Federal Perkins Loans

What are Federal Perkins Loans?

Federal Perkins Loans is a low-interest (5 percent) loan for both undergraduate and graduate students with financial need. The school is the lender. The loan is made with government funds, and your school contributes a share. You must repay this loan to your school, not to the Federal government.

How much can be borrowed?

Depending on when your student applies, the level of need, and the school’s funding level, you can borrow up to:

-$4,000 for each year of undergraduate study (the total amount you can borrow as an undergraduate is $20,000).
-$6,000 for each year of graduate or professional study (the total amount you can borrow as a graduate/professional student is $40,000, including any Federal Perkins Loans you borrowed as an undergraduate).

Other than interest, is there any charge to get these loans?

A fee is involved for Direct and FFEL Stafford Loans but not for a Federal Perkins Loan. But, after you start to repay, if you skip a payment, make a payment late, or make less than a full payment, you might have to pay a late charge. If you continue not making payments as required, you will have to pay collection costs.

How will funds be paid?

Your school will either pay you directly (usually by check) or credit your account. Generally, you’ll receive the loan in at least two payments during the academic year.

Can I cancel the loan if I change my mind, even if I’ve signed the note agreeing to the loan’s terms?

Yes. Your school must notify you in writing whenever it credits your account with your Perkins Loan funds. You may cancel all or a portion of your loan if you inform your school within 14 days after the date your school sends you this notice, or by the first day of the payment period, whichever is later. (Your school can tell you the first day of your payment period.) If you receive Perkins Loan funds directly by check, you may refuse the funds by returning the check to the school.

When do I pay back this loan?

If you’re attending school at least half time you have nine months after you graduate, leave school, or drop below half time status before you must begin repayment (those on active duty with the military might have longer than nine months). This period of time is called a grace period. If you’re attending less than half time check with your financial aid administrator to determine your grace period. At the end of the grace period, you must begin repaying your loan. You may be allowed up to 10 years to repay. Military personnel called to active duty will have additional options to postpone repayment. The school that made the loan should be contacted for more information.

How much will I have to repay each month?

Your monthly payment amount will depend on the size of your debt and the length of your repayment period. The table below shows typical monthly payments and total interest charges for three different 5-percent loans over a 10-year period.

Are there any tax incentives available for paying back these loans?

Yes, there are tax incentives for certain higher education expenses, including a deduction for student loan interest for certain borrowers. This benefit applies to all loans used to pay for post-secondary education costs. The maximum deduction is $2,500 a year. IRS Publication 970, Tax Benefits for Higher Education, explains these credits and other tax benefits. You can find out more at www.irs.gov or by calling the IRS at 1-800-829-1040. TTY callers can call 1-800-829-4059.

Is it ever possible to postpone repayment of my Federal Perkins Loan?

Yes, under certain conditions, you can receive a “deferment” or “forbearance” on your loan, as long as the loan isn’t in default. During a deferment, you’re allowed to temporarily postpone payments, and no interest accrues (accumulates). Check with the financial aid office at the college to see what deferments are available.

The school that made your loan must defer your Federal Perkins Loan(s) during periods where you perform a service that qualifies you for loan cancellation.

Deferments are not automatic. You must apply for one through your school, generally by using a deferment request form your school can give you. You must file your deferment request on time or you’ll pay a late charge. For more details on deferments, contact your school’s financial aid office.

If you temporarily can’t meet your repayment schedule but aren’t eligible for a deferment, you can receive forbearance for a limited and specific period. During forbearance, your payments are postponed or reduced. Interest continues to accrue, however, and you’re responsible for paying it.

Forbearance is not automatic either. You may be granted forbearance in intervals of up to 12 months at a time for up to 3 years. You must apply for forbearance to the school that made your loan or to the agency the school employs to service your loan. You’ll have to provide documentation to show why you should be granted forbearance.

You must continue making scheduled payments until you’re notified that deferment or forbearance has been granted. Otherwise, you could become delinquent or go into default.

Is it ever possible to have my Federal Perkins Loan discharged (canceled)?

Yes. Federal Perkins Loans can be canceled if the borrower dies or becomes totally and permanently disabled, for example. A loan can also qualify for cancellation under certain other conditions, as long as you’re not in default. See below for the list of cancellation provisions. For more information, contact your financial aid office.

If you have any questions about the terms of your Federal Perkins Loan, check with the school that made you the loan. Only that school may grant deferment, forbearance, or cancellation, or make other decisions concerning your loan.

This program, along with other financial aid programs, is subject to change from year to year.

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