Detailed Information on the
Federal Perkins Loans Assessment

Proposes to eliminate the funding for this program and redirect funds to more effective student aid programs, such as Pell.

As long as the program exists, implement a new performance measurement approach that tracks program success on student persistence (i.e., staying in school) and graduation. This includes collecting improved program and financial data and developing meaningful efficiency measures.

Measure: Persistence: The gap between persistence rates for campus-based aid recipients and for the general student population will decrease each year. [Targets under development.]

Explanation:The persistence rate is defined as the percentage of non-graduating students in a given year who return to continue their studies in the following year. A specific methodology to account for transfers and other data anomolies is under development.

Measure: Completion: The gap between completion rates for campus-based aid recipients and for the general student population will decrease each year. [Targets under development.]

Explanation:The completion rate is defined as the percentage of full-time degree-seeking students completing within 150 percent of the normal time required.

Is the program purpose clear?

Explanation: According to the authorizing statute, the program's purpose is to stimulate and assist "in the establishment and maintenance of funds at institutions of higher education for the making of low-interest loans to students thereof to pursue their courses of study'"

Evidence: The program's purpose is clearly expressed in section 461 of the Higher Education Act of 1965, as amended.

Does the program address a specific and existing problem, interest, or need?

Explanation: Institutions currently maintain revolving funds in excess of $7 billion; these funds will support new Perkins loan awards in excess of $1 billion annually without additional Federal Capital Contributions. In addition, low-income students are eligible to receive other federal student loans, Federal Family Education Loans (FFEL) or Federal Direct Loans (DL), that under current economic conditions offer lower interest rates than are available in the Perkins program.

Evidence: Almost 2,000 institutions participate in the Perkins Loan program, making $1.2 bilion in loans to over 700,000 students in FY 2003. The size of the Perkins Loan revolving fund is documented in Department financial reports. Variable DL and FFEL Stafford Loan interest rates for award year 2002-03 were below the 5 percent fixed rate in Perkins; rates for 2003-04 are expected to be even lower.

Is the program designed so that it is not redundant or duplicative of any Federal, state, local or private effort?

Explanation: Loans available under Perkins Loans are both redundant and duplicative, given the broad availability of need-based, subsidized, and relatively low-interest Stafford loans through FFEL and DL.

Evidence: The FFEL and DL programs will make nearly $21 billion in Stafford loans to almost 5 million borrowers in FY 2003. In the event policymakers conclude that there are insufficient loans available, then loan limits in FFEL and DL could be adjusted rather than relying on a separate and redundant Perkins program.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The design of the program, based on institutional revolving funds, is significantly less efficient for the Federal taxpayer than the guaranteed or direct loan models available through FFEL and DL.

Evidence: The absence of credit reform and unit cost data makes it difficult to quantify the extent of program design inefficiencies. Given current subsidy and interest rates, and based on historical comparisons between Perkins, FFEL, and DL, the Department could make the same number of loans available through DL and FFEL at lower interest rates and less costs. Moreover, FFEL and DL have better track records on collections of defaulted debt than Perkins.

Is the program effectively targeted, so program resources reach intended beneficiaries and/or otherwise address the program's purpose directly?

Explanation: The program's institutional allocation formula (i.e., how much program funding is given to each school to offer Perkins aid) is designed to heavily benefit postsecondary institutions that have participated in Campus-Based programs for a long time, at the expense of more recent entrants or new applicants. Since these longstanding institutions do not have a higher proportion of needy students, this allocation formula tends to limit the program's ability to target resources the neediest beneficiaries.

Evidence: The program's allocation formula is detailed in section 442 of the Higher Education Act of 1965, as amended.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The Department has developed common measures for the Campus-Based programs (Work Study, Supplemental Education Opportunity Grants, and Perkins Loans). These measures relate to the targeting of Campus-Based aid to low-income students and the impact of such aid on student persistence and graduation rates, benchmarked to the overall population. The Department is working with OMB on developing an appropriate efficiency measure for this program.

Evidence: Department of Education Strategic Plan

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: Specific targets and timeframes are shown in the "Measures" tab. Once completed, they will also be included in the Department's annual performance plans. Targets and timeframes for the new measures are under development. No annual data is currently available to support these goals.

Evidence: See answer to 2.1

Does the program have a limited number of specific annual performance measures that demonstrate progress toward achieving the program's long-term measures?

Explanation: See answer to 2.1.

Evidence: Department of Education Strategic Plan; Goal 5, Objectives 5.1, 5.3

Does the program have baselines and ambitious targets and timeframes for its annual measures?

Explanation: See answer to 2.2

Evidence: See answer to 2.2

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, etc.) commit to and work toward the annual and/or long-term goals of the program?

Explanation: Program partners (i.e., schools) support the goals of the Perkins program, reporting data through the annual Fiscal Operations Report and Application to Participate (FISAP) form and meeting program statutory and regulatory requirements, as set out in program participation agreements. Schools also report program data through a variety of Department financial systems, as well as through ongoing surveys such as the Integrated Postsecondary Data System (IPEDS). Data from these reports are used in determining program performance.

Evidence: IPEDS, Department of Education financial and program management reports

Are independent and quality evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: No evaluations of the Perkins loans programs have been conducted for at least the last 15 years.

