What Perkins Loans Are

A Perkins loan is a federal student loan made directly by your school, not by a bank or the Department of Education. Your school lends you money from a fund it manages, and you repay the school after you graduate or drop below half-time enrollment. The interest rate is fixed at 5 percent, and the government subsidizes the interest while you are still in school — meaning you do not owe interest that accrues during your time as a student.

Perkins loans are no longer being issued as of September 30, 2017. However, millions of borrowers still hold Perkins loans and are making payments on them. If you took out a Perkins loan before that date, the information here explains how your loan works and what your repayment options are.

Key Takeaways

  • Perkins loans have a fixed 5 percent interest rate and do not accrue interest while you are enrolled at least half-time in school.
  • Your school is your lender and servicer, so you make payments directly to your school's loan office, not to a federal loan servicer.
  • You have a six-month grace period after graduation or dropping below half-time status before your first payment is due.
  • Perkins loans offer forgiveness programs for teachers, nurses, and other public service workers that can cancel up to 100 percent of your balance.
  • If you have trouble paying, you can request a deferment, forbearance, or income-driven repayment plan through your school.

How Much You Can Borrow

The amount you could borrow in a Perkins loan depended on your year in school and your financial need. Undergraduate students could borrow up to $5,500 per year, with a total limit of $27,500 for all undergraduate borrowing. Graduate students could borrow up to $8,000 per year, with a total limit of $60,000 including any undergraduate Perkins loans.

Your school determined how much you could actually borrow based on your cost of attendance and other financial aid you received. Even if you were under the annual or lifetime limit, your school might have offered you less if other aid covered your expenses. The amount you borrowed is what you now owe, plus any accrued interest from after your grace period ended.

Interest and Fees During School

While you were enrolled at least half-time, the federal government paid the interest on your Perkins loan. This is called interest subsidy. You did not owe that interest, and it did not add to your balance. Your loan balance stayed exactly what you borrowed.

Perkins loans had no origination fees, no process fees, and no prepayment penalties. This made them cheaper to borrow than most other federal loans. Once you left school or dropped below half-time enrollment, the subsidy ended and interest began to accrue on your balance at 5 percent per year.

Your Grace Period and When Payments Start

You had a six-month grace period after you graduated, left school, or dropped below half-time enrollment. During this time, you did not have to make payments, and interest did not accrue. This gave you time to find work and get your finances in order.

After the six months ended, your first payment was due. Your school's loan office sent you information about your repayment plan and payment amount before the grace period ended. If you did not receive this information, contact your school's financial aid office directly — they manage your Perkins loan account and have your payment schedule.

Standard Repayment and Other Payment Plans

Under the standard repayment plan, you made fixed monthly payments over ten years. This plan had the lowest total interest cost because you paid off the loan fastest. Your school calculated your payment amount based on your total balance and sent you the details before your grace period ended.

If ten years was too short, you could request an extended repayment plan that stretched payments over up to 25 years. Your monthly payment would be lower, but you would pay more interest overall. You could also request income-contingent repayment, where your payment was based on your income and family size rather than a fixed schedule. To change your repayment plan, contact your school's loan office — they handle all changes to Perkins loans, not the federal loan servicer.

Forgiveness Programs for Teachers and Public Service Workers

Perkins loans offered loan cancellation — not forgiveness, but outright cancellation — for borrowers in certain professions. Teachers who worked in low-income schools could have up to 100 percent of their Perkins loan cancelled. Nurses and other health professionals working in underserved areas, Peace Corps volunteers, and military service members also had cancellation options.

The amount cancelled depended on how long you worked in the may have access to role. A teacher in a low-income school could have 15 percent of the loan cancelled for each year of service, up to 100 percent after five years. To pursue cancellation, contact your school's financial aid office with proof of your employment. They will verify your may be able to access and process the cancellation directly.

What to Do If You Cannot Pay

If you were having trouble making your monthly payment, you had options. You could request a deferment, which paused your payments for a set time if you were unemployed, in graduate school, or facing other hardships. During a deferment, interest did not accrue on your Perkins loan — the government still paid it.

You could also request forbearance, which paused payments for up to three years if you did not meet the conditions for deferment. During forbearance, interest did accrue and was added to your balance. Both options required you to contact your school's loan office in writing and explain your situation. Your school decided whether to grant the request based on your circumstances.

Finding Your Loan Servicer and Making Payments

Your Perkins loan servicer is your school, not a private company. The financial aid office or loan office at the school where you borrowed the money handles your account. If you attended multiple schools and borrowed Perkins loans at each one, you have separate loans with each school and make separate payments to each.

To find your school's loan office, contact the financial aid office at the school where you borrowed. They will give you the address, phone number, and website where you make payments. If you no longer have contact information for your school, search for "[School Name] financial aid office" online or call the school's main number and ask for the loan office.

Frequently Asked Questions

Can I consolidate my Perkins loan into a federal Direct Consolidation Loan?

Yes, you can consolidate a Perkins loan into a Direct Consolidation Loan through the Department of Education. However, consolidation ends the Perkins loan benefits — you lose the 5 percent interest rate, the interest subsidy, and the cancellation programs. Most borrowers should not consolidate Perkins loans because the benefits are better than Direct Loans.

What happens if I default on my Perkins loan?

If you do not make a payment for 120 days, your loan goes into default. Your school can take legal action to collect, and the default is reported to credit bureaus. You lose deferment and forbearance options. Contact your school when ready if you cannot pay — they may work with you on a payment plan or hardship option before default occurs.

Do I still owe my Perkins loan if my school closed?

Yes, you still owe the loan. The Department of Education took over servicing of Perkins loans from closed schools. Contact the Federal Student Aid office at 1-800-4-FED-AID to find out where to send your payments now.

Can I get my Perkins loan forgiven if I work in public service?

Perkins loans have their own cancellation programs for teachers, nurses, and military service members — these are separate from the Public Service Loan Forgiveness program that applies to Direct Loans. Contact your school's financial aid office to learn whether your job qualifies for Perkins cancellation.

Is the 5 percent interest rate locked in for the life of my loan?

Yes. Perkins loans have a fixed 5 percent interest rate that never changes, no matter how long you take to repay. This is one of the main advantages of Perkins loans compared to other federal student loans.