Federal Perkins Student Loans Lowest Federal Interest Rate (Almost)
Federal Perkins student loans are often given to Pell grant qualified students to eliminate the problems caused by high interest student loan debt. In many ways, they are the best student loan.
Your Perkins loan eligibility is decided by your FAFSA EFC number. (The lower, the better.)
But, because schools contribute at least one-third of the government's appropriation for these loans, they are the ones who decide which of their students to award these funds to.
Usually if you qualify for a Pell grant, but you still need additional funds, you will be awarded a Perkins loan. These loans have low interest, easy repayment and may be forgivable.
Each school has its own 'packaging philosophy'.
Their decisions about awarding Perkins loans will depend on these factors:
the amount of funding the school is entitled to under the federal formula
the amount of other money the school has to distribute
The Higher Education Opportunity Act (HEOA, August 14, 2008) increased the Perkins loan limits. They are now $5,500 per year for undergraduates (up from $4,000) and $8,000 per year for graduate students (up from $6,000).
- There is a lifetime limit of $27,500 for undergraduates and $60,000 (including undergraduate loans) for graduate students.
- Repayment starts after a 9 month grace period when you leave school. (3 months longer than for Stafford loans.)
- Payments are made to your school, not to any government lender.
- Federal Perkins student loans can be consolidated into the Direct loan program as long as at least one of the loans consolidated is a Direct or FFELP loan. (Check the student loan consolidation calculator to see if your interest rate can be lowered by doing this.)
- In order to qualify for the income-based monthly payment formula, your Perkins loans must be consolidated under the Direct Loan program.
- Perkins student loans are subsidized loans. Interest is paid by the government until repayment starts.
However federal Perkins loan changes have been made this year that will impact the way interest is calculated on these loans.
- Perkins loans are student loans without cosigner. All federal loans except (in some cases) PLUS loans, do not require cosigners.
And now, borrowers who default on Perkins loans can be successfully rehabilitated (out of default) by making 9 consecutive payments rather than 12. This shortens the time until you are allowed to receive more federal student aid (including Pell grants) if you have been forced to leave school before finishing. Another new regulation allows borrowers in repayment for federal Perkins student loans to request that their loans be placed in forbearance without submitting their request in writing. This allows for faster processing, so that your fees are not climbing while you are waiting.
Some more useful college funding information you might need!
Federal Perkins student loans funds have not been increased as part of the stimulus bill. There continues to be limited funds available for this program, so it is important to get your FAFSA in early.
