This study reviews the financial soundness of the Perkins Loan Program, a federal program that provides low-interest loans to financially needy students through postsecondary institutions, and identifies ways to make the Perkins program less financially dependent on additional federal appropriations to cover operating costs and default losses. Results found that of the 3,230 participating schools, 419 (13 percent) had Perkins program revolving funds in which the income from repayment and interest exceeded operating costs and losses. For the remaining schools, the program's costs and losses exceeded their funds' income by a cumulative total of about $1.05 billion, requiring new federal and school capital contributions. Schools with high default rates have avoided funding restrictions by assigning their defaulted loans to the U.S. Department of Education (ED) and so have retained funding eligibility under the current formula. The study found that using a default rate formula that included assigned loans would more effectively limit the continued funding of schools with high default rates; this, in turn, would reduce the program's default costs. Other cost-reduction and revenue-generating alternatives include delaying loan disbursement and raising the loan interest rate. Ten tables and two figures are included and, in the appendixes, comments from the Coalition of Higher Education Assistance Organizations and ED. (JB)