Perkins Loan: What Borrowers Need to Know

If you’re applying to college, you may have heard that the Federal Perkins Loan is an option available to help you afford college. But what is a Perkins Loan, and can you still borrow one to pay for school?

Below, we take a look at these and other questions about Perkins Loans so that you can make an informed decision about accepting the financial aid that you are offered as a part of your financial aid package.

What is a Perkins Loan?

A Perkins Loan was a special type of federal student loan created under the Federal Direct Student Loan Program that was specifically designed to help especially needy recipients pay for their college expenses. Under the program, schools participating in the Perkins Loan program received funds from the federal government, which the schools would then distribute to student borrowers who met eligibility requirements.

These loans were different from other federal student loans, like Direct Loans, in a number of important ways:

  • They carried a lower interest rate compared to most comparable loans
  • They came with a 9-month grace period instead of the more typical 6-month grace period
  • They were subsidized by the federal government, which means they did not accrue interest while a student was enrolled in college or while their loan was in deferment or a grace period
  • They were available for a variety of forgiveness programs

Unfortunately, the law which created Perkins Loans did not renew in Congress in September of 2017. This means that no new Perkins Loans can be disbursed or granted to borrowers.

What is the interest rate on a Perkins Loan?

Perkins Loans that were granted prior to September 30, 2017 carry a fixed interest rate of 5%. This was much lower than the interest rate charged by other federal and private student loans.

Because the Perkins Loan was subsidized by the federal government, any interest that accrued while you were enrolled in college or during your 9-month grace period after leaving school was paid by the federal government. Over the life of your loan, this could save borrowers hundreds or even thousands of dollars in interest payments.

Learn more about the difference between subsidized and unsubsidized student loans. 

How much can you borrow?

Because the Perkins Loan Program no longer exists, today’s college students cannot borrow new Perkins Loans.

That being said, when the program was active, eligible undergraduate students could borrow $5,500 worth of Perkins Loans each year for which they qualified, up to a total of $27,500.

Eligible graduate students could borrow $8,000 worth of Perkins Loans each year for which they qualified, up to a total of $60,000. This maximum amount included any undergraduate Perkins Loan balance.

Perkins Loan Eligibility

Unfortunately, college students can no longer qualify to borrow a Perkins Loan because the program no longer exists. In the past, to qualify for a Perkins Loan a borrower would have needed to:

  • Be an undergraduate, graduate, or professional student
  • Be enrolled full-time or part-time
  • Be attending a school that participated in the Perkins Loan Program
  • Be able to prove financial need, as determined through your FAFSA application

How to Apply for a Perkins Loan

As the Perkins Loan Program no longer exists, you cannot currently apply for a Perkins Loan.

In the past, completing your FAFSA application would automatically allow you to apply for all types of financial aid, including the Perkins Loan. If you were eligible to receive a Perkins Loan, you would have been notified by your school as a part of your financial aid package.

You can submit a FAFSA application here.

Perkins Loan Repayment Plans

Perkins Loans do not come with the same repayment options as most other federal student loans. Typically, borrowers were required to repay their loans over the course of a 10-year standard repayment plan, though portions of the loan could be forgiven for public service.

Perkins Loan Refinancing and Consolidation

There is no federal student loan refinancing program. In order to refinance your Perkins Loan, you would need to turn to a private lender who would essentially convert your loan into a private loan. While this may bring benefits such as a lower interest rate or lower monthly payments, it also means that you will be losing certain benefits carried by federal loans, such as the ability to place your loans in deferment or forbearance. Because Perkins Loans do not accrue interest during deferment, borrowers should think carefully before deciding to refinance them. Therefore, it’s important to weigh the pros and cons of refinancing before you make a decision.

Student loan consolidation is a process in which you combine multiple federal student loans into a single new loan, called a Direct Consolidation Loan. This new loan’s balance will be the total of all of its component loans, added up. The interest rate that it carries will be the weighted average of all of the loans that make it up.

Perkins Loans can be consolidated under this program.

Perkins Loan History

The Perkins Loan Program was originally established in 1957, making it the oldest federal student loan program. It was then incorporated into the Higher Education Act of 1965, which created the Federal Guaranteed Student Loan program. This program also made other federally-backed student loans available to college students, such as Direct Loans.

Unfortunately, the Perkins Loan Program failed to renew in September of 2017, effectively ending the program.

Alternatives to Perkins Loans

While the Perkins Loan Program was especially beneficial to borrowers with exceptional financial need, it is no longer an option for borrowers. That being said, other options do exist.

Direct Subsidized Loans are, as the name implies, subsidized by the federal government. They are designed for undergraduate borrowers who demonstrate financial need in their FAFSA application. Additionally, Direct Unsubsidized Loans are available to all undergraduate, graduate, and professional students, regardless of financial need. Direct Subsidized and Unsubsidized Loans are also sometimes known as Stafford Loans.

Other programs like the Direct Graduate PLUS Loan Program and the Direct Parent PLUS Loan Program can also help you fill in the gaps if Direct Loans will not cover all of your educational expenses.

Additionally, if Direct Unsubsidized Loans do not cover the total cost of tuition, you may be able to borrow private student loans, though these will typically be more expensive.