Perkins Loans were designed for undergraduate and graduate students who demonstrated exceptional financial need. Although the program has ended, 1.6 million borrowers still owe $4.7 billion in Perkins Loans as of mid-2021.
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 on Sept. 30, 2017. If you were awarded a Perkins Loan before then, you still have to pay your loan back, in almost all cases.
Benefits of Federal Perkins Loans
Perkins Loans Are Subsidized Loans
With federal subsidized student loans like Perkins Loans, the government pays the interest on the loan while you’re in school, during your grace period, and if you need to defer your loan payments for an eligible reason.
That creates significant savings compared with federal unsubsidized student loans, when interest may continue to grow even if you are not currently required to make payments on the loan.
The benefit still exists for students who took out Perkins Loans.
Additionally, Federal Perkins Loans had no origination fee. In contrast, Direct Loans currently have an origination fee of 1.057%, and Direct PLUS Loans for parents and grad students have a fee of 4.228% until Oct. 1, 2021. (The percentages change on Oct. 1 every year.)
Perkins Loan Interest Rate
While other federal student loan rates are tied to the 10-year Treasury note, the Perkins Loan rate was fixed at 5%—which used to be lower than some other loan types.
For the 2023-2024 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 5.50%, the rate on Direct Unsubsidized loans for graduate and professional students is 7.05%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 8.05%. The interest rates on federal student loans are fixed and are set annually by Congress.
Extended Grace Period
Another benefit of Perkins student loans is their extended grace period.
Most federal student loans have a grace period of six months after graduation to begin payments. Perkins Loans give an extra three months, so borrowers don’t have to start repaying a Perkins Loan for nine months after they graduate, leave school, or drop below half-time enrollment.
That said, any borrower who is eager to start repaying student loans doesn’t have to wait until a grace period is over to begin.
Perkins Loan Forgiveness Programs
If you have Perkins Loans, you may also qualify for certain forgiveness programs, depending on your employment or volunteer status.
If you work as a Peace Corps volunteer, firefighter, law enforcement officer, nurse, librarian with a master’s degree at a Title I school, public defender, teacher who meets specific criteria, among several other jobs, you could be eligible to have all or part of your Perkins Loan forgiven.
How Much Could You Borrow?
If you were eligible for a Perkins Loan, you most likely were only 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.
For dependent undergraduate students whose parents are eligible for Direct PLUS Loans, the aggregate federal student loan limit is $31,000, with no more than $23,000 of that for subsidized loans. Undergrads deemed independent can have an aggregate of $57,500 in federal student loans, with no more than $23,000 in subsidized loans.
The aggregate federal loan limit for graduate or professional students is $138,500, which includes federal loans received for undergraduate studies.
Refinancing Your Student Loans
You may now be seeking a lower interest rate for your outstanding student loan balance.
Since graduating from college and getting a job, you may be making significantly more money and have established good credit. If that’s the case, refinancing your federal and/or private loans may be a good choice.
Even though Perkins Loans have good repayment options and a steady, reasonably low-interest rate, not all student loans enjoy the same perks.
Before you refinance, which means paying off any or all current loans with a new, private loan, preferably with a lower interest rate, it is important to review the benefits of your current loans. Refinancing would eliminate federal benefits like deferment and income-driven repayment plans.
Depending on your credit history and earning potential, you may be able to 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.
Federal Perkins Loans, for students of exceptional need, came with benefits and a fixed interest rate that was relatively low at the time. Billions are still owed on Perkins Loans, and a borrower may want to weigh the merits of seeking a lower rate.
SoFi is a leader in the student loan space, offering refinancing of both federal and private student loans with a fixed or variable rate and no application or origination fees.
Student Loan Refinancing
If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.
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