Understanding Federal Perkins Loans After the Program’s End
Learn what a Federal Perkins Loan is, how it worked, and what current borrowers need to know about repayment, benefits, and options.
Federal Perkins Loans were a specialized type of federal student loan designed for students with the highest financial need. Although schools no longer make new Perkins Loans, many borrowers still carry this debt and must understand their rights and obligations.
This guide explains how Perkins Loans worked, why the program ended, and what options are available if you still have one.
1. Overview of Federal Perkins Loans
A Federal Perkins Loan was a low-interest federal student loan offered to undergraduate and graduate students who demonstrated exceptional financial need. Unlike most other federal student loans, Perkins Loans were funded jointly by the federal government and participating schools, and the school acted as the lender.
Key characteristics
- Type of loan: Federal, need-based student loan program.
- Administered by: Participating colleges and universities, not by the U.S. Department of Education’s direct loan system.
- Interest rate: Fixed 5% annual rate during repayment.
- Subsidized: No interest charged while the borrower was in school at least half-time, during grace, and during qualifying deferment.
- Target group: Students with exceptional financial need, as determined by federal financial aid formulas and institutional policies.
Program status today
The Federal Perkins Loan Program was discontinued. Authority for schools to make new Perkins Loans to most students ended in 2017, after a series of temporary extensions. However, borrowers who received Perkins Loans in the past remain fully responsible for repayment, and schools continue to service or assign these loans as required by law.
2. Eligibility and Borrowing Limits
Perkins Loans were intended as a last-resort, highly targeted form of aid. Financial aid offices awarded Perkins funds only after accounting for grants, work-study, and other federal loans.
Who could receive a Perkins Loan?
- Enrollment status: Generally must have been enrolled at least half-time in an eligible degree or certificate program.
- Citizenship: U.S. citizens or eligible noncitizens qualified under standard federal aid rules.
- Financial need: Determined using the Free Application for Federal Student Aid (FAFSA) and school-based packaging policies; only students with exceptional need were considered.
- School participation: Only students attending schools that chose to participate in the Perkins program could receive these loans.
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Annual and lifetime limits
The federal government set maximum amounts that students could borrow, though many schools awarded less due to limited funds.
| Student type | Annual cap | Lifetime (aggregate) cap |
|---|---|---|
| Undergraduate | Up to $5,500 per year | Up to $27,500 in total |
| Graduate / professional | Up to $8,000 per year | Up to $60,000 including undergraduate Perkins debt |
Because Perkins funds were limited, some students received awards well below the statutory maximums.
3. Interest, Subsidy, and Fees
Perkins Loans had a simple and predictable cost structure, which made them more favorable than many private loans and some older federal loans.
Interest rules
- Fixed 5% interest rate: The rate remained constant for the life of the loan, regardless of market conditions.
- No interest in school: Interest did not accrue while the borrower was enrolled at least half-time.
- No interest during grace: The same 0% interest treatment applied during the post-enrollment grace period and qualifying deferments.
Fees and costs
- No origination fee: Unlike some Direct Loans, Perkins Loans generally did not include an upfront origination fee charged to the borrower.
- Late charges: Schools could assess modest late payment fees after missed due dates, such as a fixed dollar penalty per late payment.
- Collection costs: Delinquent or defaulted loans could incur additional collection charges, which significantly increased the total amount owed.
4. Repayment Basics for Perkins Borrowers
Although no new Perkins Loans are being made, existing borrowers still follow the program’s long-standing repayment framework.
Grace period
- Length: Typically a nine-month grace period after leaving school, graduating, or dropping below half-time enrollment.
- Interest during grace: No interest accrues; the loan remains at 0% during this time.
- Purpose: Allows borrowers time to secure employment and prepare their budget before payments begin.
Standard repayment terms
- Repayment length: Up to 10 years, not including periods of qualifying deferment.
- Payment frequency: Often monthly, but some schools allowed bimonthly or quarterly payments.
- Minimum payment: Many institutions set a minimum of about $40 per month, which could increase depending on total debt.
