How Did a Perkins Loan Work?
Unlike other federal student aid that comes directly from the U.S. Department of Education, Perkins Loans were administered by the borrower’s college or university. The school served as the lender, using a pool of funds from both the federal government and its own resources. The loan was based on exceptional financial need, which was determined by the Free Application for Federal Student Aid (FAFSA).
Key features included:
- A low, fixed interest rate of 5%.
- A nine-month grace period after the student graduated, left school, or dropped below half-time enrollment. This was three months longer than the standard six-month grace period for Direct Loans.
- The school as the lender, meaning payments are made to the school or a student loan servicer they hired, like ECSI or UAS.
Congress chose not to renew the program, and the last Perkins Loans were disbursed on September 30, 2017. While no new loans are available, millions of borrowers are still responsible for repaying their outstanding balances.
Perkins Loan Cancellation vs. Public Service Loan Forgiveness (PSLF)
The most significant advantage of a Perkins Loan is its unique cancellation program, which is often faster than other federal forgiveness options. Borrowers in certain public service careers may have a percentage of their loan canceled for each year of service, potentially reaching 100% forgiveness.
Eligible professions include teachers in low-income areas, firefighters, law enforcement officers, nurses, public defenders, and members of the military, among others. A typical cancellation schedule for a full-time eligible employee is:
- Years 1 & 2: 15% canceled per year
- Years 3 & 4: 20% canceled per year
- Year 5: 30% canceled
This tiered forgiveness is a key difference from Public Service Loan Forgiveness (PSLF), which requires 120 qualifying payments (10 years) before forgiving the entire remaining balance at once.
How to Manage Your Existing Perkins Loan
If you still have a Perkins Loan, it is crucial to manage it actively, as it is separate from your other federal loans.
First, identify your loan servicer. If you are unsure who manages your loan, visit the official Federal Student Aid website (StudentAid.gov) and log in to view your loan details in the National Student Loan Data System (NSLDS).
Next, carefully weigh the pros and cons before making changes. You might consider rolling your Perkins Loan into a Direct Consolidation Loan to simplify payments or qualify for PSLF. However, consolidating a Perkins Loan makes you permanently ineligible for its unique cancellation benefits. For some borrowers, Perkins cancellation is a much faster path to becoming debt-free.
Finally, avoid delinquency. Defaulting on a Perkins Loan carries severe consequences, including damage to your credit score, wage garnishment, and the seizure of tax refunds. If you are struggling to make payments, contact your servicer immediately to discuss options like deferment or forbearance.
For official information on eligibility and to find cancellation request forms, visit the Perkins Loan Cancellation and Discharge page on the Federal Student Aid website.