Perkins Loans

student-on-scholarshipThe U.S. Department of Education offers several loan programs to place an affordable education within your reach. The Federal Perkins Loan Program provides assistance to qualifying students who can demonstrate financial need and who are seeking a higher degree through an approved postsecondary school. With low fixed interest rates and manageable repayment terms, Perkins Loans allow needy students to finance the rising costs of a higher education. Perkins Loans can be used to cover education-related expenses such as tuition, books, a computer, and housing.

Perkins Loans are sponsored by the federal government, which allocates funds to participating schools. These funds are then disbursed to students through the educational institutions, which match a certain percentage of the funds. If you qualify for a Perkins Loan, your lender will be the school that you’re attending. Because they act as lenders and match federal funds, participating schools can play a role in determining which students receive a Perkins Loan and how much is offered.

Who Is Eligible for a Perkins?

Low-income students enrolled in an undergraduate, graduate, or vocational program at an institution that participates in the Perkins Loan Program are eligible to receive the Perkins Loan. Not all schools offer Perkins Loans, so it’s important to consult with your school’s financial aid office to find out which programs are available. Students must be able to demonstrate financial need in order to qualify.

Compared with other federal loan programs, like the Direct PLUS and Stafford Loans, very few Perkins Loans are issued each year. According to the New America Foundation, only half a million dollars in new Perkins Loans were issued in 2014, with an average loan amount of $1,700. By comparison, approximately $8 million in new Stafford Subsidized Loans were issued, with an average loan of $3,250.

What About Repaying the Loan?

You will be responsible for repaying a Perkins Loan at an interest rate of 5 percent, with a repayment period of up to 10 years. If you make your payments consistently and on time, there will be no other charges for this loan. However, if you are late on payments or default on your Perkins Loan, you will be charged late fees. You may also be charged extra fees for collection.

After you complete your degree, you will have a grace period of nine months before you have to start repaying your loan, provided that you’ve been attending school at least half-time. The same grace period applies if you drop out of school or leave for any other reason. If you are unable to start making payments at the end of the grace period, or if you’re financially unable to afford your payments in the future, you can apply for a deferment to postpone repayment temporarily.

The sooner you start repaying your loan, and the larger the payments you make, the more money you’ll save in terms of interest. Paying back your student loan promptly also helps you maintain a strong credit rating as you move forward into the future.

What Are the Advantages of a Perkins Loan?

Low fixed interest rates make Perkins Loans desirable. Even if national interest rates rise, the rate on your Perkins Loan will remain the same, as long as you meet the conditions of repayment. Loan insurance is available at no cost, so if you were to die or become unable to work because of an illness or injury, the insurance could repay your loan. In addition, loan forgiveness programs make it possible to reduce the size of your loan if you commit to working in certain professions.

How Do I Apply?

You can apply for a Perkins Loan by filling out the Free Application for Federal Student Aid (FAFSA). The earlier you apply for a Perkins, the greater your chances of receiving one of these highly competitive loans. Perkins funds are limited and awarded on a first come, first served basis. 

What if I Need to Cancel My Loan?

If you decide not to enroll in school after you’ve been awarded a Perkins, or if you no longer need the money, you can cancel the loan by contacting your school’s financial aid department. Your loan can be cancelled even if part of the money has been disbursed, but there are deadlines for full or partial cancellation. Review your loan agreement carefully for the terms and conditions of cancellation.

A Perkins Loan that has already been disbursed can be cancelled at 100 percent in only a few conditions:

Working in specific professions or in high-risk areas may allow you to qualify for loan forgiveness. Between 50 and 100 percent of a Perkins Loan can be forgiven if you work in one of these areas:

To qualify for loan forgiveness, you must commit to working in the specified area or profession for a certain period of time. Any Perkins Loan borrower is eligible for loan forgiveness, regardless of when the loan was made, as long as the work was performed after 1998. If you need to apply for loan forgiveness or cancellation, contact the institution that is servicing your loan to start the process.

What’s the Next Step?

Once you’ve determined that the school you’re attending participates in the Perkins Loan Program, you can apply for a Perkins Loan by completing the FAFSA. Filling out this form allows you to apply for other forms of financial aid, such as Direct Loans or Pell Grants. In some states, you can also apply for state-issued student loans or grants by completing the FAFSA.

Financial need shouldn’t be a barrier to achieving the education you want. It’s not easy to qualify for a Perkins, but if you meet the program’s financial requirements, this low-interest loan can help you reach your academic and professional goals. Use our convenient Student Loan Comparison Tool to find out which types of aid are right for you.

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