E^A^,^{§ 46}⁵⁽^a⁾⁽²^{0 U}^.^S^.^C^.^{§ 1}⁰⁸⁷^e^e⁽^a⁾⁾^.
²⁵^T^each^{er c}^aⁿ^cel^l^a^tⁱ^oⁿ^s^m^a^y^b^e^graⁿ^t^e^d^oⁿ^l^y^t^oⁱⁿ^dⁱ^vi^du^al^{s t}^eachⁱⁿ^{g i}ⁿ^{a sch}^o^o^l^serviⁿ^{g ch}ⁱ^l^d^r^en^f^r^o^m^l^o^w^-ⁱⁿ^co^m^e
^f^a^m^ilie^{s a}^{nd w}^h^ic^{h is liste}^dⁱⁿ^the^Dⁱ^r^e^c^t^or^y^{of D}^e^sⁱ^gn^ate^d^Low^-^Iⁿ^c^o^m^e^Sc^ho^ols^f^o^r^Te^ac^he^r^C^anc^e^l^l^a^tio^{n Be}^ne^fi^ts^.
²⁶^Bo^rro^w^e^{rs w}^h^o^h^a^v^e^recei^v^e^d^{a n}^a^tioⁿ^a^{l serv}^{ice ed}^u^catioⁿ^aw^ard^f^o^{r v}^o^luⁿ^t^{eer serv}^ice^w^ith^Am^eric^o^r^p^s^uⁿ^d^e^{r T}^itle
^I^-^D^of^the^N^a^tiona^{l a}^{nd C}^o^m^m^unity^Se^r^v^ic^e^A^c^{t of}^{1990 a}^r^eⁿ^o^{t e}^lⁱ^g^ible^f^o^r^loaⁿ^c^aⁿ^c^e^lla^tioⁿ^be^ne^f^its^.

Perkins Loan cancellation is based on both the number of years of service an individual has
completed and a rate of cancellation applicable to the particular type of service. Table 2 presents
the percentage of the principal of Perkins Loans that is canceled for each year of service in an
activity eligible for Perkins Loan cancellation. The terms of the program prescribe that the
amount of principal and interest canceled for public service shall not be considered as income for
purposes of the Internal Revenue Code (IRC) of 1986.
The Secretary is required to reimburse institutions for Perkins Loans canceled for students
engaged in public service. Funds for reimbursing institutions for loan cancellations may not come
from the appropriation designated for FCCs. Each year, the Secretary is required (to the extent
feasible), to reimburse institutions within three months after they file their applications for
reimbursement of campus-based funds. (Funds for the reimbursement of Perkins Loan
cancellations are appropriated separately from funds for Perkins Loan FCCs.)
Table 2. Perkins Loan Cancellation Rates by Type of Service
^{Percent of Perkins Loan Prin}^{cipal Can}^{celed Per Year}
^{of Service}^{Type of Service}
¹^st^{and 2}^nd³^rd^{and 4}^th⁵^th^{Year and}^Max.
^Years^Years^Later^Total
^{Elementary or}^secondary^{school teacher in a}^{15 20}³⁰¹⁰⁰
^{designated low-income school}
^{Staff membe}^{r in Head Start}^progr^am¹⁵¹⁵¹⁵¹⁰⁰
^{Special education teacher/IDEA}^p^rofessional^{15 20}³⁰¹⁰⁰
^provider
^{Armed Forces in area of}^hostilitie^s^12½^12½^N/A⁵⁰
^{Peace Corps or Americor}^{ps*VISTA volunteer}¹⁵²⁰^N/A⁷⁰
^{Law enforce}^{ment or}^corrections^officer¹⁵²⁰³⁰¹⁰⁰
^{Full-time teacher in shortage}^su^{bject area}¹⁵²⁰³⁰¹⁰⁰
^Nurse^{or medical technician}¹⁵²⁰³⁰¹⁰⁰
^{Employee of p}^{rovider of services}^{to high-risk}^{15 20}³⁰¹⁰⁰
^{children and families}
^Source:^H^{EA, § 465}⁽²⁰^U.S.C.^§¹⁰^87ee).
A borrower’s liability to repay Perkins Loans is also canceled upon death or becoming
permanently and totally disabled, as determined according to regulations issued by the Secretary.
However, institutions are not reimbursed by the Secretary for loans canceled due to death or
disability.
In general, a Perkins Loan is considered to be in default if the borrower has failed to comply with
the terms of the promissory note or failed to make payments on a loan for 240 days (for a loan
repayable monthly) or 270 days (for a loan repayable quarterly). The cohort default rate for an
institution is defined as the percentage of current and former students entering repayment on
Perkins Loans received for attendance at that institution who default on their loans before the end

of the following award year.²⁷For institutions with less than 30 students entering repayment in
any year, the cohort default rate is calculated over a three-year period.
A borrower who has defaulted on a loan may rehabilitate the loan by making 12 consecutive on-
time payments. Rehabilitated borrowers are returned to regular repayment status, begin a new 10-
year repayment schedule, and have the default removed from their credit history. A borrower may
rehabilitate a loan only once.
In certain instances where a school has followed due diligence procedures and is unable to collect
payments on a loan in which the amount owed is $25 or more, the school may assign a Perkins ²⁸
Loan (or NDSL) for collection to Federal Student Aid (FSA) Collections at ED.Upon accepting
a loan, ED acquires all rights in the loan and any payments made to the lending institution must ²⁹
be forwarded to ED.Any collections on Perkins Loans assigned to ED are returned to the U.S. ³⁰
Treasury.
Under the Perkins Loan program, funds are allocated to IHEs according to procedures using a
two-stage process somewhat similar to that used for the FSEOG and FWS programs—funds first
are allocated according to institutions’ previous year’s allocations (base guarantee), and any
remaining funds are allocated according to institutions’ share of excess eligible amounts of
student need (fair share increase). Unlike the formulas for the FSEOG and FWS programs,
however, the Perkins Loan allocation formulas also include a default penalty applicable to
institutions with large proportions of borrowers defaulting on their Perkins Loans. The default
penalty is used to limit the awarding of Perkins Loan FCCs to only institutions with cohort
default rates below a maximum threshold. Institutions with a cohort default rate of less than 25%
are assigned a default penalty of “1” and those with a default rate of 25% or greater are assigned a
default penalty of “0.”
According to the allocation formulas, FCC funds first are allocated to IHEs according to their
previous year’s allocations with priority going to institutions that participated in the Perkins ³¹
program in FY1999. These institutions are eligible to receive 100% of their FY1999 allocation.
Institutions that began participating in the Perkins Loan program after FY1999, but which are not
first- or second-time participants, are eligible to receive 100% of the amount they received in
their first year of participation. Those institutions that began participating after FY1999, and
which are first or second time participants, generally are eligible to be awarded either 90% of the
amount they received in the previous year or 90% of the amount awarded to comparable

