Perkins Loan Vs Pell Grant

2017 saw the end of the federal Perkins loan program, which offered low-interest loans to students with severe financial need.

The government provided the majority of the funding for Perkins, but some schools also made a contribution. (Tom Werner/Getty s).

Undergraduate and graduate students who demonstrated exceptional financial need when attempting to pay for school were drawn to the federal Perkins loan as a viable option. But as of Sept. 30, 2017, new Perkins loans are no longer available. They had a fixed 5% interest rate and a longer grace period than other student loans at nine months. The fact that the schools involved in the program would contribute a portion of the loan and the borrower would typically repay the school directly made them particularly special.

Here are some important details about the Perkins loan program and what borrowers should expect when it expires.

Unlike Pell Grants, a Perkins student loan must be repaid. Payment terms vary up to 10 years, and some Perkin loans may qualify for deferment or loan forgiveness.

What Is a Perkins Loan?

A need-based student loan known as a Perkins loan has a fixed interest rate of 5% and a 10-year repayment period. Because the Perkins loan was subsidized by the federal government, interest did not accumulate during the loan’s nine-month grace period. Borrowers had the option of beginning loan repayment in the tenth month following graduation, withdrawal from or dropping out of school, or status as a less-than-half-time student.

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The Perkins loan differs from other federal student loans in two key ways. First, the government provided the majority of the funding for Perkins, but approximately 1,700 schools also made a contribution. Typically in two installments over the course of the academic year, the schools would send their borrowers a check for the borrowed money or would simply credit their accounts. [.


Another distinction is that, as opposed to the dozen federal student loan servicers who serve as a middleman between borrowers and the Department of Education, Perkins loans are typically repaid to the school or a servicer that collaborates with the school.

Who Was Eligible for Perkins Loans?

Up until September, undergraduate and graduate students who showed extreme financial hardship were qualified for the Perkins loan. 30, 2017. Students needed to first complete the Free Application for Federal Student Aid, or FAFSA, as with other types of federal financial aid.

Borrowers for undergrads were only permitted to borrow $5,500 annually, with a total cap of $27,500. Graduate students could borrow up to $8,000 annually with a maximum of $60,000, which included any outstanding Perkins loan balance from their undergraduate studies.

Why Did the Federal Perkins Loan Program Expire?

The federal government began to phase out the Perkins loan in 2015 due to financial difficulties, but later extended the program until 2017 in the hopes that a more long-term solution would be found.

Those who wanted to keep the Perkins loan program were worried about preserving low-cost options for the most needy borrowers, while those who supported letting it expire hoped to streamline and centralize federal student loans.

Congress did not renew the Perkins loan program, so it was terminated officially on September 30, 2017. Final loan disbursements were allowed through June 30, 2018. [.


Perkins Loan Discharge, Forgiveness and Cancellation

You may have options if you want your Perkins loans forgiven, canceled, or discharged, but only if you are not in default. The Department of Education states that in the case of Perkins loans, “the holder of the loan may declare the loan to be in default if you do not make any scheduled payment by the due date.” For the majority of federal student loans, default occurs if full payments have not been made for at least 270 days. “.

You may be qualified for deferment or forbearance, which let you temporarily stop making payments or lower your monthly payment amount, if you’re just having trouble paying back your Perkins loan. [.


You may choose to postpone loan repayment if you are a borrower who is not in default and who is enrolled at least half-time in a graduate program. Keep in mind that because the loan is government-subsidized, interest accruing during periods of deferment will be paid. If you’re thinking about taking this action, your best resource will be the financial aid office at your school.

Loan discharge. For a number of reasons, you may be released from your obligation to repay your Perkins loan. If a school closed before a student could finish his or her program of study, as long as the loans were received on or after January 1, 2010, these are the reasons: death; total and permanent disability; 1, 1986; or in some rare instances, bankruptcy.

