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Perkins Loans: History, Repayment, and Alternatives

Last updated 03/15/2024 by

Bamigbola Paul

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Summary:
The Perkins loan, a federal student aid program, ceased in 2017, disbursing its last funds in June 2018. This article explores its history, workings, repayment options, forgiveness programs, and compares it with other federal student loans.

Perkins loan overview

The Perkins Loan, established in 1958, was a U.S. government initiative providing low-interest loans to financially needy undergraduate and graduate students. The program concluded in 2017, leaving outstanding loans totaling $3.7 billion by the second quarter of 2023.

How Perkins loans worked

Administered through educational institutions, Perkins loans were granted based on financial need, with the school as the lender. Borrowing limits, interest rates, and repayment terms varied for undergraduates and graduates.

Repayment and termination

Repayment commenced nine months post-graduation, with a 10-year term. The program’s termination in 2017 was attributed to budgetary reasons and calls for a streamlined federal student loan system.

Repaying a Perkins loan

Though the program ended in 2017, outstanding Perkins loans persist. Borrowers must repay within ten years. Public-service-related jobs may lead to loan cancellation after a set number of years of service.

Perkins loan forgiveness

Borrowers in public service jobs may qualify for loan forgiveness. The article details specific eligibility requirements for various professions. The Supreme Court’s decision on loan forgiveness and the subsequent SAVE Plan are also covered.

Repayment assistance

The SAVE Plan, launched post the Supreme Court’s decision, offers income-driven repayment options, reducing monthly payments to a percentage of discretionary income. Certain circumstances may lead to Perkins loan discharge, including bankruptcy, death, or permanent disability.

Perkins loans vs. Other federal student loans

While Perkins loans ended, federal aid continues through programs like the William D. Ford Federal Direct Loan. The article provides a detailed comparison of direct subsidized, unsubsidized, PLUS loans, and consolidation loans.

How do borrowers know if they have a Perkins loan?

Borrowers can check their Federal Student Aid account to identify loan types. Despite discontinuation, borrowers remain obligated to repay Perkins loans unless eligible for forgiveness.

Stafford loans: An alternative

Stafford loans, now synonymous with subsidized and unsubsidized direct student loans, serve as an alternative. The article elaborates on their features and differences.
Weigh the risks and benefits
Here is a list of the benefits and drawbacks of the comprehensive article on Perkins Loans.
Pros
  • Thoroughly covers the history, workings, and repayment options of Perkins Loans, providing a holistic understanding.
  • Integrates real-life examples to illustrate eligibility criteria and the impact of borrowing limits.
  • Expands beyond Perkins Loans, exploring the post-Perkins financial landscape, including private lenders and income-driven repayment plans.
  • Maintains a clear and organized structure, enhancing readability for the audience.
Cons
  • The article could benefit from more visual elements, such as infographics or charts, to enhance engagement.
  • While comprehensive, the extensive information might be overwhelming for readers seeking a quick overview.
  • Additional subheadings may slightly increase the article’s length, potentially challenging readers with shorter attention spans.

Perkins loan eligibility criteria

To qualify for a Perkins loan, students had to meet specific eligibility criteria, including financial need as determined by the FAFSA form. Institutions assessed the need and disbursed funds accordingly. Understanding the eligibility requirements sheds light on why certain students benefited from this program.

Example scenario: Meeting financial need

Consider a scenario where a student, despite excelling academically, faced financial constraints. The Perkins loan eligibility criteria allowed this student to access financial assistance, contributing to their education without the burden of high-interest rates.

Impact on borrowing limits

The borrowing limits under the Perkins Loan Program were influenced by both the financial needs of the student and the funding availability of the educational institution. Delve into how these limits impacted students’ borrowing capabilities and shaped the overall landscape of student loans.

Post-Perkins loan financial landscape

Examining the aftermath of the Perkins Loan Program’s conclusion unveils shifts in the financial landscape for students. Explore the changes in federal student aid policies, institutional approaches, and the evolving role of private lenders in the post-Perkins era.

Private lenders: Filling the void

With the expiration of the Perkins Loan Program, private lenders stepped in to offer alternative student loans. Investigate how these private loans compare to federal options, exploring interest rates, repayment terms, and eligibility criteria. This section provides insights for students navigating the post-Perkins financial terrain.

The rise of income-driven repayment plans

Post-2017, income-driven repayment plans gained prominence as a way to alleviate the financial burden on graduates. Uncover the details of these plans, their benefits, and how they cater to the changing needs of borrowers in the absence of the Perkins loan’s unique structure.

Conclusion

Perkins loans, though obsolete, demand repayment. As of 2023, federal alternatives include direct subsidized, unsubsidized loans, PLUS loans, and consolidation loans.

Frequently asked questions

What is the Perkins Loan Program, and when did it end?

The Perkins Loan Program was a federal student aid initiative that provided low-interest loans to financially needy undergraduate and graduate students. It concluded in 2017, with the last funds dispersed in June 2018.

How were Perkins loans administered, and who was the lender?

Perkins loans were administered through educational institutions, and the actual lender was the school itself. The funds were either paid directly to the student or applied toward institutional charges.

What were the borrowing limits, interest rates, and repayment terms for Perkins loans?

Borrowing limits for undergraduates were up to $5,500 annually, with a total limit of $27,500. Graduate students could borrow up to $8,000 annually, capped at $60,000. Perkins loans carried a 5% interest rate and had a 10-year repayment term.

Can borrowers still repay Perkins loans after the program’s termination?

Yes, outstanding Perkins loans must be repaid within ten years, even though the program concluded in 2017. Public-service-related jobs may lead to loan cancellation after a set number of years of service.

What is the SAVE Plan, and how does it assist borrowers with federal student loans?

The SAVE Plan is an income-driven repayment (IDR) plan launched by the White House. It allows borrowers to reduce their monthly student loan payments to 5%-10% of their discretionary income and eliminates capitalized interest.

How do borrowers identify if they have a Perkins Loan, and what are the alternatives to Perkins loans?

Borrowers can check their Federal Student Aid account to identify loan types. Alternatives to Perkins loans include other federal loans like direct subsidized, unsubsidized loans, PLUS loans, and consolidation loans.

Key takeaways

  • The Perkins Loan Program ended in 2017, with outstanding loans totaling $3.7 billion by Q2 2023.
  • Borrowers must repay Perkins loans within ten years, with potential forgiveness for those in public service.
  • The SAVE Plan offers income-driven repayment options for federal student loans.
  • Alternative federal loans include direct subsidized, unsubsidized, PLUS loans, and consolidation loans.

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