²⁷^H^E^A^,^{§ 46}²⁽^g⁾^[⁴^{2 U}^.^S^.^C^.^§¹⁰⁸^7bb⁽^g⁾^]^.
²⁸^For^a^dditi^ona^l^inf^o^r^m^a^{tion o}ⁿ^t^h^e^a^s^sⁱ^gⁿ^m^e^{nt of}^P^e^r^k^ins^L^o^aⁿ^s^t^o^ED^f^o^r^c^o^lle^c^tion^,^s^e^e^U^.^{S. D}^e^pa^r^t^m^e^{nt of}
^Educ^a^tio^{n, O}^f^fⁱ^c^e^of^Fe^de^r^a^{l Stud}^eⁿ^{t A}ⁱ^{d, D}^e^a^r^C^o^lle^a^g^ue^L^e^tte^r^,^C^B^-^06-^12,^“^R^e^v^is^e^d^A^s^sⁱ^gⁿ^m^e^{nt For}^m^a^nd
^P^r^oc^e^dure^s^f^o^{r A}^ssigⁿ^ing^P^e^rk^ins^L^o^aⁿ^s,”^A^u^g^u^{st 200}^{6, a}^t^htt^p^://w^ww^.i^f^a^p.e^d^.g^ov^/dpc^le^tte^rs/CB06¹²^.htm^l.
²⁹^ED^,^FS^{A H}^a^nd^bo^ok^{, v}^o^l.^6—^C^a^m^pus^-^B^as^e^d^Pr^o^g^r^a^m^s^,^pp.^6-¹²⁴^thr^o^ug^h^6-¹^26.
³⁰^T^h^{e S}^ecret^ar^yⁱ^s^au^t^h^o^rⁱ^zed^,^b^u^tⁿ^o^t^re^q^uⁱ^re^d^,^t^o^real^l^o^cat^{e co}^l^l^ectⁱ^oⁿ^s^recei^ved^oⁿ^su^ch^l^o^an^{s (l}^{ess a}ⁿ^am^{ount not to}
^exce^ed³⁰^%^t^o^co^{ver co}^l^l^ectⁱ^oⁿ^c^o^st^{s) t}^o^IHE^s^acco^rdⁱⁿ^{g t}^o^t^h^{e p}^r^oced^u^r^{es f}^o^{r al}^l^o^catⁱⁿ^{g f}^e^d^e^ral^capⁱ^t^a^l^coⁿ^t^ri^b^u^tⁱ^oⁿ^s
^(d^escri^b^ed^b^e^l^o^w⁾^.
³¹^A^c^c^o^r^d^ing^t^o^the^D^e^pa^r^t^m^e^{nt of}^Educ^a^tio^n’^s^Ex^p^l^a^nati^oⁿ^of^W^o^r^k^s^h^e^e^t²⁰^07-²⁰⁰⁸^Aw^ar^d^Pe^rⁱ^od^f^o^{r t}^h^{e cam}^p^u^s^-
^ba^s^e^{d prog}^ra^m^s^{, this}^is^e^qua^l^to^th^e^ins^titu^tio^n’s^a^w^a^r^d^y^e^a^r^1999-²⁰⁰⁰^c^oⁿ^d^iti^ona^l^g^u^a^r^aⁿ^te^e^,^m^u^ltip^lie^{d by}^its^a^w^a^r^d
^y^e^a^r^1999-²⁰^{00 c}^o^h^o^rt^de^f^a^{ult pe}^na^lty^f^a^c^t^{or, m}^u^ltiplie^{d by}^a^60.⁷⁷^%^re^duc^tio^{n f}^a^c^t^or.

institutions on a per-capita basis. However, if an institution began participating in the Perkins
Loan program after FY1999 and received a larger allocation in its second year of participation
than in its first, it is allocated 90% of the amount it received in its second year of participation if
this is a larger amount than it would otherwise receive. The minimum grant amount is $5,000.
Any institution with a default penalty of “0,” however, has its FCC allotment reduced to “0.”
After allocating funds according to institutions’ previous year’s allocations, any remaining FCC
funds are allocated based on each institution’s fair share of excess eligible student need. This is
the amount by which an institution’s share of eligible self-help need exceeds the amount already
allocated to it according to its base guarantee. Like in the FWS program, self-help need is
calculated separately for undergraduate students, and for graduate and professional students
according to formulas that take into account the institution’s COA and the approximate EFCs of
students attending the institution. However, for the Perkins Loan program, an institution’s eligible
amount of need is the amount of the institution’s self-help need, minus the institution’s collections
(defined as the amount the institution collected in the second year prior to the award year,
multiplied by 1.21), multiplied by its cohort default penalty (either 1 or 0).
The Secretary is authorized to reallocate any excess Perkins Loan funds returned by institutions.
Eighty percent of these funds must be reallocated to institutions according to their excess eligible
amounts of student need, while the remaining 20% can be reallocated according to regulation
established by the Secretary. An institution returning more than 10% of its allocation will have its
subsequent year’s allocation reduced by the amount returned, unless waived by the Secretary as
contrary to the interest of the program.
Upon ceasing to participate in the Perkins Loan program or if authorization of the program
expires, institutions are required to begin a distribution of assets from their revolving loan ³²
funds. Should either occur, institutions must repay the Secretary a portion of the balance of their
loan funds that is proportional to the amount constituted by FCCs. In many instances, this ³³
percentage could range between 85% and 90% of an institution’s Perkins Loan fund. In its
FY2006, FY2007, and FY2008 budget proposals, the Administration has recommended
terminating the Perkins Loan program, which would result in a distribution of assets.
Institutions are afforded flexibility in being able to transfer funds between the campus-based
programs in which they participate. They may transfer a total of 25% of their allotment under the
Perkins Loan program for use in the FSEOG or FWS programs, or both. Institutions also may
transfer up to 25% of their allotment under the FWS program for use in the FSEOG program.
Work-colleges also may transfer up to 100% of their Perkins Loan FCC to the FWS Work-
Colleges program. No funds may be transferred out of the FSEOG program.

³²^H^E^A^,^Se^c^{tion 4}⁶⁶⁽²^{0 U}^.^S.^C^.^§¹⁰⁸^7f^f⁾^.
³³^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^{n, O}^f^fⁱ^c^e^o^f^P^o^s^t^s^e^c^o^nda^r^y^Educ^a^tio^n,^D^e^ar^C^o^lle^a^gue^Le^tte^r^C^B^-⁰^0-⁰⁵^,^Enc^l^os^ur^e¹^.
^In^stitu^tⁱ^oⁿ^{s p}^a^rtici^p^atin^gⁱⁿ^th^e^P^e^rkⁱⁿ^{s L}^o^an^p^r^o^g^ram^t^y^pⁱ^call^y^h^a^v^e^receiv^e^d^{FCCs th}^r^o^u^g^h^o^u^t^th^e^d^u^ratioⁿ^o^f^th^eir
^pa^r^tic^ipa^tio^{n i}ⁿ^t^h^e^pr^og^r^a^m^.^Fr^om^the^inc^e^p^tion^of^the^pr^og^r^a^m^thr^oug^{h t}^h^e¹⁹⁹²^-¹⁹⁹^{3 a}^w^a^r^{d y}^e^a^r^{, the}^f^e^de^r^a^{l s}^h^a^r^e
^w^a^{s 9}⁰^%^.^In^t^h^{e 19}⁹³^-¹⁹⁹⁴^aw^ard^y^ear,^t^h^{e f}^e^d^e^r^a^l^sh^{are was 7}⁰^%^.^Sⁱⁿ^{ce t}^h^{e 19}⁹⁴^-19⁹⁵^aw^ard^y^ear^t^h^{e f}^e^d^e^ral^sh^are
^ha^s^be^eⁿ⁷⁵^%^.

