College is an expensive undertaking, and many students don’t have the resources to pursue their degrees. To help more students attend and graduate from college, the U.S. government supports several student aid programs for students at all levels of income. Low-income college students who apply for financial aid often qualify for a Federal Perkins Loan.
What is a Federal Perkins Loan?
Federal Perkins Loans (“Perkins Loans” for short) are loans given through the Federal Perkins Loan Program. Perkins Loans are low-interest and intended to help low-income undergraduate and graduate students pay for college.
Unlike Direct Loans (Stafford Loans), which are paid by the U.S. Department of Education, Federal Perkins Loans are distributed by participating colleges themselves. If you receive a Perkins Loan, your school will apply it to your tuition and other fees and charges.
Perkins Loans are a great option for low-income students, but not all colleges and universities participate in the program. If you’re unsure whether your school participates in the program, contact your financial aid department before proceeding with the application process.
Applying for a Federal Perkins Loan
The first step to apply for a Federal Perkins Loan is filling out the FAFSA (Free Application for Federal Student Aid). Your FAFSA information will help the colleges you’re applying to determine whether you’re eligible for financial aid, how much you’re eligible to receive, and what kind.
Am I Eligible for a Federal Perkins Loan?
Eligibility for a Federal Perkins Loan is dependent on the following factors:
Financial need
To receive a Federal Perkins Loan, you must demonstrate exceptional financial need to fund your college education. Your estimated financial need is determined by the “expected family contribution” information provided by the FAFSA.
Legal citizenship
Federal Perkins Loan borrowers must be a citizen or naturalized/permanent resident. You will need to have a valid Social Security Number and show required immigration papers if applicable.
Secondary education
To receive a Perkins Loan, you must be a high school graduate (public or private) and have obtained your diploma or GED.
Enrollment
Borrowers must be officially enrolled in a program at a college or university that participates in the Federal Perkins Loan Program.
Satisfactory academic performance (SAP)
Borrowers must maintain satisfactory academic performance during their school’s probationary period. Your school’s financial aid office will have more information about its specific SAP requirements for Federal Perkins Loans.
Financial aid history
Perkins Loan borrowers should not have other student loans in default, and you will need to certify that you do not owe a repayment of any government-sponsored student aid. If you do have loans in default or owe a repayment, you will need to make arrangements with the federal government for debt repayment.
Other criteria
- If you’re a male student born on or after January 1, 1960, or you’re at least 18-25 years of age upon date of enrollment, you must be registered with the Selective Services.
- You must also not be participating in a residency or medical internship program unless it is related to the college program in which you’re enrolled.
How to Receive Your Perkins Loan
Based on the above criteria and your FAFSA information, your school will determine whether you’re eligible for a Perkins Loan, and how much you’re eligible to borrow. Once you’re approved to receive a Perkins Loan, you will be required to complete these steps:
Complete entrance counseling
Your school may require you to attend entrance counseling to ensure you understand the terms of your loan before you sign. If you’re still unsure of anything about your loan, this is the time to ask.Sign the
Promissory Note
The promissory note is the agreement you sign to receive your Federal Perkins Loan. It will include the terms of your loan and repayment schedule. Once you sign the promissory note, you’ve agreed to receive a Perkins Loan.
Borrowing Responsibly
When considering any type of loan or installment credit, it’s always important to read the fine print and understand the terms and conditions, and financial aid loans are no different. Federal student aid programs like the Federal Perkins Loan Program, however, do offer some advantages to students over private loans when used wisely.
Know How Much to Borrow
The FAFSA will determine how much you’re eligible to borrow with a Perkins Loans and other kinds of financial aid, but it’s ultimately up to you to decide how much you want to borrow. If you’re planning to work your way through school or pay for college in other ways, create your own budget to estimate how much money you’ll still be lacking. (Remember to account for things like food and books.)
Then, compare this number to the number estimated by FAFSA. If you decide you don’t need to borrow as much money is offered to you by your school’s Federal Perkins Loan Program, you can choose to borrow a lower amount. You shouldn’t be afraid to accept a Perkins Loan or other financial aid, but you should keep in mind how it will affect your finances in the future.
How Much Can You Borrow with Federal Perkins Loans?
In addition to knowing how much financial aid you need to pay for college, it’s important to know the limitations of Federal Perkins Loans when it comes to how much you can borrow. The amount you can borrow with a Perkins Loan depends on multiple factors:
- Financial Need
- This is the primary factor to determine whether you can receive a Perkins Loan; it also determines how much you’re eligible to receive.
- Funds Available
- Because the college you attend is the lender of your Perkins Loan, the amount you can receive is limited to how much they have available to lend and how many Perkins Loans they’re paying out that year.
- Undergraduate vs. Graduate
- Undergraduate students can receive up to $5,500 per year, depending on the factors above.
- Graduate students can receive up to $8,000 per year, depending on the factors above.
Perkins Loans vs Private Loans
If you’re eligible, federal student aid such as Federal Perkins Loans are likely your best choice to borrow money for school. Federal Perkins Loans offer the benefit of a grace period before you’re expected to begin repayment, and the interest rate is lower than that of most private student loans. If you go into a qualified career, you may even be eligible for up to 100% forgiveness of your Perkins Loan after a number of years of full-time work.
Grace Period and Repayment Flexibility
One of the benefits of Federal Perkins Loans is their flexibility when it comes to repayment. Taking out a Federal Perkins Loan gives you the benefit of a grace period before you must start making payments, depending on your enrollment status:
- If you attend school at least half-time, you will have nine months from the time you graduate or otherwise leave school (or drop below half-time status) before you must make your first loan payment.
- If you attend school less than half-time, your school’s financial aid office can help you find out long your grace period will be.
What is the Interest Rate on Federal Perkins Loans?
Because it is a loan, you as the borrower are responsible for paying back your Perkins Loan, with interest. However, Federal Perkins Loans come with a lower interest rate than most private loans: 5%.
The interest rate is the same for every borrower, no matter what your financial standing or academic history, and it doesn’t vary based on your credit.
Federal Perkins Loan Forgiveness
If you work full-time in one of these service-oriented careers after graduation, you may be eligible for partial or complete forgiveness of your Federal Perkins Loan after 10 years. You might need to consolidate into the William D. Ford Consolidation program depending on what type of forgiveness you would like to apply for.
- Teacher
- Provider of childhood education
- Volunteer – VISTA, Peace Corps, or AmeriCorps
- Military service
- Family services agency employee
- Nurse or medical technician
- Librarian with master’s degree at Title I school
- Firefighter
- Attorney in federal public or community defender organization
- Law enforcement or corrections
- Speech pathologist with master’s degree working at a Title I school
- Provider of early intervention services for the disabled
- Staff member in the education component of a Head Start program or licensed child care program
You might also qualify for a cancellation of your Perkins Loan in the peace corps loan forgiveness program.
Investing in Your Future
Paying for college can be a barrier to entry for many students, but that doesn’t have to be so with the help of federal programs like the Federal Perkins Loan Program. If you have low income and meet the other requirements for a Perkins Loan, a financial aid loan can be a great way to achieve your goals. A Perkins Loan is an investment in your future and, if borrowed wisely, can lead to a promising academic and professional career.
