Perkins Loans Explained
The U.S. Department of Education offers several loan programs to make an affordable education possible for everyone. 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.
Perkins loans are known for their low fixed interest rates and manageable repayment terms. Perkins Loans allow in-need students to finance the rapidly rising costs of a higher education. Similar to other types of federal loans, Perkins Loans can be used to cover education-related expenses such as tuition, textbooks, and educational housing costs.
The federal government sponsors the Perkins loans program, and the allocation of loan funds. Perkins loan funds are disbursed for students directly to the education institutions themselves. The educational institution is responsible for matching a certain percentage of the funds. If you qualify for a Perkins loan, your lender will effectively be the school your are attending! Because the institution acts as a lender with match federal funds, the institution plays a role in the determination of funds. The institution has influence over loan amounts and criteria.
Who Can Get a Perkins Loan?
Perkins loans are designed for low-income students enrolled in an undergraduate, graduate, or vocational program at an institution that participates in the Perkins Loan Program. Not every school offers Perkins loans to its students, so you should consult with the financial aid office to find our if the program is in place. Students who qualify for Perkins loans are able to demonstrate financial need.
In comparison to other federal loan programs, like the Direct PLUS and Stafford Loans, very few Perkins loans are issued to students each year. According to the New America Foundation, only $500,000 in new Perkins Loans were issued in 2014, with an average loan amount of $1,700. In comparison, approximately $8 million in new Stafford Subsidized Loans were issued to students.
Advantages of Perkins Loans
Anytime you can finance through low interest loans you are doing well for yourself. Perkins loans are so desirable because they have low fixed interest rates. Even if market interest rates increase, the rate you pay on Perkins loans will remain the same as long as you meet the conditions of borrowing.
Loan insurance is provided at no cost, so you won't be on the hook if you become disabled or die. Moreover, loan forgiveness programs do exist and are available for some individuals who commit to certain professions.
Repaying Perkins Loans
Borrowers are responsible for repaying a Perkins loan with an interest rate of 5 percent. The repayment period of a Perkins loan is 10 years. If borrowers make on time payments, there are no excess or misc. charges to consider. However, if you pay late or default on a Perkins loan, you will be charged late fees and collection fees.
After graduation borrowers can enjoy a nine month grace period before loan repayment beings on the loan. 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 you can apply for a deferment to postpone repayment temporarily.
How to Apply
Borrowers can apply for a Perkins loan by filling our the Free Application for Federal Student Aid (FAFSA). The earlier you submit your application, the better chance you have of getting a Perkins loan. Like other federal student loans, Perkins funds are limited and awarded to borrowers on a first come, first served basis. If interested, you could browse private college loan products offer by privately financed banks as a supplement.