What Are Federal Perkins Loans?
TL;DR: Federal Perkins Loans were low-interest, government-funded loans specifically designed for students with exceptional financial need. Although the program ended in 2017, borrowers who took out Perkins Loans before that date are still responsible for repayment and may have access to unique forgiveness and cancellation options based on their career field and length of service.
Federal Perkins Loans were a form of student aid offered by the U.S. Department of Education to assist students with significant financial need. Unlike many federal loans, the Perkins Loan program was campus-based, meaning funds were disbursed directly by participating colleges and universities. These schools determined eligibility based on financial need, academic progress, and other criteria. Perkins Loans carried a 5% interest rate, which was fixed, making them an attractive option for low-income students who met the program’s qualifications.
Key Features of Federal Perkins Loans
- Low, Fixed Interest Rate
Perkins Loans came with a 5% interest rate, one of the lowest available for federal student loans. The fixed rate meant borrowers didn’t have to worry about fluctuating interest, which is especially beneficial for budgeting and planning. - Grace Period and Flexible Repayment
Borrowers had a 9-month grace period after graduation, withdrawal, or dropping below half-time enrollment before they needed to begin repayment. This was longer than the typical 6-month grace period provided by other federal student loans. - Forgiveness and Cancellation Options
Perkins Loans offered several unique cancellation options for borrowers working in qualifying fields such as teaching, law enforcement, firefighting, and nursing. In many cases, a percentage of the loan could be canceled for each year of qualifying service, with the potential for full forgiveness after five years in some professions. - Campus-Based Administration
Unlike direct loans, Perkins Loans were managed by the college or university, which set loan limits based on available funds. Schools also managed the repayment process and had some discretion in determining financial need, which meant aid packages could vary significantly from school to school.
Who Was Eligible for Federal Perkins Loans?
Eligibility for a Perkins Loan depended on several factors, primarily financial need. When students filled out the FAFSA (Free Application for Federal Student Aid), the Department of Education calculated an Expected Family Contribution (EFC). Perkins Loan eligibility was typically reserved for students whose EFC was low enough to demonstrate exceptional financial need. Undergraduates could receive up to $5,500 annually, while graduate students could receive up to $8,000 per year, with a lifetime borrowing limit of $27,500 for undergraduates and $60,000 for graduate students.
Why Did the Perkins Loan Program End?
The Perkins Loan Program was officially discontinued in September 2017 as part of a federal decision to simplify student aid options and reallocate funds. Although this program is no longer available, borrowers with outstanding Perkins Loans must still repay them. Those loans are eligible for specific types of loan forgiveness and cancellation benefits depending on the borrower’s employment and service in certain fields.
Repayment and Forgiveness Options for Perkins Loan Borrowers
Borrowers still repaying Perkins Loans may qualify for various forgiveness and cancellation programs. Options include:
- Teacher Loan Cancellation: Teachers in low-income schools or in high-need subject areas may qualify for partial or complete loan cancellation after a set number of years.
- Public Service Loan Forgiveness (PSLF): While Perkins Loans themselves don’t qualify for PSLF, borrowers can consolidate their Perkins Loans into a Direct Consolidation Loan, making it eligible for PSLF.
- Service-Specific Forgiveness: Professions like law enforcement, firefighting, and nursing may also be eligible for partial or complete forgiveness.
What Borrowers Need to Know Now
For those still managing Perkins Loan debt, it’s crucial to stay informed about repayment terms, deferment options, and possible cancellation benefits. Borrowers should reach out to their college’s financial aid office or loan servicer for guidance on repayment and to learn more about any applicable forgiveness programs. Although new Perkins Loans aren’t being issued, the support structure around existing loans can help make repayment more manageable, especially for those working in qualifying public service positions.
Federal Perkins Loans offered a unique combination of low-interest rates and forgiveness opportunities for students in need. Although the program has ended, borrowers can still benefit from the repayment and cancellation options tailored to public service and other qualifying professions. If you hold a Perkins Loan, take time to explore any forgiveness or cancellation options that could make repayment easier, especially if you work in education, healthcare, or public service fields.
Disclaimer: The information provided in this post is for general informational purposes only and should not be considered financial advice. Student loan situations can vary significantly based on individual circumstances, and decisions around deferment or forbearance can have lasting financial impacts. Before making any changes to your loan repayment plan, consult a qualified financial advisor or your loan servicer to understand the best options for your unique situation.