What is Perkins loan, and how does it work? If you’re curious and seeking answers, we recommend diving into this article to gather all the information you need.
Perkins loan is a type of federal student loan intended to offer financial assistance to students. This loan is subsidized, indicating it carries a low-interest rate.
This means you won’t accrue or pay interest until after you leave school, during the grace period, or while you’re still in school. Throughout this time, the Department of Education takes care of settling the loan’s interest.
So, whether you’re an undergraduate or graduate student in need of financial aid, applying for a Perkins loan is an option.
Regrettably, the Perkins Federal Loan Program was discontinued in 2017. Nevertheless, those who received the loan during its active period still must repay it, and they can continue to access benefits from the program.
How Does It Work?
Perkins loans initially provided crucial financial aid to undergraduate and graduate students facing financial difficulties in meeting their educational expenses.
The financial aid office of the educational institution provided aid to students, either directly credited or used for official charges.
In essence, the school acted as the primary lender, and the repayment of the loan was directed back to the school.
Prospective students interested in securing a Perkins loan needed to go through the application process, with their school’s funding capacity and individual financial needs determining the borrowing limits. Undergraduates had access to a maximum of $5,500 per year, capping at $27,500.
For graduate students, the borrowing limit was extended to $8,000 per year, with an overall cap set at $60,000. Additionally, a federal Perkins loan carried a 10-year repayment term with a 5% interest rate.
However, the repayment phase commenced nine months after the student left school, dropped below half-time status, or successfully graduated.
Perkins Loan Eligibility
To apply and be approved for a Perkins loan, you must meet specific criteria. If you’re considering applying for a federal Perkins loan, you must:
- Attending a school or college that is taking part in the Perkins loan program.
- You must be a graduate, undergraduate, or professional student.
- Must be in financial need.
- Enroll part-time or full-time.
If you meet all the following criteria, you are eligible to apply and participate in the federal Perkins loan program.
How To Apply For Perkins Loan
Applying for the loan is done through the FAFSA. However, the federal Perkins loan program, which ended in 2017, requires specific steps to be followed if it is still active. They include:
- First of all, make sure that your school is participating in the program.
- Confirm the timeline for submitting the FAFSA.
- Prepare all the necessary information to complete your application.
- Select your submission method.
- You can also set a time with your guardian to complete the FAFSA process.
Lastly, obtain your student aid report (SAR) and begin to get application status updates. After you submit your FAFSA. In about 3 to 5 days, you will get an email with the guide for getting your SAR.
How To Repay
Many individuals who borrowed from the program might believe that, since it’s no longer active, they don’t have to repay the loan.
However, this is not the case, as repayment is still required unless you qualify for the loan forgiveness program. As of the second quarter of 2023, outstanding loans amount to $3.7 billion, held by 1.2 million borrowers.
Meanwhile, for those employed in public-service-related jobs such as nursing or teaching, loan cancellation is possible after a certain number of years of service.
Additionally, when repaying the loan, you may encounter a different loan provider for this specific loan type compared to your other federal loans.
Therefore, it’s important to note that the maximum repayment term for a Perkins loan is 10 years.
Perkins Loan Forgiveness
If you’re interested in the Perkins loan forgiveness program, it’s essential to ensure that you meet the program’s qualifications.
To be eligible, you must be working in a public service job for a minimum of 4 to 7 years, depending on the nature of your job. Through this commitment, you can have 100% of your debt forgiven.
Students also have the option to apply for partial debt forgiveness after their first completed year in a job or position. Keep in mind that the forgiveness program varies by profession, so you can visit StudentAid.gov to determine the amount of forgiveness you may qualify for.