Servicing and consolidation
Because schools acted as the lender, the institution or its contracted servicer handled billing and payment processing.
- Loan servicer: May be an in-house campus office or an outside billing company working on the school’s behalf.
- Consolidation option: Eligible Perkins Loans can typically be combined into a Direct Consolidation Loan, which transfers the debt into the federal Direct Loan program and may open access to income-driven repayment plans.
- Caution: Consolidating Perkins Loans can cause the borrower to lose unique cancellation benefits specific to the Perkins program; borrowers should compare options carefully before consolidating.
5. Deferment, Forbearance, and Relief Options
Perkins borrowers facing financial or personal challenges may qualify for temporary relief that pauses payments or delays collection.
Deferment
During deferment, payments are not required and interest does not accrue, preserving the subsidized nature of the loan.
Common deferment categories (subject to detailed criteria) include:
- Enrollment at least half-time in an eligible postsecondary program.
- Enrollment in certain approved fellowship or rehabilitation training programs.
- Period of unemployment while actively seeking full-time work (up to prescribed time limits).
- Documented economic hardship, as defined by federal rules, often limited to a maximum number of years.
- Qualifying service in the military, Peace Corps, or comparable volunteer service organizations.
- Temporary total disability of the borrower, spouse, or dependent, under specific conditions.
Forbearance
Forbearance provides another form of short-term relief when a borrower cannot qualify for deferment but still struggles to make payments.
- Interest treatment: Interest does accrue during forbearance; unpaid interest may be capitalized (added to principal) depending on school policy.
- Common reasons: Financial hardship, medical issues, or other circumstances deemed acceptable by the institution.
- Forms and documentation: Borrowers must apply and provide supporting evidence; approval is not automatic.
6. Cancellation and Forgiveness Benefits
One of the most distinctive features of Perkins Loans is the potential for partial or complete cancellation of the loan in exchange for specific types of public service work.
Professions that may qualify
Under federal law, borrowers could have a percentage of their Perkins Loan principal canceled for each year of eligible full-time service in certain fields. Examples include:
- Teaching in low-income schools or in specialized shortage areas.
- Providing early intervention services for children with disabilities.
- Serving as a law enforcement or corrections officer.
- Working as a nurse or medical technician.
- Employment in qualifying child or family services agencies.
- Military service in select roles and duty stations.
- Full-time volunteer service in organizations comparable to the Peace Corps.
How cancellation typically worked
- Year-by-year cancellation: A fixed percentage of the remaining principal was canceled after each full year of eligible service, often over multiple years, potentially up to 100%.
- Deferment during service: Borrowers performing qualifying service could usually obtain a deferment so they did not have to make payments while earning cancellation credit.
- Application process: Borrowers needed to apply annually, provide certification from employers, and meet strict definitions of qualifying service.
7. Default and Its Consequences
Failing to repay a Perkins Loan can trigger serious financial and academic consequences.
What constitutes default?
Default occurs when a borrower does not make required payments for an extended period and fails to arrange deferment, forbearance, or a new repayment plan with the school or servicer.
Potential consequences
- Acceleration: The entire remaining balance can become immediately due and payable.
- Collection actions: The school may refer the account to a collection agency, adding significant collection costs to the amount owed.
- Loss of benefits: In default, the borrower typically loses eligibility for further deferments, cancellations, or other borrower benefits until the loan is rehabilitated or paid.
- Impact on aid: The borrower generally becomes ineligible for new federal student aid until the default is resolved.
- Credit damage: Default can be reported to credit bureaus, making it harder to qualify for future loans, housing, or favorable interest rates.
- Institutional holds: Some schools may place a hold on academic transcripts or deny future enrollment until satisfactory payment arrangements are made.
