A Perkins loan is a form of financial aid provided by the school to needy undergraduate and graduate students utilizing funds from the institution and the government. The program includes around 1,700 higher education institutions.
The amount you can borrow is determined by your financial need, the money available at your professional school or college, and the amount of additional financial help you get. Due to the limited amount of cash available for the loan, not everyone who qualifies will receive one.
To learn how you can qualify for the loan, keep reading the following guide. We have rounded up several frequently asked questions about the program. You’ll learn how it works, who is eligible for the financial aid, and other essential information borrowers like you should know before applying for it.
What is a Perkins loan?
A Federal Perkins Loan, often known as a Perkins Loan, is a need-based student loan issued by the United States Department of Education to help American college students finance their post-secondary education.
Undergraduate loan limitations for the 2009-2010 academic year were $5,500 each year, with a lifetime maximum borrowing of $27,500. However, the maximum for graduate students was $8,000 per year, with a lifetime cap of $60,000 (including undergraduate loans).
Additional limits on the setting of employment may apply depending on the sector of employment. Forgiveness for teachers, for example, may be limited to low-income schools, while forgiveness for nurses may be contingent on work at a non-profit medical center.
A part of the debt was forgiven (as long as the loan remains in good standing). Cancellation is usually made on a graduated scale: 15% for the first year, 15% for the second year, 20% for the third year, 20% for the fourth year, and 30% for the fifth year.
How do you qualify for it?
To be eligible for a Perkins Loan, you must be all of the following:
- An undergraduate, graduate, or professional student with exceptional financial need
- Enrolled full-time or part-time
- Attending a school that participates in the federal Perkins loan program
Do you pay back Perkins loan?
Yes, you do! You have nine months after graduating, leaving school, or dropping below half-time status before you must begin repayment if you are enrolled at least half-time. Check with your college or career school to see how long your grace period will be if you are only going half-time.
What kind of loan is it?
Perkins loans are federal student loans based on financial need. They are subsidized loans, which means the federal government pays the interest on the loans while you are enrolled in school.
Unlike other federal loans, Perkins loans are issued through your school. This implies you’ll repay these debts in collaboration with your school or a firm hired by your school. Once you begin repaying your Perkins loan, it may be serviced by a different loan servicer than the rest of your federal loans.
What is the interest rate for a Perkins loan?
A Perkins loan comes with a 5% interest rate. Interest does not accumulate on a Perkins loan while you are enrolled in school at least half-time, during a grace period, or during an approved deferral.
However, you will be liable for paying interest while the debt is under repayment or forbearance.
Why is it called a Perkins loan?
The Perkins loan program, which began in 1957, is the oldest federal loan program. Carl D. Perkins, a former member of the United States House of Representatives from Kentucky, was honored with the program’s name.
Can you pay off Perkins loan early?
Yes, you can! Perkins loans have a ten-year payback period. Payments can be made once a month or once a quarter. Prepayment penalties do not apply if you pay off your loan early.
What replaced Perkins loans?
So far, nothing has been able to take its place. However, Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), college assistance awards, work-study, subsidized federal student loans, and private loans are also available to students in need.
Pell Grants don’t have to be paid back. Undergraduate students can apply for it, and the amount varies. The figures fluctuate yearly and are determined by a student’s Expected Family Contribution (EFC).
The FSEOG, on the other hand, is money that the college receives from the government and then distributes. It can range anything from $100 to $4,000 each year, depending on the additional help a student receives.
The Federal Application for Free Student Aid (FAFSA) grants both Pell Grants and FSEOG (FAFSA). Colleges with endowments large enough to provide this form of gift aid fulfill 100% of their financial needs.
Can you settle a Perkins loan?
If you have a pretty big lump sum to give, it’s worth exploring a settlement or compromise. However, negotiating a contract like this may be tricky.
Settlements for federal student loans are tough to come through, although they are available in some circumstances. Perkins loans of any amount can be settled (also known as compromised) by the Department of Education, which can also suspend or discontinue the collection of these loans.
Negotiating a “good” bargain, on the other hand, can be challenging. The Department of Education gives only a few hints about what they will likely accept. Small Perkins Loan amounts may also be written off by schools.
What happens if you default on the loan?
If you do not repay the Perkins loan, you will be in default and may face collection efforts, court judgments, and wage garnishments. If your loan is paid in monthly installments, you will be deemed in default after 270 days of non-payment and 330 days if your loan is paid in more than monthly installments.
If you go behind on a regular monthly payment, you have nine months to catch up. This means you may catch up on your payments or work out a payment plan with your lenders, such as postponed payments or debt cancellation.
If you fail on a Perkins Loan, the government has many methods for collecting payment. It can:
- Garnish your wages
- Notify credit bureaus
- Take legal action
- Turn your name over to a collection agency
- Withhold income tax refunds
If you do not resolve your Perkins loan default, you will be ineligible for any additional federal student loans. Any other government-backed loan will be ineligible for deferment. You possibly won’t be able to renew some professional licenses. Also, you won’t be allowed to join the military either.
Your credit score will be impacted as well. Moreover, your ability to borrow money or find new employment will be harmed due to your lower credit score.