Institutions generally have used their transfer authority to move funds to the FSEOG program,
primarily from FWS. For award year (AY) 2005-2006, based on data reported to ED, 1,495
institutions participating in the FWS program transferred a total of $108.9 million to the FSEOG ³⁴
program. During years when Perkins Loan FCCs were appropriated, some institutions also
transferred funds from the Perkins Loan program to the FSEOG and FWS programs.
Institutions participating in the campus-based programs are entitled to an administrative cost
allowance to cover the expenses of administering the programs. Administrative cost allowances
are determined according to the following schedule:
• 5% of the institution’s first $2.75 million in expenditures; plus
• 4% of the institution’s expenditures greater than $2.75 million and less than $5.5
million; plus
• 3% of the institution’s expenditures in excess of $5.5 million.
In calculating administrative costs, institutions include both federal and institutional ³⁵
expenditures. Institutions take their administrative cost allowances out of federal funds allocated
for the FSEOG and FWS programs, and from cash on hand in their revolving loan funds for the
Perkins Loan program. Institutions have some discretion in determining how to allocate
administrative costs across the three campus-based programs. Administrative cost allowances as
claimed for the campus-based programs are shown in Table 3.
Table 3. Administrative Cost Allowances for the
Campus-Based Programs: AY 2005-2006
^{Campus-Based Pr}^ogra^m^{Administrative Cost Allowan}^ce
^{FSEOG $15,1}^48,5²⁹
^{FWS 63,8}^15,1⁴²
^{Perkins Loans}^67,3^25,0⁶⁹
^{Total 146,}²⁸^8,74⁰
^Source:^{U.S. Department of}^Edu^{cation, Office of Postsecondary E}^ducation,^{Federal C}^{ampus-Based Pr}^{ograms Data}
^{Book 2007}^.

This section presents budget information on past funding levels for the campus-based programs,
and also program information including the number of institutions participating in each program,

³⁴^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^{n, O}^f^fⁱ^c^e^o^f^P^o^s^t^s^e^c^o^nda^r^y^Educ^a^tio^n,^Fe^de^r^a^{l C}^a^m^pus^-^B^as^e^d^Pr^ogr^am^s^D^a^{ta B}^ook
²⁰⁰⁷^{, a}^t^htt^p^://w^w^w^.e^d.g^o^v^/^fⁱ^na^id/prof^/^re^s^ourc^e^s^/da^t^a^/^da^ta^book²⁰⁰⁷^/^d^a^t^a^book²⁰⁰⁷^.h^tm^{l. (H}^e^r^e^a^f^t^e^r^c^ite^{d a}^s^ED^,
^Fe^de^r^a^{l C}^a^m^pus^-^B^as^e^d^Pr^o^g^r^a^m^s^D^a^{ta B}^ook^,²⁰⁰⁷^.)
³⁵^H^E^A^,^{§ 48}^{9 (}^{20 U}^.^S.C^.^§¹⁰⁹⁶⁾^;^ED^,^F^S^{A Ha}^nd^bo^o^k^{, vo}^l^.⁶^—^C^a^m^pus^-^B^as^e^d^Pr^o^g^r^a^m^s^{, pp.}^6-^{25 thr}^oug^{h 6-}²⁶^.

the number of students awarded aid and average award amounts, and the distribution of campus-
based aid according to student and institutional characteristics.
The share of postsecondary student financial aid provided through the campus-based programs
has decreased steadily over the past 35 years. According to the College Board, whereas in
academic year 1971-1972, 19.7% of total federal student aid was provided through the campus-³⁶
based programs, preliminary figures indicate that only 3.6% was in academic year 2006-2007.
Now the greatest proportion of student aid is provided through federal loans (other than Perkins
Loans) and an increasing amount is provided through higher education tax benefits. Over the past
several years, funding has increased modestly for the FSEOG program, while funding for the
FWS and Perkins Loan programs (FCCs and loan cancellations) has decreased. FY2004 was the
last fiscal year in which discretionary funding was appropriated for Perkins FCCs. Annual
funding levels for each of the campus-based programs, beginning with FY1999 (the first year
since the last HEA reauthorization), are presented in Table 4.
Under each of the campus-based programs federal funds are required to be matched by the
participating institution (or the employer under FWS, if other than the institution). As previously
described, under each of the programs, the institutional match generally is one-third the amount
of the federal share (however, in the FWS program, the required match can be as high as one-half
of the federal share or as low as zero, depending on the type of employment). Because of the
matching requirements, the campus-based programs leverage federal funding to provide an
amount of student financial aid that is greater than the amount of federal funds appropriated for
each program.
Table 4. Campus-Based Program Funding:
Appropriations for FY1999-FY2008
^{(in thousands of doll}^ars)
^{Fiscal Year}^FSEOG^FWS^Perkins-FCC^{Perkins Loan}^{Cancellations}
^FY1999^619,⁰⁰⁰^870,⁰⁰⁰^100,⁰⁰⁰^30,0⁰⁰
^FY2000^a^631,⁰⁰⁰^934,⁰⁰⁰^100,⁰⁰⁰^30,0⁰⁰
^FY2001^691,⁰⁰⁰^1,01^1,00⁰^100,⁰⁰⁰^60,0⁰⁰
^FY2002^725,⁰⁰⁰^1,01^1,00⁰^100,⁰⁰⁰^67,5⁰⁰
^FY2003^760,⁰²⁸^1,00^4,42⁸^99,3⁵⁰^67,0⁶¹
^FY2004^770,⁴⁵⁵^998,⁵⁰²^98,7⁶⁴^66,6⁶⁵
^FY2005^778,⁷²⁰^990,²⁵⁷⁰^66,1³²
^FY2006^b^775,⁴⁶²^999,⁵²³^4,73¹^65,4⁷¹
^FY2007^770,⁹³³^980,³⁵⁴⁰^65,4⁷¹

³⁶^T^h^{e Co}^lleg^e^Bo^ard^,^Tr^eⁿ^dsⁱⁿ^St^ude^nt^Aid²⁰⁰⁷^,^“^T^r^e^ndsⁱⁿ^St^ude^{nt A}ⁱ^{d: T}^a^ble^1a⁽^H^is^tor^y⁾^,^Fu^nds^U^s^e^d^{to Fi}^na^nc^e
^Pos^t^s^e^c^onda^ry^Educ^a^tio^{n Ex}^pe^ns^e^s^{in Curre}ⁿ^t^D^o^lla^rs⁽ⁱ^{n M}^illi^ons^{), 1}⁹⁶³^-6^{4 to}²⁰⁰⁶^-0^7”²⁰⁰⁶^{, a}^t
^http:^//w^w^w^.c^olle^g^e^boa^r^d^.c^om^/^p^r^o^d_d^ow^nloa^ds^/^a^bou^t/^ne^w^s^_inf^o/^tr^e^nds^/^07_s^t^ude^nt_aⁱ^d_ta^b^le^s^.^x^l^s^.

