Perkins Loan – A College Financial Aid Option: Federal Perkins Loan and Federal Student Loan Consolidation

Perkins Loans are government-subsidized federal student loans available to those who demonstrate a financial need. Similar to Stafford Loans, the Federal Perkins Loan program offers generous payment terms and low interest rates.

This article will explain Perkins Loans and describe how eligible students can apply.

Federal Perkins Loan What is it?

Perkins Loans are set up so that the interest of the loan does not accrue while a student is in school. Additionally, the interest on these loans do not accumulate during a student’s grace period after completing school, which extends for nine months after a student has either left school or graduated.

In order to qualify, students must:

  • Complete an FAFSA form, which measures the finances of a student and his/her supporting family;
  • Demonstrate a financial need based upon information contained on the FAFSA form;
  • Be enrolled in an accredited institution of higher learning at least part-time.

It should be noted that the Department of Education begins accepting and evaluating the FAFSA form every year beginning January 1, and students may submit a new or updated form each year.

Perkins Loans have a low, fixed interest rate for new borrowers, and offer funding amounts up to $5,000 annually for undergraduates (and $8,000 for graduate and professional degree students.) Those who take out this loan have up to 10 years for repayment.

Perkins Loans may be consolidated with other federal loans through the federal student loan consolidation program.

Federal Perkins Loan Repayment Compared with Direct Loans (Stafford Loans)

One of the primary government-sponsored federal loan programs is the William D. Ford Federal Direct Loan Program (FDLP, or Direct).

Direct loans, as the name suggests, are offered directly by the federal government through the Department of Education. As the sole lender, the government releases funds for eligible students to participating schools, who then apply the funds to pay for students’ tuition and associated costs.

Perkins Loans are very closely related to the federal Direct loan program, as both are funded by the Department of Education and offer very similar terms. The primary difference between them involves a technicality regarding who the lender is. For Stafford Loans, the lender is the Department of Education. However, for a Perkins Loan, the school which the borrower attends is the actual lender (as the school receives funds from the Department of Education).

While the original funding source comes from the government for both Perkins and Stafford Loans, Perkins Loan recipients pay back their host educational institution rather than the Department of Education.

Interest Rates for Perkins Loans

Perkins Loans have fixed interest rates at a very low 5 percent. However, before deciding on taking out a loan, speak with a loan representative or a financial aid counselor to determine if any updates have been made regarding interest loan reductions.

How to Apply for Perkins Loans

Applying for a Perkins Loan is easy. Simply complete and return the above-mentioned FAFSA form, which can be obtained at any financial aid office or online from the Department of Education. There is no separate application for a Perkins Loan, though students who qualify must sign a promissory note, which contractually obligates a borrower to repay the loan according to the terms established by the promissory note.

Perkins Loan Consolidation

Perkins Loans may be consolidated with any other federal student loan through the federal student loan consolidation program. Given the low interest rates offered by Perkins Loans, students interested in consolidating for convenience should consult the various consolidation repayment options to ensure that doing so saves money.