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Student Loans

Perkins Loan Explained

As of September 30, 2017, schools were no longer allowed to make new Federal Perkins Loans. The final disbursements were made on June 30, 2018. To see other federal student loan options, check out our Federal Student Loans Guide.

In order to help more students afford the costs of attending school, the federal government has provided a number of student loan programs. These programs are funded by the government and students repay the loans with interest. In many cases, the funds are disbursed by the Department of Education.

One federal program was the Perkins Loan, and it operated a little differently than the rest. Even though the Department of Education was in charge of the funds, they were actually disbursed by schools. However, the program stopped accepting applications in 2017, and the last disbursements were made on June 30, 2018. Here’s what you need to know about the Federal Perkins Loan for postsecondary education.

What is a Perkins Loan?

Most federal student loans have the government itself as the lender, but the Perkins education loan program used the school itself as the lender. Payments were made to the school directly – or to their own servicing company. The loans were specifically geared toward students with “exceptional financial need,” which is why they were somewhat less expensive.

However, amounts available were dependent on how much the school could lend. Even if you found a school participating in the program, not everyone who applied for a Perkins Loan as a form of federal financial aid got one.

Who Used to Be Eligible for Federal Perkins Loans?

Perkins Loans were given to students demonstrating “exceptional” financial need and it was based on the expected family contribution. Borrowers could be undergraduate, graduate, or professional students enrolled half-time or full-time. However, in order to participate, you needed to make sure you attended a school that participated in the program.

Awards were made based on how much money the school had for its Perkins Loan disbursements, as well as the need demonstrated by the student and whether they had received other student aid.

Why Did the Perkins Student Loan Program End?

The Perkins Loan program came to an end after Congress allowed it to expire. Back in 2015, the program was temporarily extended, after months of deliberation by lawmakers. The agreement resulted in Perkins Loans for graduate students ending in 2016, and schools required to tell undergrad students that the program would end in October 2017.

As the expiration date approached, there was a bipartisan attempt to extend the Perkins Loan program through 2019, but the attempt was blocked and failed.

Opponents of the Perkins Loan program pointed out that it’s preferable to streamline the federal student aid programs by only having one type of federal loan and one type of federal grant. Proponents of extension said they would be willing to see the program expire at a later date — as long as there was something to replace it for the neediest students.

What Happens Now That the Perkins Loan Is No Longer Available?

Borrowers who already have Perkins Loans have to make payments as agreed on a repayment schedule when their student loan grace period ends. Students who would have used the Perkins Loan to help them pay for school need to find other sources of student aid to help them cover any funding gaps. Filling out the Free Application for Federal Student Aid (FAFSA) is an important step toward making sure you qualify for all types of federal student aid including Direct loans.

Alternatives to the Federal Perkins Loan

The first step to any financial aid is filling out the FAFSA. Even if you can’t use the Perkins Loan, you can apply for different grants. The FAFSA helps determine if you are eligible for need-based financial aid, like grants. Many schools also use the FAFSA to decide if you qualify for certain institutional grants and scholarships.

Beyond filling out the FAFSA, you can also look for scholarships and grants from non-government organizations. Many of them offer need-based programs you might qualify for if you would have met eligibility requirements for the Perkins Loan.

On top of that, it’s also possible to get student loans from the government. While the rates aren’t always as low as what was offered by the Perkins Loan, federal student loans are easy to qualify for and almost anyone can get them. Plus, federal loans come with income-driven repayment options that can make payments more manageable after you graduate. Additionally, depending on whether you qualify for Public Service Loan Forgiveness and other programs, you might have a portion of your federal loans forgiven.

After you exhaust all your federal options and private scholarship programs, you might need to turn to private student loans. These loans can be more difficult to get and often come with credit requirements. Private lenders also tend to have less flexible repayment terms, higher fixed interest rates and variable interest rates, and lower loan amounts. However, for loan borrowers, they can be a viable way to close your college funding gap now that Perkins Loans are no longer available.

>> Read more: Types of Student Loans