^{Fiscal Year}^FSEOG^FWS^Perkins-FCC^{Perkins Loan}^{Cancellations}
^FY2008^757,⁴⁶⁵^980,⁴⁹²⁰^64,3²⁷
^FY2009^c⁰^980,492⁰⁰
^Sources:^{U.S. Department of}^{Education, Budget Service,}^{Department of Education Fiscal Year 2009 President’s}
^Budget^{; and historical tables.}
^a.^{FSEOG includes a}^$1^{0 million emergency a}^p^p^{ropriation for victims}^{of Hur}^{ricanes Den}^{nis and Floyd.}
^b.^{Includes a ma}^{ndatory rea}^pp^ropri^{ation of $28,4}²⁹^milli^{on in expire}^{d FY2005}^fu^{nds p}^urs^uant^{to the}^National
^{Disaster Student Aid Fairness Ac}^{t (P.L. 109-86}^).
^c.^{President’s budget re}^que^{st for FY}²⁰⁰^9.
In fall of 2005, 6,793 postsecondary institutions were participating in HEA Title IV financial aid ³⁷
programs.During AY2005-2006, approximately 55% of Title IV institutions awarded FSEOG
aid, while approximately 48% employed students in FWS. However, only approximately 25% of
Title IV institutions advanced loans under the Perkins Loan program. While fewer institutions of
all types participate in the Perkins Loan program than in either FSEOG or FWS, far fewer two-³⁸
year and proprietary participate in the Perkins Loan program than the other two programs. It is
possible that these lower levels of participation are due to factors such as the administrative
burden of administering a revolving loan fund and the generally higher cohort default rates of
students who attend these types of institutions.
Over the past decade, there has been a slight increase in the number of IHEs participating in the
FSEOG and FWS programs. Institutional participation in the Perkins Loan program, however, has
continued a pattern of decline that has occurred over the past quarter century. Figure 1 displays
the number of institutions participating in each of the campus-based programs since the 1983-

1984 award year.

³⁷^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^{n, N}^a^tiona^{l C}^e^nte^r^f^o^r^E^duc^a^tⁱ^on^Sta^tⁱ^s^tic^s^,^Iⁿ^te^g^r^a^t^e^d^P^o^s^t^s^e^c^oⁿ^d^a^r^y^Educ^a^tio^{n D}^a^ta
^Sy^s^t^em⁽^I^P^ED^S)^,^P^e^e^r^Aⁿ^a^l^y^s^is^Sy^s^t^em^{, 2004}^.
³⁸^ED^,^Fe^de^r^a^l^C^a^m^p^us^-^B^as^e^d^Pr^o^g^r^a^m^s^D^a^t^a^B^ook^,²⁰⁰⁵^.

Figure 1. Institutions Participating in the Campus-Based Programs: AY1983-1984
through AY2007-2008
^Source:^{ED, Federal Campu}^{s-Based Programs Data Book, 2006; a}^{nd ED, Federal Campus -Based P}^{rograms Data}
^{Book, 2007.}
This section presents information on the number of students being served and the average award
amounts for each of the three campus-based programs based on program data from ED. To
facilitate comparison of student award amounts over time, these data have been adjusted to 2005
dollars according to the consumer price index for all urban consumers (CPI-U).
FSEOG program data on the number of students granted awards and the average award amount
since the 1986-1987 award year (in constant 2005 dollars) are presented in Figure 2. Once the
smallest of the three campus-based programs in terms of the number of students served, the
FSEOG program has grown steadily since its inception in the 1967-1968 award year to become
the largest today. Since AY 1989-1990, it has served more students annually than either of the
other two campus-based programs. The number of students receiving FSEOG awards increased
considerably during the 1990s, reaching 1.4 million in 2005-2006 (more than twice as many
students as received awards in 1986-1987). The average amount of aid provided per student under
the FSEOG program is the lowest among the three campus-based programs. Over the past two
decades, increasing numbers of students have been served through the FSEOG program, and the
average award amount has increased from $633 in 1986-1987 to $764 in 2005-2006. However, in
constant dollars, award amounts have declined by 32%.

Figure 2. FSEOG: Number of Students Receiving Awards and Average Award
Amounts, AY1986-1987 through AY2005-2006
^Source:^{U.S. Department of}^Edu^{cation. Office of Postsecondary E}^{ducation. Federal Campus Based}^Programs
^{Data Book 2007.}
FWS program data are presented in Figure 3. For most of the past two decades, between 650,000
and 750,000 students have been served annually through FWS; however, in recent years there has
been a marked increase in participation—more than 810,000 students received FWS aid in 2004-
2005. Since the mid-1980s, the average FWS award has increased from $912 in 1986-1987 to
$1,478 in 2005-2006. However, when adjusted for inflation, this amounts to a decrease of 9.1% in
constant dollars. From AY1994-1995 through AY1999-2000, institutions participating in the FWS
program were required to expend at least 5% of their initial and supplemental FWS allocations to
compensate students employed in community service jobs. Beginning with AY2000-2001,
institutions are now required to expend 7% of their FWS allotment on community service and to
operate at least one tutoring or family literacy project. Since the community service requirements
have been in place, ED reports that the number of students employed in community service
increased from 58,596 in AY1994-1995 to 135,758 in AY2004-2005, but decreased to 121,097 in
AY2005-2006. The shaded portion of the bars in Figure 3 indicates the number of students
employed in community service.

Figure 3. FWS: Number of Students Receiving Awards and Average Award Amounts,
AY1986-1987 through AY2005-2006
^Source:^{U.S. Department of}^Edu^{cation. Office of Postsecondary E}^{ducation. Federal Campus Based}^Programs
^{Data Book 2007.}
Success in meeting the community service requirements is determined by dividing the total funds
used to compensate students employed in community service jobs by the institution’s total FWS
allocation; and by determining whether the institution expended part of its allocation to
compensate students for community service employment as reading tutors or for family literacy
activities. Institutions may apply to the Secretary for a waiver from either or both of the FWS
community service requirements. There is no explicit penalty for failing to meet the requirement.
Information on the expenditure of FWS funds for community service, by IHE for AY2005-2006,
has been reported by the U.S. Department of Education and is available from the Corporation for
National and Community Service. Overall, participating IHEs spent 15.75% of their allocations to
compensate students employed in community service jobs. Of 3,366 IHEs reporting data for ³⁹
AY2005-2006, 2,997 (89%) either met the 7% expenditure requirement or received a waiver.
Historical data on the Perkins Loan program are provided in Figure 4. Approximately the same
number of students receive aid through the Perkins Loan program as through FWS. Since 1986-
1987, the annual number of students served has ranged between approximately 640,000 and
760,000. The average Perkins Loan amount, however, is considerably greater than the amount of
aid provided under either FSEOG or FWS. Over the past two decades, average Perkins Loan

³⁹^Corp^ora^tio^{n f}^o^{r Na}^tio^na^{l a}ⁿ^d^Co^m^m^unit^y^Se^rv^ic^e^,^V^o^l^uⁿ^t^e^e^r^ingⁱⁿ^Am^e^r^ic^a^,^T^h^e^Role^of^the^Fe^de^r^a^{l G}^o^v^e^rn^m^e^nt,
^Fe^de^r^a^{l W}^o^r^k^-^S^tudy^P^r^og^r^a^m^,^a^t^http:^//w^w^w^.na^tiona^ls^e^r^vⁱ^c^e^.^g^o^v^/^p^d^f^/^05-⁰^6_FW^S^.x^ls^{. N}^o^te^{: da}^ta^a^r^e^not^r^e^por^te^d^on
^tutori^ng^aⁿ^d^f^a^mⁱ^l^y^lite^ra^c^y^proje^c^ts.