Evidence:  

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The measures discussed in 2.1 are new, and will be reflected in future budget requests. However, the Department did not request funding for new Perkins loan federal capital contributions in FY 2004. While this decision was not tied directly to the program's performance relative to specific goals, it was based on other objective data, such as the size of the Perkins revolving fund and the broad availability of alternative low-cost Federal loans.

Evidence: FY 2004 and 2005 President's Budget

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: The Department is working to develop effecitive, program-specific performance measures, as discussed under 2.1.

Evidence: See 2.1

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: ED primarily collects Perkins Loan information through the FISAP, which is used by participating institutions to report program data to the Department and apply for continued program participation. However, data ED collects on the FISAP is not sufficient for program management or performance assessment.

Evidence: Perkins loan program and financial data. FISAP data is not timely, or internally consistent, in that the design of the form, which requests cumulative rather than annual data, makes it almost impossible to reconcile financial information. In addition, no credit reform data is collected. While the quality of loan-level data in NSLDS is improving, problems remain with a number of fields.

Are Federal managers and program partners (grantees, subgrantees, contractors, cost-sharing partners, etc.) held accountable for cost, schedule and performance results?

Explanation: ED's managers are subject to EDPAS, which links employee performance to relevant Strategic Plan goals and action steps, and is designed to measure the degree to which a manager contributes to improving program performance. OFSA federal managers are also subject to performance agreements developed under its Performance-Based Organization authority. Postsecondary institutions (the program partners) are held accountable through statutory cohort default rate penalties, annual compliance audits, and periodic program reviews, including site visits by ED. In addition, ED requires institutions participating in the Campus-Based programs to sign program participation agreements. To receive a "Yes," ED needs to: (1) identify for OMB the federal managers for this program; (2) demonstrate the relationship between these managers' performance standards and the program's long-term and annual measures; and (3) demonstrate the relationship between program partners' performance standards and the program's long-term and annual measures.

Evidence:  

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: Financial audits and program reviews indicate that funds are obligated in a timely manner and for the intended purpose.

Evidence: Department financial statements and supporting materials and documentation.

Does the program have procedures (e.g., competitive sourcing/cost comparisons, IT improvements, approporaite incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: This program has not yet instituted procedures to measure and improve cost efficiency in program execution. However, as part of the President's Management Agenda, the Department is implementing "One-ED" -- an agency-wide initiative to re-evaluate the efficiency of every significant business function, including the development of unit measures and the consideration of competitive sourcing and IT improvements. A "yes" answer is likely once the One-ED process is applied to this program's relevant business functions. [Note: Although the Department is currently developing a unit cost accounting system to measure cost effectiveness in FSA programs, this system is not yet fully in place.]

Evidence:  

Does the program collaborate and coordinate effectively with related programs?

Explanation: The Perkins Loan program operates effectively within the overall Federal student aid system, taking advantage of shared application and aid disbursement procedures and systems, common institutional and student eligibility regulations, and program reviews.

Evidence: Perkins loan application and Federal funds disbursement processes; aid award packaging.

Does the program use strong financial management practices?

Explanation: The lack of reliable financial data, coupled with a lack of credit and unit cost analysis, undermine program financial management. That said, the Department did receive an unqualified audit opinion, and no material weaknesses or reportable conditions related to Perkins Loans have been identified.

Evidence: Department financial statements and supporting materials and documentation. As stated above, FISAP design issues make it impossible to reconcile financial information. In addition, no credit reform data is collected and problems remain with certain NSLDS data fields.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: The Department is in the process of developing program-specific unit cost measures to better assess management efficiency, and is finishing a data strategy for the Office of Federal Student Aid (OFSA). The Department also plans to conduct a One-ED strategic investment review for OFSA.

Evidence: The Department of Education's One-ED Strategic Investment Review process. Also, the Student Aid Administration PART includes a performance measure related to management efficiency, and information on OFSA's data strategy.

Is the program managed on an ongoing basis to assure credit quality remains sound, collections and disbursements are timely, and reporting requirements are fulfilled?

Explanation: Despite its $7 billion portfolio, the program is not managed as a credit program, but rather as a formula grant program. Most credit management responsibility rests with participating institutions, subject to Department regulations.

Evidence:  

Do the program's credit models adequately provide reliable, consistent, accurate and transparent estimates of costs and the risk to the Government?

Explanation: The program is not budgeted or accounted for as a credit program, but rather as a formula grant program. The Department does not maintain a credit model for the program, nor require participating insitutions to report at the level of detail required to support credit reform estimation and accounting.

Evidence: FY 2004 and 2005 President's Budget; Department of Education financial statements and supporting documentation and reports.

Has the program demonstrated adequate progress in achieving its long-term outcome performance goals?

Explanation: Program performance goals are newly established; no long-term data are available.

Evidence:  

Does the program (including program partners) achieve its annual performance goals?

Explanation: Program performance goals are newly established; no long-term data are available.

Evidence:  

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program performance goals each year?

Explanation: The Department has yet to develop and implement efficiency measures to quantitively assess performance improvements. The Department is working with OMB on developing an appropriate efficiency measure for this program.

Evidence:  

Does the performance of this program compare favorably to other programs, including government, private, etc., that have similar purpose and goals?

Explanation: The lack of meaningful credit reform and program performance information prevents useful cross-program comparisons.

Evidence:  

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: No evaluations of the Perkins loans programs have been conducted for at least the last 15 years.

Evidence: