What Is Happening With Perkins Loans?
The Perkins loan program was an attractive option for both graduate and undergraduate students with an exceptional need of financial assistance looking to pursue higher education.
However, this loan option was stopped and is no longer available, effective September 30th, 2017.
It featured an extended grace period of 9 months as compared to most student loans.
Moreover, the Perkins loan’s interest rate was fixed at just 5%, thus making it a viable option for low to middle-income households
What Does A Perkins Loan Mean?
This loan type was first started in the 1950s as the National Defense Student Loans (NDSL) and were only available to needy students willing to pursue further studies in engineering, mathematics, or an accepted modern foreign language.
One of the unique things about the Perkins student loan was that the schools which were a part of this program provided a portion of the sum and the borrowers were able to directly repay the school.
With time, these loans were moved under the category of federal student loans. Perkins for students were only offered to graduate and undergraduate students with proven financial needs.
These loans are subsidized, meaning interest doesn’t accrue during the period while you’re in school.
Once both are over, you’ll have a period of 10 years to repay the loan at a fixed interest rate of 5%.
Sadly, due to budgetary constraints, the Federal government proceeded to phase out the loan in 2015, but extended it until 2017 in the hope of finding a permanent solution.
Eligibility Requirements And Limits
All undergraduate and graduate students with proven financial hardships were eligible to apply for Perkins loan until September 30th, 2017.
The first step in the application was to fill in the Free Application for Federal Student Aid (FAFSA) form.
Only a certain amount of Perkins loans can be taken per year by students. For undergraduates, the cumulative limit was $27,500 and the yearly limit was $5,500.
You can't borrow more than $8,000 a year if you are a graduate student.
The total amount you can borrow for both undergraduate and graduate loans combined was limited to $60,000.
Although the loan was backed by the government, it was distributed by the eligible institutions (colleges and universities) which were a part of this program.
The maximum amount a student was eligible to borrow directly depended on the availability of the funds from the preferred school.
This implies that even if you were eligible for a loan, there isn’t any guarantee that you would have been able to borrow the maximum limit each year.
Repayment Terms And Other Options
The ideal Perkins loan repayment terms are 10 years after the student graduates and the nine-month grace period has expired.
Since it was a subsidized loan, the interest didn’t accrue when the borrower was in college or during the extended grace period.
Still, if the student faced financial hardship, they could apply for a Perkins Loan consolidation.
Students could also opt for cancellation, forgiveness, and loan discharge if they hadn’t defaulted on the loan.
Ideally, if a borrower fails to make full payments for 270 days, the federal loan is marked “default” as per the stipulations set by the US Department of Education (ED).
However, in the case of Perkins, the holder of the loan may declare your loan to be in default if you miss a scheduled payment by the due date.
In case, you’re facing difficulties repaying the monthly amounts, you can apply for a forbearance or deferment.
You can also opt for a Perkins Loan consolidation to better manage your finances. Some other options include:
- Discharge - You might be eligible for a loan discharge in case of death, permanent and total disability, or if your school closed before you graduated. This is applicable to loans borrowed on or after January 1st, 1986.
- Cancellation For Teachers - You can qualify for full loan cancellation if you’ve worked full-time in a nonprofit or public secondary or elementary school as a teacher, or as a special education teacher, or as a teacher in the field of science, math, bilingual studies, and/or foreign languages.
- Volunteer Service Or Employment Cancellation - Multiple volunteer services and occupations qualify for cancellation of these loans. Most lenders accept cancellation requests after the borrower has completed 5 years of service. Professions include:
- Volunteering with AmeriCorps or the Peace Corps
- Working in the Military
- Working as a teacher in a low-income demographic
- Any legal profession that serves the public
- Medical practitioners in an underserved area
- Law enforcement officer
When you fill the FAFSA form, you’ll get to know other subsidized and unsubsidized loans that you’re eligible for.
One of the best things that you can do is check with your school to learn about grants and loans they offer.
Furthermore, keep reviewing the official Student Aid website to see the list of eligible loans that’ll help you pursue higher education.