amounts have more than doubled, increasing from $1,067 in 1986-1987 to $2,190 in 2004-2005.
In constant dollars, this represents an increase of 15%.
Figure 4. Perkins Loans: Number of Students Receiving Awards and Average Award
Amounts, AY1986-1987 through AY2005-2006
^Source:^{U.S. Department of}^Edu^{cation. Office of Postsecondary E}^{ducation. Federal Campus Based}^Programs
^{Data Book 2007.}
Perkins Loans cohort default rates have declined from a high of 12.95% for the 1995-1996 cohort
to 8.10% for the 2004-2005 cohort. (See Table 5.) Four-year institutions typically have the lowest
cohort default rates, while those of two-year and proprietary institutions are much higher. At the
end of FY2004, the Administration reported a total of $1.2 billion in outstanding defaulted ⁴⁰
Perkins Loans, with $321 million of this amount assigned to ED for collection.
Table 5. Perkins Loan Cohort Default Rates:
AY1993-1994 through AY2004-2005
¹⁹⁹^3-¹⁹⁹^4-¹⁹⁹^5-¹⁹⁹^6-¹⁹⁹^7-¹⁹⁹^8-¹⁹⁹^9-²⁰⁰^0-²⁰⁰^1-²⁰⁰^2-²⁰⁰^3-²⁰⁰^4-
¹⁹⁹⁴¹⁹⁹⁵¹⁹⁹⁶¹⁹⁹⁷¹⁹⁹⁸¹⁹⁹⁹²⁰⁰⁰²⁰⁰¹²⁰⁰²²⁰⁰³²⁰⁰⁴²⁰⁰⁵
^10.7⁶^12.5⁷^12.9⁵^12.4⁸^11.5⁴^10.6¹^{9.99 8.35 8.85 8.29 8.12 8.10}
^Sources:^ED,^{Federal Campus-Based Programs Data Books}^{, 1996 through 2007}^{; U.S}^{. Department of}^E^ducation,
^{Official Cohort Default Rates for Schools, National Student Loan Default Rates.}

⁴⁰^O^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^{nd B}^udg^e^t^,^Bu^dge^t^{of t}^h^e^Uⁿ^ite^{d St}^ate^s^G^o^v^e^r^nm^eⁿ^{t, Fis}^c^{al Ye}^ar²⁰⁰⁵^—A^pp^e^ndix^,
^“^D^e^p^a^r^t^m^eⁿ^{t of}^Educ^a^tio^{n, O}^f^fⁱ^c^e^of^Stude^{nt F}ⁱ^na^nc^ia^{l A}^s^sⁱ^s^t^aⁿ^c^e^,^{” p.}³⁶^1.

In the 110^th Congress, authorization for the campus-based programs and other HEA programs has
been extended through April 30, 2008, under the Higher Education Extension Act of 2008 (P.L.

110-198). In each chamber, bills have advanced to amend and extend the HEA. On July 24, 2007,

the Senate passed S. 1642, the Higher Education Amendments of 2007; and on February 7, 2008,
the House passed H.R. 4137, the College Opportunity and Affordability Act of 2008. Both bills
amend the campus-based programs, as well as other programs authorized under the HEA, and ⁴¹
extend their authorization through FY2013. On July 29, 2008, House and Senate conferees ⁴²
agreed to a conference report to accompany H.R. 4137. This part of the report reviews selected
aspects of the campus-based programs that may be affected by proposals contained in S. 1642 and
H.R. 4137, as passed by the Senate and the House, respectively.
Over the past several years, a number of proposals have been made to substantially modify or ^th
terminate authorization for one or more of the campus-based programs. For instance, in the 108 ^th
Congress and in the 109 Congress, HEA reauthorization bills were considered that would have
amended the procedures used to allocate funds to institutions by phasing out the procedures for ⁴³
allocating funds on the basis of institutional base guarantees.For each year since FY2004, in its
budget request, the Administration has requested that no funding be provided for federal capital
contributions for the Federal Perkins Loan program; and for each year since FY2006, it has
proposed terminating the program. In its FY2006 budget request, the Administration proposed
replacing the FWS program requirement that IHEs use 7% of their allocation to compensate
students employed in community service jobs with a community service set-aside equal to 20% of
the funds appropriated for FWS. Under the proposal, IHEs would apply separately for community
service funds that could be used only to support community service employment. In the summer
of 2006, the Secretary’s Commission on the Future of Higher Education recommended “that the
entire financial aid system be restructured” and that “federal grant programs should be ⁴⁴
consolidated to increase the purchasing power of the Pell Grant.” The Administration’s FY2008
and FY2009 budget requests have recommended terminating both the FSEOG program and the ⁴⁵
Federal Perkins Loan program.

⁴¹^For^m^o^r^e^de^ta^ile^{d i}ⁿ^f^o^r^m^a^{tion on}^S.¹⁶^42,^H^.^R^.⁴¹^37,^aⁿ^d^H^E^A^r^e^a^u^thor^iz^a^tion^,^s^e^e^C^R^S^R^e^por^{t R}^L³³⁴¹^5,^Hⁱ^ghe^r
^Educ^a^tio^{n Ac}^{t Re}^aut^hor^iz^atio^n:^A^C^o^m^p^ar^is^on^{of C}^u^r^r^e^{nt L}^a^w^an^d^M^a^jor^Pr^o^pos^als^{, by}^A^d^a^m^Stoll^e^t^a^l^{., a}ⁿ^d^CRS^th
^R^e^por^{t R}^L³⁴²⁸^3,^Hⁱ^ghe^r^E^duc^a^tⁱ^{on Ac}^t^Re^au^th^or^iz^ati^on^{in t}^h^e¹¹⁰^Co^ng^{ress: A Co}^mpa^r^ison^{of Majo}^{r Prop}^o^s^a^l^s^{, by}
^Bl^ake^A^l^an^Nau^g^h^t^oⁿ^et^al^.
⁴²^T^h^e^Se^na^te^C^o^m^m^itte^e^{on H}^e^a^{lth, Ed}^uc^a^tion^,^L^a^bor^{, a}^nd^P^e^ns^io^ns^ha^s^pos^te^d^a^dr^a^f^{t of}^the^c^onf^e^r^eⁿ^c^e^r^e^por^{t to}
^acco^m^p^an^y^H.^R.⁴¹³⁷^t^h^at^w^a^{s agreed}^t^o^b^y^Ho^u^s^{e an}^d^S^eⁿ^a^t^e^co^nf^er^{ees o}ⁿ^Ju^l^y²⁹^,²⁰⁰⁸^,^at^h^t^t^p^:^/^/^h^el^p^.^sen^a^t^e^.^g^o^v^/
^Hearⁱⁿ^gs/²⁰⁰^8_⁰⁷^_2^9_^E^/^KOS⁰⁸⁴⁰⁰^_^x^m^l^.^p^d^f^.
⁴³^F^o^{r a m}^o^{re d}^e^t^aⁱ^l^e^d^dⁱ^scu^ssi^on^o^fⁱ^ssu^{es co}ⁿ^cernⁱⁿ^g^t^h^{e al}^l^o^catⁱ^oⁿ^p^r^o^ced^u^r^{es f}^o^{r each}^o^f^t^h^{e t}^h^{ree ca}^m^p^u^s^-b^ased
^pr^og^r^a^m^s^{, s}^e^e^C^R^S^R^e^por^{t R}^L³²⁷⁷⁵^,^T^h^e^C^a^m^pus^-^B^as^e^d^Fi^na^ncⁱ^a^{l Ai}^{d Pr}^o^g^r^a^m^s^:^A^Re^vⁱ^e^w^an^{d A}^naly^s^is^o^f^the
^Alloc^a^tⁱ^oⁿ^of^Fu^nds^{to I}ⁿ^s^tit^utioⁿ^s^an^{d the}^Dⁱ^s^t^rⁱ^bu^tio^{n o}^f^Ai^{d t}^o^St^ude^nts^,^by^D^a^vⁱ^{d P}^.^Sm^ole^.
⁴⁴^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^n,^A^Te^s^t^of^Le^ade^r^s^hⁱ^p^:^C^har^ti^ng^the^Futur^e^{of U}^.^{S. H}ⁱ^ghe^r^E^duc^at^io^n,²⁰^06,^p.¹⁹^{, a}^t
^http:^//w^w^w^.e^d.g^o^v^/^a^bout/^bds^c^o^m^m^/^lis^t/hie^df^utur^e^/^r^e^por^ts^/^f^ina^l^-^r^e^por^t.p^d^f^.
⁴⁵^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^n,^Fⁱ^s^c^a^l^Y^e^a^r²⁰⁰⁸^J^u^s^tif^ic^a^tions^of^A^ppr^opr^ia^ti^{on Es}^tⁱ^m^a^te^s^{to the}^C^ong^r^e^s^s^,^V^o^lum^e
^I^I^,^Stu^d^eⁿ^t^Aⁱ^{d O}^v^e^r^vⁱ^ew^{, 2007,}^{pp. N}^-^{5 t}^o^N^-⁶^,^a^v^a^ila^ble^a^t^htt^p^://^w^w^w^.^e^d.g^o^v^/^a^bout/^o^v^e^r^v^iew^/^b^udget^/^budg^e^t⁰⁸^/
⁽^c^onti^nue^d.^..)