Perkins loan teacher cancellation. If you have worked full-time in a public or nonprofit elementary or secondary school system as a teacher serving students from low-income families, as a special education teacher (including early special education, such as infants and toddlers or children with disabilities), as a bilingual educator, or as a teacher in the subjects of mathematics, science, foreign languages, or any other field determined by a state to have a high need, you may be eligible for a 100% cancellation of your Perkins loans.

There are many more specific requirements for teachers to receive Perkins loan cancellation, so be sure to read the details on the Department of Educations Federal Student Aid website.

Employment or volunteer service cancellation. There are numerous other professions and volunteer activities that are also eligible for the cancellation of Perkins loans. After five years of qualifying service, many of these are eligible for 100% cancellation:

  • Early childhood education provider.
  • Employee at a child or family services agency.
  • Faculty member at a tribal college or university.
  • Firefighter.
  • Law enforcement officer.
  • Librarian with masters degree at a Title I school.
  • Military service.
  • Nurse or medical technician.
  • Professional provider of early intervention (disability) services.
  • Public defender.
  • Speech pathologist with masters degree at a Title I school.
  • Volunteer service (AmeriCorps VISTA or Peace Corps).
  • Remember that cancellation usually happens on a graduated scale based on the total amount of the original debt: 15% for the first year, 15% for the second year, 20% for the third year, 20% for the fourth year, and 30% for the fifth year.

    Other Options for Students With Financial Need

    The federal Perkins loan program was allowed to expire by politicians who believed it was time for a simplified, less perplexing student loan and repayment system. However, even though the Perkins loan is no longer available, students who can demonstrate financial need still have other funding options. Be sure to complete the FAFSA to see what you may be eligible for.

    The federal Pell Grant is one of the choices for undergraduate students. Pell Grants do not require repayment, in contrast to student loans. Each year, the top award varies; for the 2019–2020 award year, the top award for Pell Grants is $6,195, and the bottom award is $650.

    The amount of a student’s Pell Grant award is determined by his or her expected family contribution, or EFC, which is determined by filling out the FAFSA, the cost of attendance at the school, whether the student is enrolled full- or part-time, and the anticipated length of attendance. From the participating schools, all eligible students will receive the full amount they are entitled to.

    The Federal Supplemental Educational Opportunity Grant is another non-repayable choice for undergraduate students who are experiencing financial difficulty. The FSEOG is directly administered by the financial aid office at your school, and the amount you might receive is determined by the data on your FAFSA.

    The amount of other financial aid you receive is one of the considerations made when determining your FSEOG award, which can range from $100 to $4,000 per year. To find out if your school participates in the FSEOG program, get in touch with the office right away. Since not all schools do, and grant money can run out,

    About Student Loan Ranger

    Student Loan Ranger helps prospective and current students and recent graduates make sense of borrowing options, student debt and loan repayment. The blog is currently authored by Education Finance Council, a national trade association representing nonprofit and state-based higher education finance organizations; GreenPath Financial Wellness, a national nonprofit organization that provides financial counseling and education to empower people to lead financially healthy lives; and The Institute for College Access & Success, an independent nonprofit organization that conducts research, analysis and advocacy on making higher education more available, affordable and equitable. Previous blog contributors include the Financial Counseling Association of America, National Foundation for Credit Counseling and American Student Assistance.

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    Perkins Loan Vs Pell Grant


    What is the difference between a Pell Grant and a loan?

    Unless otherwise specified, a Federal Pell Grant is not required to be repaid, unlike a loan. Learn why you might be required to repay a federal grant in full or in part. You are only permitted to receive Federal Pell Grant money from one school at a time.

    What type of student qualifies for a Perkins Loans?

    Applicants must meet all of the following requirements in order to be eligible for a Perkins Loan: exceptional financial need; undergraduate, graduate, or professional student Enrolled full-time or part-time. being a student at a school that accepts Federal Perkins Loans

    What are Perkins loan benefits?

    Perkins Loans are a type of federally guaranteed student loan that are jointly administered by the U S. government and individual colleges and universities. The low-interest, long-term loans target students with serious financial hardship.

    What replaced the Perkins loan?

    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.