What is a Perkins Loan?

Article Summary:

Perkins loans were federal student loans offered to undergraduate and graduate students who could demonstrate exceptional financial need. The repayment period for these low-interest loans was ten years, which offered a fixed rate of 5% for the lifetime of the loan. Depending on your circumstances, your Perkins loan debt may be forgiven.

It’s actually more accurate to ask, “What was a Perkins loan?” because they were discontinued due to budgetary cuts in September of 2017. It was once the oldest federal loan program and more than 30 million students with financial needs benefited from them. However, because they were long-term loans, there are many outstanding Perkins loans today.

Since Perkins loans are no longer available, you should be aware of the many other avenues to financial aid for low-income families. This includes both federal and private financial aid options, such as grants, scholarships, and direct loans. In this article, we’ll discuss how the Perkins loan helped students, repayment options, and alternatives for students continuing their education today.

What is a Perkins loan?

The Federal Perkins Loan Program was a federally subsidized student loan awarded to students attending colleges or career schools who showed “exceptional” financial need. They guaranteed a low interest rate and were subsidized, meaning the federal government paid the interest for as long as a student stayed in school at least half-time.

Perkins loans were awarded to undergraduate and graduate students through the U.S. Department of Education (ED) office of Federal Student Aid. However, unlike other federal loans, the school acted as the lender (and contributed a portion of the money). When the student began making loan payments, they would direct those payments to the school (or the school’s third-party loan servicer) rather than the United States government.

The yearly borrowing limit for undergraduate loans was capped at $5,500 with a maximum total of $27,500. Graduate students could borrow up to a max of $60,000, with a yearly cap set at $8,000. That $60,000 limit included any Perkins loans debt they carried over as an undergrad.

Do you have to pay back Perkins loans?

You do, but you have ten years to do it. Furthermore, if you have other student loans you can apply for loan consolidation, which can give you a longer loan term and more loan repayment options. You might also be able to get a lower interest rate and simplify your finances by consolidating all your student loans into one. Under certain circumstances, you might qualify for loan forgiveness or a discharge.

Student borrowers also have a nine-month grace period between graduating and starting the repayment process. This provided students an extra three months to get their financials in order, as most student loans offer only six months.

Can you get your Perkins loan forgiven or discharged?

Depending on your employment, you may be eligible for loan forgiveness through the Public Service Loan Forgiveness (PSLF) program. For example, if you are a full-time teacher, nurse, firefighter, or working at one of any number of other public service jobs, you might qualify.

Similarly, if you served in the military, you might be able to gain forgiveness through the National Defense Student Loans Discharge program.

You may also have your Perkins loan discharged due to traumatic events. This included bankruptcy, school closure (if it closed before the student obtained a degree), death, or permanent disability.

What are some alternatives to the Perkins loan program?

Though federal Perkins loans are no longer an option, there are several alternatives available to meet your financial aid needs. Ideally, you or your parents planned ahead and tucked away some savings for your education, but that’s not always the case.

Undergraduate and graduate students can still apply for free money through grants, scholarships, or work-study programs. If you don’t qualify for these options, you may want to apply for direct loans offered by the federal government. You can also apply for personal loans if the above suggestions aren’t enough to pay for all of your educational expenses.

Do you still have to fill out a FAFSA?

The first step each year is to fill out the Free Application for Federal Student Aid (FAFSA). This application helps the school’s financial aid office come up with the expected family contribution (EFC) and the difference between that and the school’s cost of attendance (COA).

Based on that number, the school will come up with a package of financial aid to attempt to bridge the gap between EFC and COA. A student’s financial aid package often included a combination of different aid. For instance, a single student may receive financial aid through grants, student loans, and work-study programs.


The biggest and most common federal grant program is the Pell Grant. This grant currently offers up to $6,495 per year and is available to any student in need. These are usually only awarded to undergraduate students and, unlike student loans, rarely need to be paid back.

