Update on Federal Perkins Loans
Loan Program is Scheduled to be Discontinued
If you are an undergraduate or graduate college student with exceptional financial requirements, you might be relying on the low-interest federal Perkins Loan Program to provide additional funding for your college education. However, you will need to take into consideration that this program is currently scheduled to be phased out. Of course, anything can change when it comes to government programs but, as of now, the last awarding date is September 30, 2017 for undergraduates and September 30, 2016 for graduate students.
While other federal student loan programs have the federal government as the lender, the Perkins Program is unique in that the college itself is the lender. Payments are made directly to the school itself or the school’s loan servicer. The interest rate is currently 5%. All colleges do not offer this option to their students, but there are about 1700 schools that do participate, although funding may be limited at specific institutions. Undergraduate students may be eligible to borrow up to $5,500 a year, and graduate or professional students may be eligible to receive up to $8,000 per year.
Completion of the FAFSA and a Perkins promissory note are required to be considered for a Perkins loan.
Payments on Perkins loans may be deferred while the student is enrolled at least half-time in a post-secondary institution. Upon graduation or leaving the school, there is usually a nine month grace period before repayment begins. Borrowers who are still experiencing financial difficulty after payments begin will need to contact their college or loan servicer to determine if they are eligible for loan deferment or forbearance. If you go on to perform teaching services at low-income schools, you may be eligible for loan cancellation under certain circumstances.
Perkins Loans may be consolidated with other federal student loans into a Direct Consolidation Loan.
Here are some of the ways the stated expiration dates will affect Perkins borrowers:
- Undergraduate Students: Schools may make Perkins Loans through September 30, 2017 to eligible current undergraduate students who, on the date of disbursement, have an outstanding balance on their Perkins loans and who have received all Direct Subsidized Stafford Loan aid for which they are eligible. For new undergraduate students, schools may make Perkins Loans through September 30, 2017 to students who do not have an outstanding balance on a Perkins Loan made by the school, and who have received all Direct Subsidized and Unsubsidized Stafford Loan aid for which they are eligible. Eligible undergraduate student borrowers who receive a disbursement of a Perkins Loan after June 30, 2017 and before October 1, 2017 for the 2017-2018 award year may receive any subsequent disbursements of that specific Perkins Loan.
- Graduate Students: Schools may continue to make Perkins Loans through September 30, 2016 to eligible graduate students who received a Perkins Loan before October 1, 2015 if the graduate student received the most recent Perkins Loan from the same school, and the new Perkins Loan will enable the student to continue or complete the same academic program. Eligible graduate student borrowers who receive a disbursement of a Perkins Loan after June 30, 2016 and before October 1, 2016 for the 2016-2017 award year may receive any subsequent disbursements of that specific Perkins Loan.
Individual situations are all different, and it may be necessary to contact the school’s financial aid office to determine your exact eligibility. Undergraduate students with extreme financial need should also be aware that, even though this program may be discontinued, they might still be eligible to receive assistance through the federal Pell Grant program. This amount is awarded based on financial need, and does not need to be repaid. The maximum award under this program for the 2016–17 award year is $5,815.
Students who believe that they will require financial aid assistance for the 2017-18 academic year should be aware that the FAFSA will be online beginning October 1, 2016. It will be crucial for students with exceptional financial need to complete and submit this application as soon as possible in order to qualify to receive any remaining Perkins funds their college may still be able to disburse.