Over the past several years, a number of major changes have been proposed for one or more of
the campus-based programs, including their termination. However, the proposals being advanced ^th
in the 110 Congress would make comparatively modest changes to the programs and would
extend the authorization of appropriations to fund most programs through FY2013. The
remainder of this part provides a brief overview amendments to the campus-based programs
proposed in S. 1642 and H.R. 4137.
S. 1642 authorizes the appropriation of $675 million for the FSEOG program for FY2008, and
such sums as may be necessary for each successive fiscal year through FY2013. H.R. 4137
authorizes the appropriation of $675 million for FY2009, and such sums as may be necessary for
each successive fiscal year through FY2013.
Under current law, the Secretary is authorized to allocate an amount equal to up to 10% of the
amount by which funds appropriated for the programs authorized under HEA, Title IV, Part A
exceeds $700 million, among IHEs from which 50% or more Pell Grant recipients either graduate
or transfer to four-year IHEs. S. 1642 eliminates this provision; H.R. 4137 retains current law.
The authority to allocate FSEOG funds to institutions meeting the specified 50% graduation or
transfer rates is not exercised by the Secretary, and institutional data on Pell Grant recipient
graduation and transfer rates are not currently collected by ED. (Although this authority is not
used for the FSEOG program, the Secretary once exercised a similar authority under the FWS
program to award $13 million in FWS funding for the 1997-1998 award year to IHEs that
certified that 50% or more of their 1990-1991 Pell Grant recipients had either graduated or ⁴⁶
transferred to a four-year college.)
As noted earlier, after allocating base guarantee funds to institutions, all remaining funds are
allocated to institutions according to fair share allocation procedures. According to the fair share
allocation procedures, funds are allotted to IHEs in proportion to each institution’s share of the
national total of institutional need that is in excess of the amount each IHE received as its base
guarantee. Institutional need is an expression of the relationship between the average cost of
attendance (COA) at a participating institution and the average expected family contributions
(EFCs) of the students who apply for federal student aid at that institution. For purposes of the

^(...c^on^tin^ue^d)
^justif^ic^a^tions/ⁿ^-a^idov^e^r^vⁱ^e^w^.pdf^.
⁴⁶^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^{n, O}^f^fⁱ^c^e^o^f^P^o^s^t^s^e^c^o^nda^r^y^Educ^a^tio^n,^D^e^a^r^C^o^lle^a^g^ue^L^e^tte^r^C^B^-^97-^11,^J^u^ly^{1, 19}⁹⁷^;
^http:^//www^.ifa^p.e^d^.g^ov^/dpc^le^tte^rs^/doc⁰²⁴⁶^_^b^o^d^y^o^f^t^e^x^t.htm^.

fair share allocation procedures, COA consists of the average tuition and fees per student at the
IHE, plus a standard living cost allowance and an allowance of $450 for books and supplies.
Both S. 1642 and H.R. 4137 increase the allowance for books and supplies from $450 to $600
uniformly for all institutions. It appears that this change will have a very modest impact in
redistributing the allocation of fair share funding from higher-cost institutions to lower-cost
institutions, since the $150 increase is proportionally greater for low-cost IHEs. For example, if
an IHE has a COA of $5,000, the change represents a 3% increase in COA; for an IHE with a
COA of $15,000, the change represents only a 1% increase in COA. Still, because in recent years,
after allocating funds for base guarantees, only a limited amount has been available for allocation
according to fair share procedures and because the aggregate total of institutional need will
increase as well, the redistribution of funds across institutions will likely be minimal.
Under current law, two authorizations of appropriations are provided for the FWS program.
Section 441(b) authorizes the appropriation of funds for the FWS program in general; and §
448(f) authorizes the appropriation of funds for the Work-Colleges component of the FWS
program. Although a separate authorization of appropriations is provided for Work-Colleges,
funds have often been provided from the amount appropriated under § 441(b). For example, for
FY2006, $6 million was provided for Work-Colleges from among the total FWS appropriation ⁴⁷
provided under § 441(b).For FY2008, the conference report to the Consolidated Appropriations
Act, 2008 (P.L. 110-161) directs ED “to provide the same funding as in fiscal year 2007 for the
Work Colleges program authorized under section 448 of the Higher Education Act from the ⁴⁸
Federal Work-Study Programs appropriation.”
S. 1642 authorizes the appropriation of $1 billion for the FWS program for FY2008, and such
sums as may be necessary for each succeeding fiscal year through FY2013. S. 1642 also removes
the separate authorization of appropriations specifically for the Work-Colleges program and
provides for the use of funds appropriated under § 441(b) for the Work-Colleges program.
H.R. 4137 authorizes the appropriation of $1.5 billion for the FWS program under § 441(b) for
FY2009, and such sums as may be necessary for each successive fiscal year through FY2013; and
such sums as may be necessary for FY2009 through FY2013 for the Work-Colleges program.
H.R. 4137 also establishes a new authorization of appropriations to grant funds to IHEs for Off-
Campus Community Service (described below). Such sums as may be necessary are authorized to
be appropriated for FY2009 through FY2013 for Off-Campus Community Service grants.