Other, more specialized federal grants, include the Federal Supplemental Educational Grants (FSEOG), Iraq and Afghanistan Service Grants (IASG), and Teacher Education Assistance for College and Higher Education (TEACH) grants.

Direct loans

The William D. Ford Federal Direct Loan (direct loan) Program is the U.S. Department of Education’s federal student loan program and, unlike grants, must be paid back with interest. There are four different types of direct loan.

  1. Direct subsidized loans. These loans support eligible undergraduate students who can demonstrate financial need, to help cover the costs of college or career schools.
  2. Direct unsubsidized loans. Not based on financial need, direct unsubsidized loans are available for undergraduate, graduate, and professional students.
  3. Direct PLUS loans. PLUS loans are made to parents of dependent students or graduate and professional students to fill the gaps that other financial aid doesn’t cover. These loans aren’t based on financial need, but lenders will require a credit check.
  4. Direct consolidation loans. With a consolidation loan, you can roll all of your eligible federal student loans into one. This way you only have to deal with one monthly loan payment after you’re out of school.

What is the difference between a federal Perkins loan and a direct loan?

For one thing, Perkins loans are no longer available and direct loans are. Plus, many direct loans are not subsidized by the government, which means you’re on the hook for all the interest that accrues.

Direct also usually come with higher interest rates than Perkins loans, but that may vary depending on your specific loan terms.

Work-study programs

The federal work-study program provides part-time employment for students to help them cover some of their educational expenses. Jobs might be on-campus or off-campus and, ideally, involve some type of community service or relate to the student’s course of study.

What are your other financing options?

If you’ve exhausted federal financial aid options (those listed above), there are still several other avenues to help fund your education. There are innumerable grants and scholarships awarded by both public and private companies and organizations, but it takes time to research what offers you’re eligible for. Awards can vary from need-based to merit-based, or even to your specific field of study.

If you still need extra money to cover your educational expenses, you may also want to consider private student loans or personal loans. However, if you’re a young student with little or no credit, you may need a parent to co-sign.

Private student loans

If you don’t qualify for federal loans, you may want to review student loans offered by private organizations. While the terms may not be as favorable, private loans are a viable financing option for students in need of additional funding.

Each student’s financial situation is different, so it’s best to compare multiple private lenders before you make your final decision.

Personal loans

If you still need extra money to cover your educational expenses, you may also want to consider personal loans. However, because these loans come with credit requirements, higher interest rates, and less flexible loan terms than government loans, personal loans can offer educational financing for someone looking to re-enter school. This may be through a trade school or a two-year community college program where private student loans may not be an option.

Unfortunately, not every personal loan lender will allow you to use the loan funds for college education. Before agreeing to the loan, be sure to review the terms carefully and do your research.

Student credit cards

A further option might be to look into getting a credit card to pay for your books and other school expenses. Some credit card companies have deals especially for students with 0% introductory rates and no annual fee. This could allow to spread out some of your expenses over time while also helping to build good credit for your future.

Key Takeaways

  • A Perkins loan was a federally subsidized low-interest loan for students who demonstrated exceptional financial need.
  • The loan came with a 10-year repayment period and a 5% interest rate.
  • There are a number of other federally-funded options for college financing, including direct loans, grants, and scholarships.
  • In certain circumstances, you can get your loans forgiven, canceled, or discharged.
View Article Sources
  1. Perkins Loan — Consumer Financial Protection Bureau
  2. Get Temporary Relief — Federal Student Aid
  3. Perkins Loan Cancellation and Discharge — Federal Student Aid
  4. What is a Signature Loan? — SuperMoney
  5. 2021 Personal Loans Industry Study — SuperMoney
  6. Personal Loans: Reviews & Comparisons — SuperMoney
  7. Best Personal Loans for Students | March 2022 — SuperMoney
  8. No Private Student Loan Forgiveness Options? Here’s 5 Alternatives — SuperMoney