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Perkins Loans: Everything You Need To Know

Published September 10, 2021

5 minute read

Devon Taylor

By Devon Taylor

A Perkins Loan was a federal program that provided low-interest loans to college students who demonstrated exceptional financial need. The program, which operated as the “Perkins Loan Program,” no longer exists. It was discontinued on September 30, 2017. The final disbursements were permitted through June 30, 2018. Although the program has been discontinued, many current (or former) American students still owe money on Perkins loans. Anyone who still holds a Perkin Loan can learn about managing the repayment of their loan by contacting the school that originally made the loan. You should try reaching out to the school’s loan officer first.

About Perkins Loans

The Perkins Loan Program began in 1958. It provided loans to about 500,000 students (over 1,400 schools) by the time it was ended for good in 2018. The Perkins Loan Program has not yet been replaced by another form of low-income, need-based student loan program by the U.S. federal government.

The main benefit of a Perkins loans was the low interest rate charged. Borrowers paid a maximum interest rate of 5%. Today, the U.S. government issues other types of federal loans to students, including directly subsidized and unsubsidized ones. These are called Stafford loans. However, Stafford loans charge interest rates of 6.8% or higher.

How Perkins Loans Worked

Perkins loans were provided through the financial aid office of the educational institution the student is attending. The loan was paid directly to the student in some cases. Alternatively, the loan was directly applied towards institutional charges and qualified educational expenses. Technically, Perkins loans were only subsidized by the government. That meant the government paid the interest that accrued on them while the student was pursuing their degree.

The Perkins Loan Program had some borrowing limits. These limits depended on when the student applied, the student’s financial need, and the school’s funding level. Students could borrow up to $5,500 per year for every year of undergraduate study. That number rose to $8,000 for each year of graduate or professional study. The interest rate was 5%, with a ten-year payback period.

Repayment Process

Those attending school at least on a part-time basis have a nine-month grace period after they graduate, leave school, or drop below half-time status before they must begin repaying a Perkins loan. Students can check with the college they attend to find out how long the grace period will be on their loan.

The actual lender for Perkins loans was the school itself. Therefore, the loan was repaid directly to the school. Other than interest, there were no other fees or charges associated. However, like all loans, if a borrower was late with a payment (or missed one entirely), a late fee would be applied. Delinquent loans could also be subject to collection costs, depending on the college issuing the loan.

Perkins loans


Program’s End

The U.S. federal government ended the program due to budgetary constraints. The government claimed that it could no longer afford to run the federal loan program. Government officials in Washington, D.C. also wanted to streamline the federal student loan program.

There has been discussions about developing another low interest student aid program for students who are in exceptional financial need. However, no such program has materialized to date. Several changes have been made to the federal student loan program in recent years, but nothing that directly replaces Perkins loans.

How to Make Payments

Since the program was only discontinued in 2018, many outstanding Perkins loans remain on the books. These loans are estimated to amount to $1 trillion of student loan debt held by more than 43 million Americans.

Perkins loans must be repaid within a 10-year period. Luckily, here are many ways to pay them off. To make payments, you should reach out to their school’s loan department or financial aid office. They will guide you through the repayment process.

Provisions and Exceptions

If you are employed in a public service-related job (such as a public school teacher or a nurse), you may be eligible to have your loans canceled after specific years of service. Another option is loan consolidation. If a Perkins loan is consolidated with other loans (student or otherwise), then you’ll potentially have more repayment options.

On their own, Perkins loans do not qualify for the same repayment options as those who hold direct federal student loans. If you want to pay off a Perkins loans, you must contact your school directly. Keep in mind that repayment processes can vary from college to college. There is no standardized process for repayment.

Loan Forgiveness

As previously mentioned, some people with Perkins loans may qualify for loan forgiveness. For example, early childhood educators, firefighters, and military personnel can all qualify to have their Perkins loan debt forgiven. The amount is based on your exact role, years of service, and outstanding loan amount.

Depending on the job and how long you’ve had it, the eligible amount of loan forgiveness you are eligible for varies. For example, you may qualify for  complete loan forgiveness if you’re a special education teacher. Other professions may qualify you for less loan forgiveness.

The Federal Student Aid Office provides online information about the percentage of funds that can be forgiven. You number will be based on a variety of criteria, including job title, years of service, and other conditions.

graduating student with perkins loans


Perkins Loans vs. Other Student Loans

Although the Perkins Loan Program has been discontinued, the U.S. Department of Education continues to help students finance higher education through other student loan programs. Unlike the previous Perkins program, the government itself is now the lender rather than various colleges and universities.

Stafford student loans, which are still offered, provide funding for relatively low interest rates. Unlike Perkins loans, however, Stafford loans are contingent on specific income levels, which need to be demonstrated by students or their families.

The Bottom Line

In summary, the Perkins loans program was a federal initiative to provide cheap loans to low-income students in the U.S. The program was discontinued in 2018, due to budget cutbacks by the Federal Government.

Although Perkins loans are no longer issues, there are more than 40 million Americans who still carry student loan debt in the form of a Perkins loan. There are many ways to repay a Perkins loan, although it’s typically done directly to the school you attended. You may also be eligible for debt forgiveness, depending on you employment status and income level.

T learn more about Perkins loans and the various repayment options, contact the loan or financial aid office of the college you attended. You can also visit the website of the U.S. Department of Education.

Devon Taylor

Managing Editor

Devon is an experienced writer and a father of three young children. He's simultaneously trying to build college funds and plan for an eventual retirement. He's been in online publishing since 2013 and has a degree from the University of Guelph. In his free time, he loves fanatically following the Blue Jays and Toronto FC, camping with his family, and playing video games.

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