Student Loans

Your Guide to the Federal Perkins Loan Program

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If you dream of attending undergraduate or graduate school, you may be researching and comparing student loans. A Perkins loan, with its 5% interest, possible forgiveness, and cancellation options, can be a great option. Read more about Perkins loans below, including what it is, eligibility requirements, application process, repayment, and loan forgiveness options, so you know if it’s the best option for your higher education pursuits.

What Is a Perkins Loan?

A Perkins student loan consists of seven characteristics:

  • Subsidized: The interest loan is paid for and covered by the government until after graduation.
  • Enrollment: Part-time or full-time students qualify.
  • Lender: Your college or university is the lender for a Perkins loan.
  • School participation: Colleges and universities choose to participate in the Perkins program. It is not a guarantee that the school you are attending or plan on attending is a participant.
  • Financial need: Perkins loans are provided based on students financial circumstances. Participating schools have different income eligibility criteria.
  • Amount borrowed: Undergraduate students may borrow up to $5,500 a year and a total of $27,500. Graduate and professional students may borrow up to $8,000 a year and a total of $60,000. $60,000 is the total a student can borrow with both undergraduate and graduate debt combined.
  • Funding availability: The availability of funding for a Perkins loan will depend on two factors: funds at the college or university and your personal financial situation.

Am I Eligible For a Perkins Loan?

In order to be eligible for a Perkins loan you must be a U.S. citizen. You also need to have:

  • A high school education: A high school diploma or GED is needed. You may take an Ability to Benefit (ATB) test to qualify if you do not have a high school diploma or GED.
  • Student level: You need to be an undergraduate, graduate, or professional level student.
  • Attendance: You will need to maintain part-time or full-time enrollment status for continued eligibility.
  • School selection: The school you select to attend needs to be a participant of the Perkins loan program.
  • School criteria: Each school may have other criteria, including income limits.

It is important to know that colleges and universities can experience an overflow of applications for Perkins loans, and a shortage of funds. So it is important to note that even if you meet the eligibility criteria, you may not be able to receive one.

How to Apply

Applying for a Perkins loan can be completed in the following four steps:

  1. Confirm that the college or university you plan on attending participates in the Federal Perkins Loan Program.
  2. Find out from your college or university what their Perkins income criteria is.
  3. File a Free Application for Federal Student Aid application.
  4. Complete a Perkins promissory note. It is a promise to repay the loan.

Repaying a Perkins Loan

When it comes to student loans, their interest rates, fees, and repayment options impact your the future finances. Here is what you need to know about Perkins loans and repayment:

  • Interest: The interest rate on a Perkins loan is 5%.
  • Fees: Loan origination fees are non-existent. Outside of the 5% interest, there are no other fees to worry about when obtaining a Perkins student loan.
  • Grace period: After graduation, there is a nine month grace period before repayment starts.
  • Minimum monthly payments: A Perkins loan taken out prior to October 1, 1992 will have a minimum monthly payment of $30. After October 1, 1992, the minimum is $40.
  • Collections: Be sure to make all payments on time when it comes time to repay your Perkins loan. If you miss a payment, you will encounter a late fee. If you miss multiple payments, you will start receiving calls from collection agents. To avoid this, when your Perkins is in repayment and you experience financial hardship, call the school you attended and ask about forbearance or deferment.

Deferment and forbearance

Many people wonder if it’s possible to postpone payments after you get out of school. The answer is yes. Deferment options are available for Perkins loans, during which time repayment of both the principal and interest will be temporarily delayed. If you don’t qualify for deferment, you may receive a forbearance, in which you may make no payment or a reduced payment while interest continues to accrue on your loan. Learn more about these options at the Student Federal Aid website.

What will my payments be each month?

You may use a Perkins loan repayment calculator to determine what your payments will be each month. Here’s a sample of some typical repayment amounts based on various principal loan amounts for Perkins Loan repayment.

Perkins Loans Monthly Payment Example
Principal Loan Amount # Payments Monthly Payment
$4500 120 $47.73
$6500 120 $68.94
$8800 120 $93.24
$12,500 120 $132.58

Tax incentives

Under IRS publication 970, you are entitled to tax benefits for higher education expenses, including a deduction for interest paid on student loans. This applies to Perkins loans. The limit is $2,500 per year.

Perkins Loan Forgiveness

There are many government-based student loan forgiveness programs available, each with their own application process and eligibility criteria. Each program also forgives a varying percentage of the loan. There are four forgiveness and cancellation types available for Perkins loans that you may be able to use: school closure, health related, career focused, and acts of service.

School closure

If you are attending a college or university that closes prior to your graduation, you will not be held responsible for the loan, and it will be 100% forgiven.

Health related

If you pass away, your Perkins loan is no longer a debt your heirs will need to worry about. It will be considered 100% forgiven. The same is true if you experience an accident where you are permanently disabled.

Career focused

There are many career-based loan forgiveness programs. These include:

  • Teachers – full-time elementary or secondary school teachers serving low income students, special education teachers, and teachers of math, science, or other teacher shortage areas may qualify for up to 100% loan forgiveness.
  • Head Start – full-time staff members in the education component of a Head Start program may qualify for up to 100% loan forgiveness.
  • Firefighters – full-time firefighters may qualify for up to 100% loan forgiveness.
  • Armed forces – service in the U.S. Armed Forces may qualify you for up to 70% loan forgiveness.
  • Correction officers – full-time corrections officers may qualify for up to 100% loan forgiveness.
  • Law enforcement officers – full-time law enforcement officers may qualify for up to 100% loan forgiveness.
  • Medical technicians – full-time medical techs may qualify for up to 100% loan forgiveness.
  • Nursesfull-time nurses may qualify for up to 100% loan forgiveness.
  • Librarians – a librarian with a master’s degree working in a Title I-eligible elementary or secondary school or in a public library serving Title I-eligible schools may qualify for up to 100% loan forgiveness.
  • Family services – full-time employees working for a public or non-profit company that provides services to low income, at-risk children and families may qualify for up to 100% loan forgiveness.
  • Attorney (working at as a public defender) – full-time attorneys employed in federal public or community defender organizations may qualify for up to 100% loan forgiveness.

Acts of service

Have you thought about joining the Peace Corps or the AmeriCorps VISTA program? Both provide recognition for your service with 70% forgiveness on a Perkins loan.

Is This Loan Right For You?

Whether Perkins student loans are for you or not will depend on if you qualify for one and if the college or university you attend participates in the program. If you qualify for a Perkins loan and your school is a part of the program, obtaining a Perkins loan may be one of the best student loan options out there for you, especially with its 5% interest and many loan forgiveness options.

If your school is not a participant of the Perkins student loan program, you do not meet the program’s eligibility requirements, or you are eligible but are not granted one due to school funding availability, you’ll need to look at other student loan options.