What is Federal Perkins Loan all about?
The Federal Perkins Loan is a boon for students with financially weaker backgrounds. Unlike other loans such as the Federal Stafford loan and the Parent PLUS loan, it is a low-interest loan, having a mere 5% interest rate. Federal student loan can be offered to both undergraduates and graduate students alike. It is offered via the financial aid office of the school. Since your school lends this loan, you must repay it. The loan is granted with aid from government funds. The school either pays it to you directly, generally via a check, or has the loan applied to any school charge you may have. In the latter case it will be disbursed in two separate payments through the academic year.
Borrowing Limits of Perkin Loans
The borrowing limit depends on various factors such as date of application, level of financial need and the school’s ability to fund the students. These factors decide how much amount can be borrowed under Perkin Loans.
- Each year an undergraduate can take up to $4,000. The total sum of money that you can borrow for undergraduate study is $27,500.
- For each year of study for graduate degree or professional studies, you may withdraw $8,000 per year. The total amount you can borrow through this loan while studying amounts to $60,000, inclusive of the Federal Perkins Loans that you borrowed while you were an undergraduate student.
During repayment is any additional charge apart from the interest?
Practically, the answer is no. Nothing else is charged apart from the interest. However, in case you skip a due repayment, make it late or give less than the full payment, you might be charged a late fee. Otherwise, no additional fee is charged on the loan. However, if you continue to fail to make payments on time, you will have to also pay collection costs.
How is Perkins Loan paid to you?
It is a very simple procedure. The school will either pay the Perkins Loan amount to you directly through a check or credit the amount to your account. This money is allotted to you usually in two payments while you pursue the academic year.
Is cancellation of the loan possible even if the promissory note* (agreeing to terms of loan) has been signed?
Yes, it is possible to cancel all or a portion of your Perkins Loan despite the promissory note. As and when the school credits the money into your account, it notifies you either not earlier than 30 days prior or not later than 30 days hence. This written notification is essentially issued in the name of the candidate receiving Perkins Loan funds.
Likewise, you can inform the school either within 14 days of the school sending you the notification, or by the first day of the payment period. You may make an inquiry from the school regarding the first day of your payment period. In case you receive money via check, simply refuse to accept it and it will be considered as your official refusal of the loan.
When is the repayment time for the Perkins loan? 1
Generally for someone who attends the school half-time, there is a span of nine months available for student loan repayment after you graduate, leave your school, or drop (the time may be longer for you if you actively work with the military). This span of time is called the grace period. In case you attend the school for even less than half-time, make inquiries about your grace period from the financial aid administrator. But one must start the repayment of loan by the end of grace period. Sometimes you may be allowed as much as 10 years for total repayment of the student loan.
Examples of Typical Payments for Perkins Loan Repayment (source: U.S. Department of Education)
|Total Loan Amount||Number of Payments||Approximate Monthly Payment||Total Interest Charges||Total Repaid|
What is the repayment amount per month?
Depending on the amount borrowed and the length of the repayment time, your monthly repayment amount will be decided. The typical calculation is shown in tabulated form above. together with how total interest is charged for different 5-percent loans for 10-year time period.
What kinds of tax credits are available during the repayment of loan?
There are certain tax incentives bestowed upon the borrowers of this loan who pursue higher education. There are also deductions on student loan interest for some borrowers. This is advantageous for those who have taken either federal or non-federal loan to cover the costs of post-secondary education. The upper limit of deduction is 2,500 dollars per year. As per the IRS Publication 970 which gives Tax Benefits to people pursuing Higher Education, these tax incentives and other tax benefits may be understood and can be calculated.
For more information, call the IRS at 1-800-829-1040. TTY callers can call 1-800-829-4059.
How the repayment of my Federal Perkins Loan can be postponed?
It is possible to postpone the loan repayment for some time and under some special circumstances. In that case, as long as your loan is not in default, you can receive a “deferment” or “forbearance” on your loan.
During the deferment period, one may temporarily postpone the payments. During that time interest would not accrue or accumulate.
For the list of deferments available, you may look under “Perkins Loans” on the chart.
In case, you are performing a service that makes you eligible for loan cancellation, the school that has lent you the loan will automatically defer your Federal Perkins Loan(s) for that time. (The description of loan cancellation and service cancellations can be seen on the next page.)
Deferment does not happen automatically and you must apply for it via your school. This is generally done by using a deferment request form that is given from the side of the school. This request should be filed in time or else it will be accepted with a late charge. Further details on deferments can be gathered from the financial aid office of the school.
