A federal Perkins loan is a subsidized loan for undergraduate and graduate students with “exceptional” financial need – regardless of income level or credit history.
Unlike the Stafford loan and Parent PLUS loan, the Federal Perkins Loan is one of the three campus-based financial aid programs – that is, the U.S. Department of Education funds the program but gives the money to the schools, which in turn act as the lenders.
According to FinAid, the Perkins loan is the best student loan available and the most generous in terms of interest rate, grace period, fees (yes, no origination fee is charged), and repayment options.
- Enrollment in an eligible school at least half-time in a degree program
- U.S. citizenship, permanent residency, or eligible non-citizen status
- Satisfactory academic progress
- No unresolved defaults or overpayments owed on Title IV education loans and grants
- Satisfaction of all Selective Service requirements
You must submit the Free Application for Federal Student Aid (FAFSA) to apply for the Perkins loan.
To be considered, you need to check “yes” in the section of your FAFSA that asks about your interest in student loans. It will then be up to the financial officer at your college to determine whether or not you are eligible. However, priority will given to recipients of Federal Pell Grant.
Upon approval of the loan, you’re required to sign a Perkins Loan Master Promissory Note1 before the school will disburse any funds to your student account.
Depending on when you apply, your level of need, and the funding level of the school, you can borrow up to $5,500 for each year of undergraduate study, up to a total of $27,500 and a maximum of 5 years.
Graduate students can borrow up to $8,000 per year of graduate or professional study (6 years max). A student can borrow a maximum combined cumulative total of $60,000 for undergraduate and graduate education.
The current fixed interest rate on all Perkins loans is 5% which is the lowest among all federal student loan programs; with the exception of subsidized Stafford loan interest rate (3.4%) for undergraduate students for the 2011–2012 school year.
The interest is subsidized while the student is in school, so you don’t pay interest on the loan while you are in school, or during the 9-month grace period available following graduation.
You don’t start repaying a Perkins loan, or interest on the loan, until 9 months after graduating, leaving school, or dropping below half-time enrollment.
Under certain circumstances, the federal government will cancel all or part of your student loan. For example, if you go into certain jobs, like nursing, law enforcement, teaching in low-income areas, or serve as a full-time volunteer in specific programs such as the Peace Corps & AmeriCorps, the loan may be forgiven.2
For more information on repaying and your obligations as a borrower, go to http://studentaid.ed.gov/.