⁴⁷^H.^Rep^t^.¹⁰⁹^-³³⁷^,^coⁿ^f^eren^{ce rep}^o^r^t^t^o^acco^m^p^an^y^H.^R.³⁰¹⁰^,^“M^akiⁿ^{g ap}^p^r^op^ri^atⁱ^oⁿ^s^f^o^{r t}^h^{e Dep}^a^r^t^m^eⁿ^t^{s o}^f^L^a^b^o^r^,
^H^e^a^{lth a}^{nd H}^u^m^a^{n Se}^r^v^ic^e^s^{, a}^{nd Educ}^a^tio^{n, a}^{nd R}^e^la^te^d^A^g^eⁿ^cⁱ^es^f^o^r^the^fⁱ^s^c^a^l^y^e^a^r^e^nding^Se^pte^m^be^r³⁰^{, 2}⁰⁰⁶^{, a}^nd
^f^o^{r othe}^{r p}^u^rp^ose^s^,”⁽^P^.L^{. 1}^09-¹⁴^{9). Sim}^ila^rly^,^f^o^{r FY20}^02,^$⁴^m^{illion w}^a^{s prov}^ide^d^f^o^{r W}^o^rk^-Colle^g^e^{s (H.Re}^p^{t. 10}^7-
³⁴²^{); f}^o^{r FY2}⁰⁰¹^,^$4^m^{illion w}^a^s^prov^id^e^d^(H.Re^p^t^.¹^06-¹⁰^33);^aⁿ^{d f}^o^{r FY1}⁹⁹⁷^,^$1.^{5 m}^illion^w^a^{s prov}^ide^d^(H.Re^p^t.
¹⁰⁴^-⁸⁶³⁾^.
⁴⁸^C^o^m^m^itte^e^P^r^int^of^the^H^o^us^e^C^o^m^m^itte^e^{on A}^ppr^opr^ia^ti^ons^on^H^.^R^.²⁷⁶⁴^/^P^.L^.¹¹^0-¹^{61 B}^ook^s^1&^{2, D}ⁱ^vⁱ^sⁱ^oⁿ^G^—
^D^e^pa^r^t^m^e^nts^of^L^a^bor^{, H}^e^a^{lth a}ⁿ^{d H}^u^m^a^{n Se}^r^v^ic^e^s^{, a}^{nd Ed}^uc^a^tion^,^a^{nd R}^e^la^te^d^A^g^eⁿ^cⁱ^e^s^A^ppr^opr^ia^tions^A^c^{t, p.}¹⁵⁸⁷^.

Both S. 1642 and H.R. 4137 increase the allowance for books and supplies used in the fair share
allocation procedures from $450 to $600. This change is similar to the $150 increase for books
and supplies described above for the FSEOG program.
Under current law, institutions must use at least 7% of their FWS allocation to compensate
students employed in community service and must operate at least one tutoring or family literacy
project. However, these requirements may be waived if the Secretary determines that enforcement
would cause hardship for students at the IHE.
S. 1642 revises the criteria upon which the Secretary may grant a waiver of the FWS community
service requirements to provide that waivers may be granted if enforcement of the requirement
would cause hardship for students at the IHE; or if the IHE certifies that 15% or more of its full-
time students participate in specified community service or tutoring and literacy activities.
H.R. 4137 establishes a new Off-Campus Community Service grant program under which the
Secretary may award grants to IHEs to recruit and compensate students for off-campus
community service employment. Under the new program, priority in the awarding of grants to
institutions would be provided for the support of early childhood education activities and
activities in preparation for and during emergencies and natural disasters. H.R. 4137 also revises
the definition of “community services” to include “responding to the needs of the community,
which may include activities in preparation for and during emergencies and natural disasters.”
Under current law, institutions may use not more than 10% or $50,000 of their FWS allocations
for job location and development programs. S. 1642 permits IHEs to use not more than 10% or
$75,000 of their FWS allocations for job location and development programs. H.R. 4137 retains
current law.
In addition to making changes to how funds are made available for the Work-Colleges program
(described above), S. 1642 permits institutions to use funds received under the Work-Colleges
program to support model volunteer community service projects associated with local IHEs. Both
S. 1642 and H.R. 4137 revise the definition of the term “work-college” by limiting eligible
institutions to public or private non-profit four-year institutions; by replacing the term “work-
learning” with “work-learning-service”; and by adding a provision that institutions require at least
half of all full-time resident students to participate in a comprehensive work-learning-service
program for at least five hours per week, or at least 80 hours during each period of enrollment,
except during summer school and approved study abroad or externship programs.

S. 1642 extends the authorization of appropriations for Perkins Loan federal capital contributions
in the amount of such sums as may be necessary for FY2008 through FY2012. H.R. 4137 extends
the authorization of appropriation for federal capital contributions in the amount of $350 million
for FY2009 and such sums as may be necessary for FY2010 through 2013. H.R. 4137 also
extends the authorization of appropriations for federal capital contributions to enable students
receiving Perkins Loans for academic years ending prior to October 1, 2014, to continue or
complete their course of study in the amount of such sums as may be necessary for FY2014
through FY2019.
Both S. 1642 and H.R. 4137 increase the allowance for books and supplies used in the fair share
allocation procedures from $450 to $600. This change is similar to the $150 increase for books
and supplies described above for the FSEOG and FWS programs.
Institutions must enter into program participation agreements with the Secretary to participate in
the Federal Perkins Loan program. Program participation agreements address certain aspects
concerning the operation of the program, including actions to be taken with respect to defaulted
loans and loans an institution decides not to service and collect. The statute grants the Secretary
authority, in certain circumstances, to permit or require institutions to assign, transfer, or refer
such loans to the Secretary. The statute also permits, but does not require, the Secretary to
reallocate funds collected on defaulted loans assigned to the Secretary, (less an amount not to
exceed 30% to cover collection costs), among other participating institutions as additional federal ⁴⁹
capital contributions. In addition, the statute grants the Secretary the authority to include in
program participation agreements “such other reasonable provisions as may be necessary to
protect the United States from unreasonable risk or loss and as are agreed to by the Secretary and ⁵⁰
the institution.”
In accordance with regulations implementing program participation agreements for the Federal
Perkins Loan program, if an institution decides not to service or collect a loan, or if a loan is in
default despite the institution’s due diligence in trying to collect on the loan, the institution may ⁵¹
assign its rights to the loan to the United States without recompense. Citing the authority under
HEA, § 463(a)(9) to add requirements to the Perkins Loan program participation agreement to
protect the United States against unreasonable risk of loss, the Secretary has promulgated
regulations, effective July 1, 2008, requiring program participation agreements to provide that
institutions must assign defaulted loans to the Secretary if the outstanding balance is $100 or
more, the loan has been in default for seven or more years, and a payment has not been received

⁴⁹^HEA^,^§⁴⁶³⁽^a)(4^)(A^{) [2}⁰^U.S.C.¹⁰⁸⁷^cc(a)(4^)(A^)]^.
⁵⁰^HEA^,^§⁴⁶³⁽^a)(9⁾^[2⁰^U.S.C.¹⁰⁸⁷^cc(a)(9^)]^.
⁵¹^{34 C}^.^F.R^.^§⁶⁷^4.⁸⁽^d)^.

