The federal government used to offer the Perkins Loan to students with exceptional financial need. The loan guaranteed low-interest rates for both undergraduate and graduate students.
Although Perkins loans accounted for only about 1 percent of student borrowing, they were an important source of funding for thousands of students. An analysis by the National Association of Student Financial Aid Administrators, estimated that 528,000 students took out Perkins loans in the 2014-15 academic year, with an average award of $2,198.
The Federal Perkins Loan Program Extension Act of 2015 was intended to phase Perkins loans out over two years, with the expectation that the entire student loan system would be overhauled by Congress before it ended. But the Perkins loan program was allowed to expire in 2017, and lawmakers are still working on a replacement.
Students needed to be enrolled at least part-time to remain eligible for funding. To apply for a Perkins loan, students needed to fill out the Free Application for Federal Student Aid (FAFSA) to determine their financial need. Unlike most other loans, the Perkins used your school as the lender. Over 1,800 schools in the country participated in this program.
Interest rates for the Perkins loan are fixed at 5%, which is lower than many private student loans. Undergraduate students were allowed to borrow up to $5,500 each year, with a total limit of $27,500 over the course of your degree. Graduate and professional students were allowed borrow up to $8,000 per year, with a maximum of $60,000. However, that total also included any Perkins loans taken out during your time as an undergraduate student.
For those who were able to take them out, one of the best attributes of the Perkins loan was that it was subsidized, meaning the federal government paid the interest while you were enrolled in school. Additionally, you had a nine-month grace period upon leaving school before you have to begin repaying the loan, compared to just a six-month grace period with most other federal loans. The Perkins loan also allows for a more liberal loan cancellation policy compared to other federal loans. If you work in certain public service fields, such as a teacher, firefighter, law enforcement officer, or nurse, you can have up to 100 percent of your loan canceled.
Because of these generous terms, accepting a Perkins loan was an excellent way to finance your post-secondary education.
Check out Credible for more information on financing your college education.