8. Perkins Loans Compared with Other Federal Loans
Although no new Perkins Loans are being disbursed, many borrowers also hold other types of federal loans. Understanding the differences can help in planning repayment.
| Feature | Perkins Loan | Direct Subsidized / Unsubsidized |
|---|---|---|
| Lender | Participating school (federally funded) | U.S. Department of Education |
| Interest rate | Fixed 5% | Varies by year; fixed for each loan disbursed |
| Need-based | Yes, for exceptional need | Subsidized: need-based; Unsubsidized: not need-based |
| Interest while in school | No interest accrues | Subsidized: no interest; Unsubsidized: interest accrues |
| Cancellation for public service | Extensive profession-specific cancellation options | Public Service Loan Forgiveness available for qualifying Direct Loans (different rules) |
| Availability today | No new loans; existing loans remain | New loans still available to eligible students |
9. Practical Tips for Current Perkins Borrowers
If you still have a Perkins Loan, you can minimize costs and protect your benefits by staying proactive.
- Keep contact information updated: Notify your school or servicer whenever you move, change phone numbers, or update your email address.
- Track your grace period: Mark the date you left school and calculate when your nine-month grace period ends to avoid missed first payments.
- Ask about cancellation early: If you plan to enter teaching, nursing, law enforcement, or other qualifying work, request details on Perkins-specific cancellation before starting the job.
- Evaluate consolidation carefully: Compare the value of Perkins cancellation benefits with the potential advantages of moving into income-driven repayment on a Direct Consolidation Loan.
- Apply for deferment or forbearance before falling behind: If you anticipate difficulty making payments, submit the necessary forms as soon as possible to avoid delinquency.
- Open all mail from your servicer: Ignoring notices can lead to missed deadlines, loss of benefits, or even default.
Frequently Asked Questions (FAQs)
Q1: Can I still get a new Federal Perkins Loan?
No. Schools can no longer make new Perkins Loans. The program has ended for new borrowing, but existing borrowers must continue to repay any outstanding Perkins debt.
Q2: How do I find out who services my Perkins Loan?
Your Perkins Loan is usually serviced by the school that issued it or by a billing company contracted by that school. Check your school’s financial aid or student accounts office, review prior billing statements, or log into the federal student aid website to see information about your loans.
Q3: Are Perkins Loans eligible for Public Service Loan Forgiveness (PSLF)?
Perkins Loans are not directly eligible for PSLF. However, if you consolidate a Perkins Loan into a Direct Consolidation Loan, the new Direct Loan may qualify for PSLF if you meet all other program requirements. Keep in mind that consolidating can eliminate Perkins-specific cancellation benefits, so compare both options before deciding.
Q4: What happens to my Perkins Loan if I go back to school?
If you re-enroll at least half-time in an eligible program, you may qualify for an in-school deferment on your Perkins Loan, during which payments pause and interest does not accrue. You must request this and provide enrollment documentation as required by your servicer.
Q5: Can my Perkins Loan be discharged if I become permanently disabled?
Under federal rules, borrowers who experience a qualifying total and permanent disability may be eligible for discharge of certain federal student loans, including Perkins Loans, if they meet strict documentation and certification requirements. Borrowers should consult their loan holder and federal guidance on total and permanent disability discharge for details.
References
- Perkins Loans — Federal Student Aid, U.S. Department of Education. 2023-05-01. https://studentaid.gov/understand-aid/types/loans/perkins
- Perkins Loan – Student Financial Services — University of Wisconsin–Stevens Point. 2017-10-01. https://www3.uwsp.edu/SFS/Pages/Perkins%20Loan.aspx
- What Are Federal Perkins Student Loans? — SoFi Learn. 2022-11-15. https://www.sofi.com/learn/content/federal-perkins-student-loans/
- Federal Perkins Student Loan — Occidental College Student Business Services. 2019-08-20. https://www.oxy.edu/offices-services/student-business-services/student-loans/federal-perkins-student-loan
- FEDERAL PERKINS STUDENT LOANS FACT SHEET — Student Financial Services, Massachusetts Institute of Technology. 2019-03-01. https://sfs.mit.edu/wp-content/uploads/2019/03/Perkins-Fact-Sheet.pdf
- Participating in the Perkins Loan Program — FSA Partner Connect, U.S. Department of Education. 2021-09-01. https://fsapartners.ed.gov/knowledge-center/2021-2022/vol6/ch3-participating-perkins-loan-program
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