Prior to 2017, the federal Perkins loan provided money to undergraduate and graduate students with exceptional financial need. The program was administered by colleges, universities, and professional schools rather than directly through the Department of Education, although the federal government kept interest on these loans low so they could be easily repaid with a standard repayment plan.
Like direct subsidized loans through the federal government, the Perkins loans program also allowed recipients to have their loans forgiven by working for the public good through certain jobs or volunteer programs.
How Did the Perkins Loan Program Work?
The Perkins loan program was not renewed by the federal government, and it officially came to an end on Sept. 30, 2017. The final disbursements through the program were completed by June 30, 2018.
The program has been in effect for decades. Though people can no longer apply for the loan, many people in the workforce, along with some current college students, still have to make payments on their Perkins loan.
Undergraduate students who qualified for the Perkins loan could borrow up to $5,500 per year. Over the course of four years, they could accrue up to $27,500 in debt through the program.
Graduate students could receive up to $8,000 per year, with a total of $60,000 in debt at the completion of their program. This $60,000 could include Perkins loans they received during undergrad schooling.
Those who received the Perkins loan benefitted from the 5% fixed interest rate and a nine-month post-graduate grace period before the loan payments began. This was the lowest possible federal loan interest rate and a longer grace period than other federal loans.
Perkins loans also allowed payment plan options, like other federal loans, starting with the standard 10-year repayment plan.
Unlike other federal loans, including direct subsidized loans, universities, colleges, and trade schools paid a portion of the loan, while the federal government made up the rest. While the program was in place, 1,700 schools across the United States participated.
The program was managed directly by colleges and universities. It gave money to students in need either by sending them a check per semester or by crediting the money to an account that the school held for the students twice per year.
However, due to budgetary issues and concerns about how complicated the Perkins loan program was, Congress did not renew it in 2015. They did extend the final program through 2017 to look for a way to help low-income or needy students that was simpler and more cost-effective. A solution was not found, and the program completely ended in 2018.
Cancellation Options for a Perkins Loan
In general, if you have a Perkins loan, you are still responsible for paying it. Many people who had financial struggles when entering college may still have financial struggles today, so it is important to understand your options for having this debt forgiven, canceled, discharged, or refinanced. You may also qualify for forbearance or deferment.
First, you may qualify for loan forgiveness or discharge, but you must not be in default on the Perkins loan. Although the program ended, you are responsible for finishing payment on any loan remainder. There are some exceptions to this rule, including public works or personal hardship.
The Department of Education and associated lenders consider you in default on the Perkins loan if you have not made full payments for 270 days. You must work with the school that administered your Perkins loan, or the lending company that currently holds it, if you are struggling financially and need help managing monthly payments.
If you need help managing this loan or think you qualify to have the debt canceled, there are some steps you can take.
- Deferment or forbearance: If you are struggling financially or personally, you may qualify for either deferment or forbearance of your loan, including a Perkins loan. Both of these programs allow you to stop making student loan payments temporarily, or they can temporarily reduce your monthly payments so they are more manageable for you.
There is one major difference between these two options: With deferment, the interest on your loan stops accruing during the months you are not paying or paying less. With forbearance, the interest still accrues.
Some loan programs allow you to put the unpaid interest toward your loan principal, but this is not true for Perkins loans. You will need to pay the interest as it accrues during the forbearance period.
You may qualify for forbearance if you experience:
- Financial trouble
- Medical expenses or long-term medical treatment
- Changes in your employment, including gaps in employment
- Other reasons that are outlined by your loan servicer
These financial struggles must lead to the monthly payment on all collective federal student loans to be equal to or greater than 20% of the borrower’s monthly income.
The school or lending institution managing your Perkins loan will not know that you are struggling with money if you do not tell them, and they will not reach out to you if you stop paying the loan. You must ask them for forms so you can submit an application for either forbearance or deferment.
If you are still in school with a Perkins loan and you drop to half-time, your loan may automatically be put into deferment. If you are working toward canceling your Perkins loan through forgiveness, discharge, or other means, your loan may be eligible for deferment.
If you are eligible for deferment, you may also receive an additional six-month grace period before payments begin. Neither this period nor the deferment period is considered part of the 10-year repayment period.
- Discharge: This is a form of debt cancellation, but it requires that you experience specific types of hardship that prevent you from working or making payments. These include total disability that prevents you from keeping a job, some types of bankruptcy, and death.
In some instances, school closure can lead to your Perkins loan being discharged. If you or your spouse is a victim of the events of 9/11, you may also qualify for discharge of this loan.
- Teacher cancellation: If you teach in a public or nonprofit elementary or secondary school system for up to five years after you graduate, you may qualify to have some or all your Perkins loan canceled. Eligible teachers include:
- Those serving low-income families
- Special education teachers, especially those teaching infants and toddlers with disabilities
- Math, science, foreign language, or bilingual education teachers
You must be directly employed by the school system, not a contractor. Federal Perkins loans will not be canceled if you teach at a postsecondary school; however, working in an elementary or secondary school as a librarian or counselor may meet the cancellation requirements.
Part of the loan will be canceled for teaching one or two full academic years. This percentage goes up the longer you teach (up to five years).
- Public service cancellation: Your Perkins loan may be forgiven in part or full if you work for the public good in some capacity. These fields include:
- Military service
- Public defender
- Firefighter or law enforcement officer
- Faculty member with a tribal college or university
- Nurse or medical technician
- Speech pathologist or librarian with a master’s degree at a Title I school
Volunteer service with AmeriCorps or the Peace Corps can also forgive or cancel at least part of your Federal Perkins loan.
Continue Repaying Your Perkins Loans to the School
While the Perkins loan program was in effect, schools could incentivize students to repay the loan by:
- Reducing the interest rate to 1% if there were 48 consecutive months of payments
- Discounting the principal of the loan up to 5% if the loan was repaid in full before the end of the repayment period
- Creating other incentives for students, with the Secretary of Education’s approval
These may still be in effect, so if you do not qualify for cancellation, forgiveness, deferment or forbearance, discharge, or other options that eliminate the debt, being in good standing with the lending servicer means you may pay less.
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