Overview of th Federal Perkins Loan:Perkins Loans are typically viewed as the best type of student loan one can receive. Unlike the Stafford and PLUS loans, they are reserved for students who demonstrate an “exceptional financial need.”
While the Federal Perkins Loans have lower overall limits than the other Federal loan programs, the other terms of the Perkins Loan (interest rate, grace period, fees, and repayment options) are the most generous.
Federal Perkins Loan Borrowing Limits:The maximum Perkins Loan amount a student can receive in any year is determined by whether they’re an undergraduate or graduate student.
For undergraduate students, there is a $4,000 per year cap on Perkins Loans. There is also an undergraduate cumulative limit of $20,000.
For graduate students, there is a $6,000 per year cap on Perkins Loans. There is also a graduate and undergraduate combined cumulative limit of $40,000.
For example, a student who had borrowed $15,000 as an undergraduate student would be limited to borrowing another $25,000 as a graduate student.
Interest Rates and Fees for Federal Perkins Loans:The current interest rate on all Perkins Loans is 5.00%. With the exception of an upcoming dip in the Stafford Loan interest rates (2010-2012 school years only), the Perkins Loan has the cheapest interest rate of any Federal student loan program.
All Perkins Loans are subsidized loans. This means that the interest is paid by the government until graduation, for any student enrolled at least half-time.
There are no loan or origination fees for a Perkins Loan.
Repaying Federal Perkins Loans:Following graduation, students are given a 9-month grace period from making payments. After this time, Perkins Loans must be repaid within a maximum of 10 years. The minimum payment on a Perkins Loan is $40 per month.
Perkins Loans may be “forgiven” in return for certain types of public service. The most notable of these, the National Defense Education Act, forgives a percentage of a Perkins Loan for each year spent teaching at a qualifying public school.
Applying for a Federal Perkins Loan:To be considered for a Perkins Loan, you must demonstrate an exceptional financial need on your FAFSA form. Completing this form will help determine your eligibility for various Stafford Loan programs as well.
Once completed, the Free Application for Federal Student Aid (FAFSA) form is forwarded to your school, which will then inform you of your Perkins Loan eligibility.