Perkins Loans: Frequently Asked Questions
Find out why they're the cheapest educational loans available
Updated 7/1/08
- What is a Perkins loan?
- How much can I borrow from the Perkins program?
- How much do Perkins loans cost?
- Who makes Perkins loans?
- How do I get a Perkins loan?
- Does everyone get approved for a Perkins?
- How is the credit crunch affecting Perkins loans?
- Are Perkins loan payments tax deductible?
- When do I have to start repaying my Perkins loan?
- What happens if I lose my job or get into other financial trouble?
- What are the advantages of a Perkins loan?
- What are the downsides of Perkins loans?
What is a Perkins loan?
A low-cost, government-guaranteed loan that colleges issue to low-income students to cover education costs.
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How much can I borrow from the Perkins program?
Up to $4,000, depending on how much your school awards you.
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How much do Perkins loans cost?
Perkins are the cheapest education loans available. They charge no interest while the student is in school and a fixed 5 percent when the student graduates.
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Who makes Perkins loans?
Colleges do. Some colleges have more Perkins money than others, so if you're hoping to take advantage of this program, it pays to apply to several schools to see if you can get a big Perkins loan from one with lots of money.
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How do I get a Perkins loan?
You, and if you are not qualified as an independent student, your parents, must fill out a FAFSA form detailing family finances, preferably by February 15. (But it's never too late.)
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Does everyone get approved for a Perkins?
No. Colleges may award a Perkins only to a student who qualifies as needy. Since each school has a different amount of Perkins money to lend out, each school has a different definition of "needy."
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How is the credit crunch affecting Perkins loans?
Indirectly. Colleges have a set pool of money they can lend through the Perkins program. Unfortunately, other factors are reducing the size of those pools. So colleges will be lending fewer and smaller Perkins loans in 2008-09.
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Are Perkins loan payments tax deductible?
It depends on your income when you start repaying. Generally, for a single person, education loan interest is deductible only if you earn less than $70,000.
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When do I have to start repaying my Perkins loan?
The first bill comes due nine months after you've left school, whether that's after graduation or after you've dropped out.
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What happens if I lose my job or get into other financial trouble?
You can call your lender and ask to apply for forbearance, which allows you to skip some payments. But beware, the interest keeps building up, so you'll owe a lot more when you start repaying again. The National Consumer Law Center has lots of good advice.
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What are the advantages of a Perkins loan? *Updated
Perkins loans have a low fixed interest rate, so the size of your payment won't rise if interest rates rise. They also offer free insurance, so the debt will be canceled if the student dies or becomes disabled. Perkins borrowers can also get their payment deferred if they get into financial trouble. And some of those who plan on entering public service can have their employers pay off their Perkins loans for them.
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What are the downsides of Perkins loans?
Unlike credit card debt and mortgages, which can be canceled if you file for bankruptcy, education loans of all types must be paid. Most bankruptcy courts will not cancel them unless your situation is extremely dire.
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