Perkins Loan

What Was a Perkins Loan?

A Perkins loan was a type of educational financial aid provided through the U.S. government's Perkins Loan Program. The federal program provided low-interest loans to undergraduate and graduate students who demonstrated exceptional financial need. This need was determined both by the educational institution's own guidelines and by the information provided by the student on the Free Application for Federal Student Aid (FAFSA) form used to apply for all government loans.

Begun in 1958, the Perkins Loan Program was providing loans to about 500,000 students and 1,400 schools when it expired in September 2017, and final disbursements of funds happened in June 2018.

How a Perkins Loan Worked

Perkins loans were actually granted through the financial aid office of the educational institution the student was attending. The loan was paid either directly to the student (usually by a check) or the loan amount was applied towards institutional charges and qualified educational expenses. Technically, Perkins loans were only subsidized by the government — that is, the government paid the interest that accrued on them while the student was pursuing a degree. The school was the actual lender, and therefore the loan was repaid to the school.

The Perkins Loan Program had borrowing limits depending 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 each year of undergraduate study — up to $27,500 — and $8,000 for each year of graduate or professional study — up to $60,000, including any undergraduate Perkins loans. The interest rate for Federal Perkins Loans was 5% for borrowers, with a 10-year payback period.

Other than interest, there were no other fees or charges associated with a Perkins loan. But like all loans, if a borrower missed a payment, or payment was sent in late, they would most likely have been charged a late fee, or collection costs, depending on the lender's educational institution issuing the loan. 

Repayment on the loan began nine months after the student graduated, left school, or dropped below half-time status. The federal government ended the loan program due to budgetary reasons because the federal government funded the loans. Those in favor of ending it were concerned about the expense of the loans, but also those who wanted a more streamlined federal student loan program.

If you are struggling financially, you may be able to cancel your Perkins loan, depending on your situation.

How to Repay a Perkins Loan

Because the loan program was only discontinued in 2017, there are still outstanding Perkins loans. These loans make up the $1 trillion student loan debt held by over 43 million borrowers.

Perkins loans must be repaid in a 10-year period but there many ways to pay them off. First, if you hold a Perkins loan, reach out to your school's loan servicer or your university's financial aid office to learn how to repay the loan. 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 you consolidate all of your student loans, including your Perkins loan, then you will have more repayment options based on your income.

On their own, however, Perkins loans do not qualify for the same repayment options as those who hold direct loans. If you want to pay off your Perkins loans, you must contact your school directly.

Perkins Loan Forgiveness

As mentioned above, if you have a Perkins loan, you may qualify for a forgiveness program, if you are an early childhood education provider, an employee at a child or family services agency, an instructor at a tribal university or college, a librarian with a master's degree at a Title 1 school, a firefighter, in the military, work in law enforcement, a nurse or medical technician, an early intervention services provider, a lawyer working as a public defender, a speech pathologist with a master's degree at Title 1 school, or a volunteer with AmeriCorps VISTA or Peace Corps.

Depending on the job and how long you have been in it, the loan amount eligible to be forgiven varies. For example, you may qualify for 100% forgiveness if you are a special education teacher, or if you work in a school serving low-income families and their children, or if you are a teacher in a field of expertise, like math or science, as determined by a state education agency to have a shortage of qualified teachers in the state you teach in.

The Federal Student Aid Office in the U.S. Department of Education provides online information about the percentage of funds that can be discharged, i.e., forgiven, based on various criteria, including job, years of service, and other conditions. From there, the individual schools that issued your Perkins loans can provide applications and instructions specific to the type of loan forgiveness you are requesting.

The Pell Grant is another form of income-dependent, need-based aid, but it doesn't have to be paid back, unlike a Perkins loan.

Perkins Loans vs. Other Federal Student Loans

Although the Perkins Loan Program was allowed to expire, the U.S. Department of Education continues to help students finance higher education through the William D. Ford Federal Direct Loan Program. Unlike the Perkins program, the government itself is the lender in this case; hence the name "direct loans."

Four types of federal direct loans are available as of July 5, 2021:

Direct Subsidized Loans

Direct subsidized loans are made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school. The size of the loan increases with each collegiate year, starting at $3,500 and rising to $5,500 for dependent students.

Direct Unsubsidized Loans

Direct unsubsidized loans are loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need. The size of the loan increases with each collegiate year, starting at $5,500 and rising to $7,500 for dependent students. The annual range is $9,500 to $12,500 for independent undergraduate students; graduate students can borrow up to $20,500.

Direct Plus Loans

Direct PLUS loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other types of financial aid. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an adverse credit history must meet additional requirements to qualify.

Direct Consolidation Loans

Direct consolidation loans allow borrowers to combine all of their eligible federal student loans into a single loan with a single loan servicer.

Perkins Loan FAQS

How Do I Know If I Have a Perkins Loan?

You would know if you have a Perkins loan because you would have applied for it when you filled out your Free Application for Federal Student Aid (FAFSA) when you applied to school. Not all schools offered Perkins loans, but your school would have contacted you regarding yours if it was part of your financial aid package. If it has been so long since you took out your loans for college, and you are still not sure, log onto the National Student Loan Data System, which you must sign up for when you have student loans.

Do I Have to Pay Back a Perkins Loan?

Yes. You have to pay back your Perkins loan. Even though the loans were discontinued by the federal government, you will still owe the money you borrowed unless you meet the specific criteria to qualify for student loan forgiveness.

What Is a Perkins Loan vs. a Stafford Loan?

A Perkins loan was a federal student loan with low interest available to undergraduate and graduate students who demonstrated financial need. The government no longer offers Perkins loans, unlike federal direct subsidized and unsubsidized loans, called Stafford loans.

Like Perkins loans, these are low-interest student loans, but these loans are not contingent on specific income, unlike Perkins loans.