Based on a student’s financial need, the federal government provided the Perkins Loan. The loan was “subsidized” while I was in college, so there was no interest accrued. The interest rate was a low fixed rate of 5%. Not all schools participated in the Perkins Loan Program. The fact that the college, rather than the government as with other federal loans, was the lender made this loan special. Loan repayment didn’t begin until nine months after graduation or when the student stopped enrolling full-time. The repayment term was 10 years.
Only about 1,700 colleges participated in the program. The government and the college would each contribute a portion of the funding. Either a check or a credit to the student’s account would be sent by the college. Undergraduates had a $5,500 annual cap and a $27,500 cumulative cap. Graduate students could only receive $8,000 annually, up to a maximum of $60,000.
What happened to the Perkins Loan Program?
As of September 30, 2017, schools were not permitted to make Perkins Loans under federal law. Final disbursements ended 6/30/18.
The program started to have budgetary issues in 2015, and the government started phasing it out. Funds were limited and not every student who qualified got money. Some congressmen hoped that they could find a permanent solution and maintain this program for the neediest students (like Ohio’s own Senator Rob Portman), but they were blocked in the US Senate.
Some believed that allowing it to expire would “simplify and centralize” federal student loans and make them easier to understand. Many feel that the need is still there.
If you have a Perkins Loan…
After repayment begins, your repayment period will last for 10 years. Your fixed low rate will remain at 5%; this is likely a lower rate than you can find elsewhere.
Perkins Loans can be discharged (you no longer need to pay it) for a few different reasons including: bankruptcy (in some cases), death, school closure (if the school closed prior to your finishing your degree), service-connected disability (veterans), spouse of a victim of the events of 9/11, or total and permanent disability. Remember, you can’t discharge a loan if you are in default.
Perkins Loans can be forgiven in certain instance for teachers and other public service workers like nurses, firefighters, law enforcement, military, etc. Pay careful attention to the steps needed to qualify.
What has replaced it?
Nothing really. Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), college aid awards, work-study, subsidized federal student loans, or private loans are required for students in need of financial assistance.
Pell Grants do not need to be repaid. The Pell Grant is for undergrads, and the amount can range from $650 to $6,195 per year in 2019/20. These numbers change from year-to-year and is based on a student’s Expected Family Contribution (EFC).
The FSEOG is money the college receives from the government that they in turn disburse. It can range from $100 to $4,000 per year. Not all schools participate. FSEOG amounts can vary based on other aid a student receives.
Both Pell Grants and FSEOG are awarded as a result of filling out the Federal Application for Free Student Aid (FAFSA). Applicants should file as soon as possible when the application opens on October 1st.
The colleges with endowments big enough to give this kind of gift aid are the ones that cover 100% of financial need. Students are required to take out federal and private student loans or participate in work-study programs to make up the difference.
Depends on where a student chooses to go to college. At a community college, maybe yes. At a 4-year college, probably not. The amount of government grants has not kept pace with the cost of education.
Let’s suppose a student is fortunate enough to receive the highest grant amount possible. That would be $10,195. The total amount of $15,695 is less than the typical tuition and room/board expenses a student will incur at an typical 4-year institution after factoring in the maximum federal student loan they are permitted to borrow as freshmen, which is $5,500. Students will have a bigger gap to fill with a higher interest private loan now that the low-interest Perkins Loan program is no longer available.
FAQ
What kind of loan is a Perkins loan?
Low-interest federal student loans through the Federal Perkins Loan Program, also known as Perkins Loans, are available to undergraduate and graduate students with exceptional financial need. Important: As per federal law, schools were no longer permitted to issue new Perkins Loans as of September
Will my Perkins loan be forgiven?
The cancellation of Federal Perkins Loans for Postsecondary Teaching is not permitted.
What type of loan is a Pell Grant?
The Pell Grant was created to help students from low-income households and is the largest federal grant program available to undergraduates. Unless otherwise specified, a Federal Pell Grant is not required to be repaid, unlike a loan.
How do I know if I got a Pell Grant?
Most borrowers can log in to StudentAid. gov to see if they received a Pell Grant. On your account dashboard and “My Aid” pages, we present details about the financial assistance you received, including Pell Grants. Log in to your account.