Perkins Loan

Perkins Loan is a scheme that provides subsidized federal student loans that do not collect interest while in school. Under the scheme, there is a grace period for repayment after leaving school. The government instead pays the interest during the period.

The federal loan program offers low-interest loans for students of graduate and undergraduate programs in need of exceptional financial need. The school of the applicant is the lender of the loans. The applicants are required to work with the school or the institution hired by the school to repay loans.

The Perkins loan is a federal, subsidized student loan program for applicants with substantial financial requirements. Students are given relief from making payments while in school or during the grace period after leaving school. The Department of Education pays the pending interest payments accrued during these periods.

The loan provides two types of grace periods: initial grace periods and post-deferment grace periods. The payments depend on the amount required to be paid off in a decade, but the grace periods are not part of these ten years. The grace period (initial) starts on the day the borrower stops being a half-time enrollment. The post-deferment grace period starts the day after the deferment period ends. Borrowers with different grace periods shall repay them in accordance with the promissory note period.

Borrowers are entitled to a nine-month grace period after not being a half-time enrollment. Suppose they return before the grace period ends and have not used it. They still are eligible for the nine months. The post-deferment grace period is granted for six months, which is immediately followed by the end of the deferment period. It precedes the date of repayment on which it resumes. Both grace periods are granted for consecutive months.

Perkins loan services are typically the Schools. The loan program was discontinued in 2017, and those who had availed it are supposed to pay it back. These borrowers are still eligible for benefits under the loan program.

The U.S. Office of Financial Aid determines the eligibility criteria for federal Perkins loans. The information from the FAFSA or the free application for federal student aid determines it. Given below are some such factors: 

• The applicant shall be a U.S. citizen or, if not, meet the required criteria.
• There are no existing defaults in federal student loans.
• No existence of Federal Pell Grant over payment.
• Has FAFSA processed on file with the Office of Family Assistance or the OFA
• They have a requirement for financial assistance.
• Applicants possess the required academic qualifications and progress.
• The applicant shall be an undergraduate or graduate.
• Eligibility or ineligibility for the Federal Pell Grant and Stafford loan shall be considered.

Borrowers are to repay the loan along with the interest in 10 years. It does not include authorized deferment, forbearance, or cancellation elements. The plan of repayment shall be disclosed to the student after establishment before they cease to be enrolled in at least half-time. The payment shall be made to schools from where the loan was taken. 

These schools may require the borrower to pay quarterly, bimonthly, or monthly. The amount is calculated by multiplying the principal and appropriating the constant multiplier (found using annual rate, payment frequency, payment made per year, and total payments).

There is an incentive repayment provided. Under this, the institution may offer a reduction in loan rates up to 1% if the borrower has made 48 consecutive monthly payments. They are also given a discount of up to 5% of the balance owed by the borrower if the loan is paid fully before the repayment period.

There are standard and graduated plans available to borrowers to pay off student loans. Standard loan repayment deals with standard monthly payments (the same amount every month) to pay off the loan. The second is a graduated plan where the monthly payment starts low but gradually increases every two years.

Forgiveness or cancellation of Perkins loans may be given to teachers, first responders, public service workers, and a few volunteers. Teachers shall be eligible for cancellation of up to 100% of outstanding loans if they meet specific requirements. They include teaching schools with low-income families and a special education teacher. They also shall teach mathematics, sciences, foreign languages, or other fields determined by the state.

The level of reduction of repayment depends on the service length by profession and volunteer role. The forgiveness is given through a gradual reduction of the loan amount pertaining to the years of service delivered. As service years go up, the amount reduced also goes up.

Given below are some of the benefits of the Perkins loans for students

• The interest rates are as low as 5%.
• It does not carry an origination or guarantee fee.
• Interests do not accrue while the applicant is in school during the 9-month grace period. The repayment period starts after the grace period.
• In case of economic distress, the loan is extended, reduced, or deferred depending on the requirements.
• The loan shall not be repaid in case of death or disability.
• The loans can be consolidated with Stafford loans for repayment.

The differences between both loans are given as follows.

• Perkins subsidized loans are those offered by the government to students. Other federal loans include Stafford loans (subsidized or unsubsidized), PLUS loans (loans for parents or graduate or professional students), and other state loans.
• Perkins education loan has a more extended grace period of 9 months.  Stafford loans have a grace period of 6 months, and loans have no grace period but come with a deferment period of 6 months.
• Perkins education loan has a fixed interest payment of 5% and no origination fee, etc. Stafford loans have an interest range of 6-8%, and loans are around 9% with origination fees, etc.