You can also get forbearance for some time if you can’t temporarily meet your repayment schedule. During that time, your payments are delayed or even reduced.
This time period for loan repayment might also be extended. However, during that time, interest continues to accumulate and should be paid back on time.
Like deferment, forbearance is also not automatic. It is granted in intervals of up to 1 year at a time for up to 3 years. The process of forbearance should be applied for in writing either to the school from which the loan was taken or to the agency that the school employed to service your loan.
All the documentation should be complete to show that forbearance should be granted.
Remember to make scheduled payments till the time deferment or forbearance is granted. Otherwise, you might be considered as a defaulter and refused both forbearance and deferment.
Is it possible to cancel Federal Perkins Loan ever?
Yes, it is possible to cancel Federal Perkins Loans anytime. It may be cancelled for the following reasons.
If the borrower becomes disabled permanently or dies, Perkins Loan is cancelled.
In other circumstances such as mentioned in the table below, this loan can also qualify for cancellation as long as one is not in default.* See the table below for the list of cancellation provisions. For detailed information, financial aid office may be contacted.
In case one is recruited in some specialties of the US Armed Forces, Department of Defense, you are entitled for incentive and may only need to repay back a small portion of your student loan. However, this is not a cancellation. Your recruiting officer may be contacted for further information.
Also under the Nursing Education Loan Repayment Program of the U.S. Department of Health and Human Services, assistance with student loan repayment is rendered.
If a student is a registered nurse and is working for 2-3 years in an eligible facility with a shortage of nurses, he/she can enter a contract which has a provision to repay either 60 percent of the participant’s total loan balance for about two years or 85 percent of it for three years.
The school which offered you the loan can alone make decisions in its case and hence any queries regarding the terms of your loan, its repayment, cancellation, deferment, forbearance can only be checked with it.
Perkins Discharge/Cancellation Summary (1)
|Cancellation Conditions||Amount Forgiven||Notes|
|Borrower’s total and permanent disability (2) or death||100%||Service qualifies for deferment also.|
|Full-time teacher in a designated elementary or secondary school serving students from low-income families||Up to 100%||Service qualifies for deferment also.|
|Full-time special education teacher (includes teaching children with disabilities in a public or other nonprofit elementary or secondary school)||Up to 100%||Service qualifies for deferment also.|
|Full-time qualified professional provider of early intervention services for the disabled||Up to 100%||Service qualifies for deferment also.|
|Full-time teacher of math, science, foreign languages, bilingual education, or other fields designated as teacher shortage areas||Up to 100%||Service qualifies for deferment also.|
|Full-time employee of a public or nonprofit child- or family- services agency providing services to high-risk children and their families from low-income communities||Up to 100%||Service qualifies for deferment also.|
|Full-time nurse or medical technician||Up to 100%||Service qualifies for deferment also.|
|Full-time law enforcement or corrections officer||Up to 100%||Service qualifies for deferment also.|
|Full-time staff member in the education component of a Head Start Program||Up to 100%||Service qualifies for deferment also.|
|Vista or Peace Corps volunteer||Up to 70%||Service qualifies for deferment also.|
|Service in the U.S. Armed Forces in areas of hostilities or imminent danger||Up to 50%||Service qualifies for deferment also.|
|Bankruptcy (in rare cases)||Up to 100%||Cancellation is possible only if the bankruptcy court rules that repayment would cause undue hardship.|
|Closed school (before student could complete program of study)||100%||For loans received on or after January 1, 1986.|
1. As of October 7, 1998, all Perkins Loan borrowers are eligible for all cancellation benefits regardless of when the loan was made or the terms of the borrower’s promissory note. However, this benefit is not retroactive to services performed before October 7, 1998.
2. Beginning July 1, 2002, a borrower who is determined to be totally and permanently disabled will have his or her loan placed in a conditional discharge period for three years from the date the borrower became totally and permanently disabled. During this conditional period, the borrower doesn’t have to pay principal or interest. If the borrower continues to meet the total-and-permanent disability requirements during, and at the end of, the three-year conditional period, the borrower’s obligation to repay the loan is canceled. If the borrower doesn’t continue to meet the cancellation requirements, the borrower must resume payment. Total and permanent disability is defined as the inability to work and earn money because of an injury or illness that is expected to continue indefinitely or to result in death. For more information on qualifying for this discharge, review your promissory note* and contact your loan holder.