Federal Perkins Student Loan
...Interest Added?

The federal Perkins student loan program will soon be a mockery of President Obama's promise to prioritize student loan debt help.

Now that SAFRA (Student Aid and Fiscal Responsibility Act) has passed, Perkins Loans have been transformed into unsubsidized loans.

The irony of course is that Perkins loans eligibility is based on financial hardship, while an unsubsidized Stafford loan is merely based on unmet need.

And the very students who will be helped by SAFRA's automatic Pell grant increases, are the same ones who will be hurt by these changes to their federal Perkins loans.

Let's say a student with a "0" EFC applied to a private school with costs of $25,000 (on the low side of average).

The student would get $5,550 in Pell money.

If the school gave the student around $14,000 (say $13,950) in grant and scholarship money, the student would still have to come up with around $5500.

The financial aid package would now include a federal loan to make up the difference, and because the student had a "0" EFC, chances are good that it would be a low-interest Perkins loan for the maximum amount of $5,500 per year.

And that brings you to the $25,000 per year cost of attendance.

What Difference Would it Make if They Became Unsubsidized Loans?

If Perkins loans become unsubsidized, the amount owed will be $24,934.

The student will be almost $3,000 more in debt.

The loan for the first year will have interest accruing for 50 months:

The second year's loan will have interest accruing for 38 months; the third year's loan will have interest accruing for 26 months; and the fourth year's loan will have interest accruing for 14 months.

These are the amounts that will be added together for the final amount due at the start of repayment:

The passage in SAFRA which makes these changes is Section 221. FEDERAL DIRECT PERKINS LOANS TERMS AND CONDITIONS:

"Unless otherwise specified in this section, all terms and conditions and other requirements applicable to Federal Direct Unsubsidized Stafford loans established undersection 455(a)(2)(D) shall apply to loans made pursuant to this section."

Perkins loan forgiveness has already been made equal to Stafford forgiveness. This bill does not benefit students who take out Perkins loans.