Federal Perkins Loan Michigan

Federal Perkins Loans Explained

Today financial aid for students comes in several forms: scholarships, grants, and student loans. Some of these sources of aid are based on financial need, others are not. The Federal Perkins Loan is awarded to students with 'exceptional' financial need.

The Federal Perkins Loan Program

What is a Federal Perkins Loan and how do I know if I am eligible? How much can I borrow and when do I have to start repaying the loan? These are some of the most common questions about the Perkins Loan. It provides an excellent, low-cost way to fund your education.

The Federal Perkins Loan was authorized in 1958 by the National Education Act. Originally known as the National Defense Student Loan Program, the Federal Perkins Loan offers students low-interest financial aid in the form of loans administered by each educational institution. The Federal Perkins Loan program is funded by a campus-based revolving fund with monies provided by both the federal government and the educational institution. Since its implementation, the fund has grown to over $8 billion dollars. Over half a million students receive Perkins Loans every year. To be eligible for a Perkins Loan, you must be a U.S. citizen or national, U.S. permanent resident, or an eligible non-citizen enrolled at least half time in an eligible program.

Perkins Loans Details

Federal Perkins Loans are a campus-based loan program because they are administered by the educational institution, rather than by the government. Your eligibility for a Perkins Loan and how much you can receive is based on financial need, how much aid you are receiving from other sources, and the availability of funds from your participating school.

Federal Perkins Loans, with a low 5% interest rate, are awarded to students with the greatest financial need. Because Perkins Loans are awarded by your school, make sure to meet their financial aid application deadline. Perkins Loans do not have fees and the grace period before repayment is 9 months after you graduate or leave school.

How Much You Can Borrow With a Federal Perkins Loan

The Federal Perkins Loan is available to both undergraduate and graduate students and the actual amount you can receive is based on your financial need, other aid you are receiving, and the funding available to the school.

The limits for the Federal Perkins Loan are:

• Undergraduate Students: up to $4,000 per year with a maximum of $20,000 as an
undergraduate student.
• Graduate Students: up to $6,000 per year with a maximum of $40,000, including
undergraduate loans.

Receiving Your Federal Perkins Loan

To apply for a Perkins Loan you (and your parents if you are a dependent student) must fill out a Free Application for Federal Student Aid (FAFSA). The information you submit on the form determines your eligibility for the Perkins Loan. Some of the information you will be required to provide includes:

• Your Social Security number, as well as those of your parents if you are a dependent
student
• W2s and other records of money earned by you (and your parents if you are a dependent
student) for the previous tax year, as well as income tax returns
• Any foreign tax returns
• Documentation of any untaxed sources of income such as Social Security payments or
welfare records
• Copies of current bank statements; investment mortgage information; and stocks, bonds,
or other investment records

Your school will usually credit your Perkins Loan to your account in installments that correspond to your academic terms. To receive the loan you will need to sign a promissory not, which is a binding legal document describing the loan and the repayment terms. Your school is the lender for your Perkins Loan and you make payments directly to them or to their agent. Depending on the amount you borrow, you have up to ten years to repay your Perkins Loans.


The Perkins Loan Compared to the Stafford Loan

There are some similarities and some differences between a Federal Perkins Loan and a Stafford Loan. Eligibility for both a Perkins Loan and a subsidized Stafford is based on financial need but the Perkins Loan offers a much lower interest rate: 5% as compared to 6.8% for the Stafford Loan. Unsubsidized Stafford Loans, however, do not use financial need as a criterion. You are not charged a fee for a Perkins Loan, but you may have to pay up to 4% of the loan amount for a Stafford Loan. You can borrow more money through the Stafford Loan program as well--a max of $23,000 as an undergrad compared to the Perkins limit of $20,000.

With the Perkins Loan, you have a 9-month grace period after you graduate or leave school before you have to being repayment of your loan compared to the Stafford Loan 6-month grace period. Stafford Loans have a variety of repayment options while the Perkins Loan has only one repayment option. Both the Stafford Loan and the Perkins Loan programs offer a variety of consolidation, deferment, forbearance, and cancellation options but the Perkins Loan program provides considerably more cancellation options related to teaching, providing public and nonprofit services, nursing, law enforcement, and service in the U.S. Armed Forces.

Other Sources of Financial Aid

The Federal Perkins Loan is just one of many sources of financial aid. Scholarships are a good source of free aid. Eligibility for a scholarship can be based on financial need, academic merit, and a host of other factors. You can research scholarship programs online or at your local bookstore or library. Other sources of financial aid include Stafford Loan, private educational loans, and PLUS Loans (Parent Loan for Undergraduate Students).

Final Points to Remember About Applying

• Complete a FAFSA online or on paper
• Sign the promissory note
• Keep a copy of the promissory note and FAFSA for your records
• Fill out a renewal FAFSA each school year by your school's financial aid deadlines

Sources:
Dept. of Education 2006-07 Guide to Federal Student Aid
StudentAid.Ed.Gov
University of Washington