With the cost of college tuition continually rising, prospective and current students along with their families may find it difficult to pay for the expenses of higher education on their own. The federal government has made a handful of student loan programs available to help offset the need to deplete savings or forego an education altogether. While many are aware that federal student loans exist, few understand that some loan programs are designed for students who have a pressing financial need when it comes to earning a college degree.
The Federal Perkins Loan program is offered by funding from the Department of Education to student borrowers who are able to show a significant financial need. Both undergraduate and graduate degree students may qualify for Federal Perkins loans, so long as there are funds available through the school at which the student is enrolled either on a full- or part-time basis. Unlike other Department of Education student loans, Federal Perkins loan borrowers repay loan balances and interest directly to the school that offered the loan.
Applying for Federal Perkins Loans
Students can qualify for a Federal Perkins loan when they are able to show an exceptional financial need based on details included in their FAFSA. As with other federal financial aid, the FAFSA is required to be completed prior to each school year by students and, in some cases, their parents. FAFSA details income from the previous tax year as well as available family contributions that could be used to help pay for the cost of attending a degree program. A completed FAFSA is submitted to the student’s school of choice where that financial aid department reviews eligibility for Federal Perkins loans.
Not all schools participate in the Federal Perkins Loan program, nor are funds always readily available for incoming students. If a student believes a Federal Perkins loan is an option for college funding they must get in touch with their college or university early on to ensure the school participates in the program and that adequate funding is available.
Loan Amounts and Costs
The loan amounts available to students who qualify for Federal Perkins loans vary based on the type of degree program they are pursuing. Undergraduate students may be eligible for up to $5,500 each year while graduate or professional students may qualify for up to $8,000 per school year. The cumulative Federal Perkins loan limit is $27,000 undergraduate students and $60,000 for graduate students. However, funding has been limited for the past several years due to diminishing federal government contributions to the program. The average Federal Perkins loan balance has been just over $4,000 for both undergraduate and graduate students.
A benefit to qualifying and receiving a Federal Perkins loan is the low interest rate compared to other student loan options. The federal government has set the interest rate for Perkins loans at a fixed 5 percent which does not change over the repayment period. Additionally, there are no funding fees or application expenses with a Federal Perkins loan.
Unlike other student loan options, Federal Perkins loan borrowers have a grace period of nine months after graduation or after leaving at least half-time status at an accredited school. This grace period means that no payments are due for that amount of time. However, most borrowers who receive Federal Perkins loans for undergraduate or graduate education are automatically placed on a standard repayment plan once the deferment period ends. The standard repayment plan for student loans extends for ten years after the grace period, and fixed principal and interest payments are due until the loan is repaid in full.
Borrowers with Federal Perkins loans have an opportunity to extend their repayment period to lower the monthly minimum payment due by going through the process of consolidating into another loan program. Student loan consolidation allows borrowers to combine all outstanding federal loans, including Perkins loans, into a single, larger loan with a fixed interest rate. The benefit of consolidation is that repayment can be extended up to 25 years, depending on the total loan balance. Income-based repayment plans are available to Federal Perkins loan borrowers only when consolidation takes place.For those who can prove an exceptional financial need for student loans, Federal Perkins loans may be a viable option in paying for the cost of attending college. Borrowers should understand the process of applying for funding as well as their options for repayment once they leave school.