Perkins Loan

What Is The Perkins Loan?

The Perkins loan was a low-interest need-based federal student loan to undergraduate and graduate students who demonstrated exceptional financial need.

Deeper Definition 

The Perkins loan was a financial aid through the U.S. government’s Perkins Loan Program to undergraduate and graduate students based on financial need. The program ended in 2017 and is no longer available to students.

The Perkins loan offered eligible students with exceptional financial needs a subsidized loan. The criteria used to determine whether a student qualified or not were set by the student’s institution and the information the student provides on the Free Application for Federal Student Aid (FAFSA) form used in applying for all government loans.

The subsidized loan program began in 1958, providing loans to about 500,000 students in 1,400 schools before it came to an end in 2017 as a result of budgetary cuts. The school where the student attended was in charge of granting and disbursing the loan, while the federal government subsidized it because they paid the interest that accrued on them while the student was in school.

The loan had certain limitations in terms of how much a student could borrow. Undergraduate students could take a loan of up to $5,500 per year, with a cumulative limit of $27,500. On the other hand, graduate students could take a loan of up to $8,000 per year. The total limit was $60,000, including any undergraduate Perkins loan debt.

The program began in 1958 and ended in 2017 without another need-based loan for students replacing it due to budgetary issues. The interest rate on loan was 5% with a 10-year payback period. Typically, borrowers could start repaying the loan nine months after graduating, dropping out of school, or falling below half-time student status.

Perkins Loan Example 

Jane was an eligible student for the loan program due to having exceptional financial needs. She borrowed the maximum amount of $5,500 per year for the duration of her university course, which was 4 years. The total amount Jane borrowed was $22,000. Joan will pay back the loan over the following 10 years, paying only a 5% interest rate.