in the previous 12 months, unless the loan was in forbearance or deferment.⁵² Current regulations
on program participation agreements do not address the transfer or referral of Perkins Loans to
the Secretary.
H.R. 4137 amends HEA, § 436(a)(4)(B) to provide that if an IHE has not knowingly failed to
maintain an acceptable collection record with respect to a defaulted Perkins Loan, the Secretary
may allow the institution to refer the loan to the Secretary, without recompense, except that the
amount collected (less collection costs) shall be repaid to the referring institution within 180 days
of collection and shall be treated as an additional federal capital contribution. H.R. 4137 also
seeks to limit the authority of the Secretary to require the mandatory assignment of Perkins
Loans.
Under current law, annual loan limits for borrowers of Perkins Loans are $4,000 for
undergraduate students and $6,000 for graduate and professional students. Aggregate loan limits
for borrowers of Perkins Loans are $20,000 for undergraduate students who have completed two
years of study, $40,000 for graduate and professional students, and $8,000 for all other students.
H.R. 4137 increases annual loan limits to $5,500 for undergraduate students and to $8,000 for
graduate and professional students. H.R. 4137 also increases aggregate Perkins Loan limits to
$27,500 for undergraduate students who have completed two years of study; $60,000 for graduate
and professional students; and $11,000 for all other students.
Under current law, borrowers of Perkins Loans are required to request forbearance in writing;
whereas such a requirement does not apply with respect to requesting forbearance on FFEL and
DL program loans. S. 1642 removes the requirement that forbearance must be requested in
writing and provides that the terms of forbearance agreed to by the borrower and the lending
institution must be documented and recorded in the borrower’s file.
Under current law, Perkins Loan borrowers may rehabilitate a defaulted loan by making 12 on-
time, consecutive, monthly payments. When a defaulted loan is rehabilitated, the holder of the
loan (i.e., the institution or the Secretary) must request that the default be removed from the
borrower’s credit history. H.R. 4137 provides that a defaulted Perkins Loan shall be considered
rehabilitated upon a borrower making 9 on-time, consecutive, monthly payments. S. 1642 retains
current law.
Under current law, borrowers of Perkins Loans who die or become permanently and totally
disabled (as determined in accordance with regulations) may have their loans discharged. S. 1642

⁵²^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^{n, “}^{34 C}^F^R^P^a^r^t^s⁶⁷⁴^,⁶⁸²^,^aⁿ^{d 6}⁸⁵^:^Fe^de^r^a^l^P^e^r^k^ins^L^o^aⁿ^P^r^og^r^a^m^,^Fe^de^r^a^{l Fa}^mⁱ^l^y
^Educ^a^tio^{n L}^o^aⁿ^Prog^ra^m^,^a^{nd W}^illia^m^{D. Ford Fe}^de^ra^{l Dire}^c^t^L^o^aⁿ^P^r^og^ra^m^;^Fina^{l Ru}^le^,”⁷²^Fe^de^r^a^{l Re}^giste^r⁶¹⁹⁹^6,
^a^{nd 6}¹⁹^73-⁶¹⁹⁷^{4, N}^o^v^e^m^b^e^r^{1, 2}⁰⁰⁷^.

provides that in addition to current provisions, Perkins Loan borrowers shall have their loans
discharged if they are unable to engage in gainful activity due to a medically determinable
physical or mental impairment that is expected to result in death, and which has lasted or is
expected to last continuously for 60 months. H.R. 4137 simplifies the procedures for having a
Perkins Loan discharged for disabled veterans by providing that borrowers of Perkins Loans who
receive a permanent total disability rating from the Secretary of Veterans Affairs, and who
provide such documentation to the Secretary, shall be considered permanently and totally
disabled for the discharge of student loans; and that such borrowers shall not be required to
present additional documentation.
As explained earlier (see Table 2), borrowers of Perkins Loans may have a portion or all of their
loans cancelled for public service. S. 1642 expands the types of public service for which
borrowers may have their Perkins Loans cancelled. Loan cancellation at the rate of 15% per year
of service is provided for service as a full-time staff member in a pre-kindergarten or child care
program that is licensed or regulated by the state. Loan cancellation the rate of 15% for the first
and second years of service; 20% for the third and fourth years of service; and 30% for the fifth
year of service, is provided for service as a full-time faculty member at a Tribal College or
University; as a librarian with a master’s degree in library science, and employed in a school
served under Title I of the ESEA, or a public library serving a Title I school; as a full-time speech
language therapist with a master’s degree working exclusively in Title I schools; and for service
as a member of the armed forces in an area of hostility (which under current law is provided at
the rate of 12½% per year, for up to four years of service). In addition to the expanded types of
public service for which loan cancellation is provided under S. 1642, H.R. 4137 also provides
loan cancellation for full-time fire fighters at the rate of 15% for the first and second years of
service; 20% for the third and fourth years of service; and 30% for the fifth year of service.
Both S. 1642 and H.R. 4137 extend eligibility to receive aid under the FSEOG and FWS
programs (as well as under the Pell Grant program) to students with intellectual disabilities who
would not otherwise qualify for federal aid by making certain student eligibility requirements
inapplicable to such students. Under both bills, a “student with an intellectual disability” is an
individual who has a cognitive impairment that substantially affects intellectual and cognitive
functioning, who is eligible for assistance under the Individuals with Disabilities and Education
and Improvement Act (IDEA) and who has completed secondary school or who is no longer
eligible for assistance under IDEA because of age, and who is enrolled or accepted for enrollment
in a comprehensive transition or postsecondary education program that meets requirements such
as preparing students for gainful employment and independent living. Students must participate in
eligible programs on at least a half-time basis by enrolling in regular classes, auditing classes,
enrolling in non-credit courses, or participating in internships.

In some states, individuals who enter into a loan agreement while they are a minor may be able to ⁵³
subsequently break the terms of their loan agreement by raising a claim of “infancy.”Both S.
1642 and H.R. 4137 specify that for the Perkins Loan program, institutions shall not be subject to
a defense raised by a borrower on the basis of a claim of infancy under state law.
Under current law, institutions may transfer up to 25% of their Perkins Loan FCC allotment to
either or both the FSEOG and the FWS programs; and may transfer up to 25% of their FWS
allotment to the FSEOG program. S. 1642 expands the transfer of allotments provision to permit
IHEs to transfer up to 25% of their FSEOG allotment to the FWS program. H.R. 4137 retains
current law.
^D^a^vⁱ^{d P.}^Sm^ol^e
^Sp^{ecialist i}ⁿ^Ed^u^catioⁿ^P^o^lic^y
^dsm^o^l^e^@^c^r^s^.l^oc.g^ov^{, 7-}⁰⁶²⁴

⁵³^A^s^defⁱ^ne^{d by}^Merria^m^-W^eb^ster’^s^Dictio^na^{ry o}^f^L^a^w^,¹⁹⁸⁶^,ⁱⁿ^f^aⁿ^c^y^{is “}^t^he^a^f^fⁱ^r^m^a^tive^de^f^e^nse^o^f^la^c^k^ing^le^g^a^l
^c^a^p^a^cⁱ^t^y⁽^a^s^{to m}^a^k^e^a^c^ontr^a^c^t^or^c^o^m^m^{it a}^c^rⁱ^m^e⁾^be^ca^us^e^of^be^ing^{too y}^oung^aⁿ^{d e}^s^p.^b^ecau^{se o}ⁿ^e^{’s age i}^s^b^e^l^o^w^an
^{age set}^b^y^st^at^u^t^e.^”