Federal Perkins Loans

What is the Federal Perkins Loan Program?

This loan program provides students with great financial need with low interest loans so that these students can afford to attend college. There are about 1,800 postsecondary institutions that participate in the Federal Perkins Loan program.

Administrators of financial aid at institutions that participate have a lot of flexibility in determining which students receive Federal Perkins Loans and how much money is loaned to eligible students.

Students who borrow Federal Perkins loans are eligible to have all or part of their loans cancelled, should they go into certain teaching jobs, certain public jobs, or the military.

Because Federal Perkins Loans are federally subsidized loans, the amount cancelled will go back to the postsecondary institution from which it was lent and that amount of money will be reinvested in the school’s loan fund.

If a student fails to repay his Federal Perkins Loan, the Federal government will also pay the school back for the part of the loan that the student failed to repay.

Institutional reimbursements for loans that are not repaid are called an “entitlement.”

Determining eligibility

To be eligible for Federal Perkins Loans, a student, or a student’s parents must first fill out a FAFSA – or Free Application for Federal Student Aid. This is a lengthy application and the student and his or her parents should have recent income tax returns to use in filling out the form.

Whether or not a student needs financial aid is determined by the United States Department of Education, which uses a standard formula that was developed by Congress. The formula includes:

• the student’s income (and any assets he or she may have if the student is independent)

• the parents income and assets

• how many people are in the student’s family

• how many of those are in college

• how much money the family has after basic living expenses are subtracted

• how much income a family has after an asset protection allowance is subtracted

Federal Perkins Loans are the best loans that a student can receive.

Advantages to Federal Perkins Loans

• They offer low interest rates – 5%

• Interest does not begin accruing until ten months after a student has graduated, left college, or become less than a half-time student

• Do not need to be entirely paid back for ten years after payments begin

• They may be totally or partially cancelled if the student goes into certain areas of teaching, the military, the Peace Corp or other government jobs.

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