So, what is a Perkins Loan? It was a student loan acquired through a federal student loan program specifically designed for students from low-income backgrounds who demonstrated exceptional financial need. The loans were meant to make going to school and repaying student loans easier for students whose financial situation may have prevented them from going to school at all.
The program expired as of September 30, 2017, so Perkins Loans are no longer available to students attending college. If you were awarded a Perkins loan before the cutoff date, you still have to pay your Federal Perkins Loan back in almost all cases, even now that the program is expired. Fortunately, the program established a variety of unique benefits that can make repaying your loan easier.
Benefits of Federal Perkins Loans
Perkins Loans Are Subsidized Loans
One of the biggest benefits of a federal Perkins Loan is that, as subsidized loans, the government pays the interest on your student loan while you’re in school, during your grace period, and if you need to defer your loans at any point. That creates a significant savings compared to other unsubsidized federal student loans where interest may continue to grow even if you are not currently required to make payments on the loan.
It’s worth noting that even though you can’t apply for Perkins Loans anymore, the benefits still exist to borrowers who took out Perkins Loans before the program was discontinued. Additionally, Federal Perkins Loans don’t have origination fees. In contrast, Direct Loans currently charge 1.062% as an origination fee and Direct PLUS Loans charge 4.248% (these rates apply to a first disbursement date that’s on or after 10/1/18 and before 10/1/19).
Perkins Loan Interest Rate
One of the best things about the program was the Perkins Loan interest rate. While other federal loan rates are tied to the 10-year treasury note, the Perkins Loan interest rate was fixed at 5% for all loans.
In comparison, the interest rates for Direct Loans are currently 5.05% for undergraduates students and 6.6% for graduate or professional students.
Direct PLUS Loans will charge parents and graduate or professional students 7.6%. (Again, all rates are current for a first disbursement date that’s on or after 10/1/18 and before 10/1/19.) Even though a 1% difference may seem small, it may make a huge impact in the amount of money you pay over the life of the loan.
Extended Grace Period
Another benefit of Perkins Loans is their extended grace period. Most federal student loans have a grace period of six months from when you graduate to when you are required to start repaying your student debt. Ideally, this six-month buffer gives you time to get a job so that you have the money to make your student loan payments.
However, Perkins Loans give you an extra three months, so you don’t have to start repaying your Perkins Loan for nine months after you graduate, enter a deferment period, or drop below half-time enrollment. Since Perkins Loans are subsidized, you also won’t be charged interest on your debt during this period. That said, if you’re eager to start repaying your student loans you don’t have to wait until your grace period is over to begin.
Special Perkins Loan Forgiveness Programs
If you have Perkins Loans, you may also qualify for certain forgiveness programs, depending on your employment or volunteer status.
For example, if you work as a Peace Corps volunteer, firefighter, law enforcement or correction officer, nurse, librarian, public defender, teacher, or child care worker, you could be eligible to have all or part of your Perkins Loan forgiven.
For every year you work in an eligible job, a set portion of your loans are forgiven. The first two years you will have 15% forgiven each year, third and fourth year you could be eligible to have 20% forgiven each year, and the fifth year of work will forgive the final 30% as well as any accrued interest.
How to Apply for a Perkins Loan
While Federal Perkins Loans sound great, the program expired in September 2017, so they are unfortunately no longer available. If you qualified for them in 2017 or before, however, you are still eligible for the Perkins Loans benefits—but you can’t reapply.
In the past, to qualify you had to be a student who had exceptional financial need and was attending school at least part-time. While there were over 1,700 post-secondary educational institutions that took part in the Perkins Loans program, not every school was a partner. In order to qualify for a Perkins Loan, you had to be enrolled in a participating school and that school would determine who would receive the loans.
How Much Could You Borrow?
If you were eligible for a Perkins Loan, you most likely would only be able to take a portion of your federal loans out as Perkins Loans. The amount you were able to borrow in Perkins Loans was determined by your personal financial situation (the maximum annual limit for undergrads was $5,500) and how much exceptional need you were deemed to have.
That means that you may have only qualified for $2,000 in Perkins Loans and the rest of your need was met using other federal student loans .
Next Steps: Refinancing Your Student Loans
If you took out other federal loans along with your Perkins loans, you may now be after a lower interest rate. Since graduating college and getting a job in your chosen field, you may be making significantly more money and have established good credit. If that’s the case, refinancing your federal loans may be the right choice. Because even though your Perkins Loans have great repayment benefits and a steady, low interest rate, not all student loans enjoy the same perks.
Before you refinance, it is important to review the benefits of your current loans. Refinancing would eliminate federal benefits like deferment, forbearance, and income-based repayment plans. When you refinance your student loans, you’ll take out a new loan with new terms and a new (hopefully lower) interest rate.
Depending on your credit history and earning potential, you could qualify for lower monthly payments or a lower interest rate, which could potentially reduce the amount of money you pay in interest over the life of the loan.
SoFi is a leader is the student loan space—offering both private student loans to help pay your way through school, or refinancing options to help you pay off your loans faster.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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