The History of the Perkins Loan
The Federal Perkins Loan Program, originally established as the National Defense Student Loan Program in 1958, was created to encourage students to pursue higher education and to support national defense. Over the years, it evolved and was renamed the Federal Perkins Loan Program. This program was a vital part of the federal student aid landscape for decades, providing a crucial funding stream for students who might not have qualified for other types of loans.
How Did the Perkins Loan Work?
Unlike other federal student loans that are disbursed directly from the U.S. Department of Education, Perkins Loans were funded by a partnership between the federal government and participating educational institutions. Schools received federal capital contributions and were required to contribute their own funds. They then managed the loan program, including awarding loans to students, collecting payments, and handling delinquency and default.
A key feature of the Perkins Loan was its favorable terms:
- Low Interest Rate: The interest rate was fixed at 5%, significantly lower than many other student loans available at the time.
- No Origination Fees: Unlike many other federal loans, Perkins Loans did not come with origination fees, meaning borrowers received the full amount they borrowed.
- Long Repayment Period: Borrowers typically had up to 10 years to repay their Perkins Loans.
- Cancellation Provisions: In certain circumstances, borrowers could have their Perkins Loans partially or fully canceled if they worked in specific public service fields, such as teaching in low-income areas or working as a law enforcement officer.
Who Received Perkins Loans?
Eligibility for a Perkins Loan was primarily based on financial need. Students had to complete the Free Application for Federal Student Aid (FAFSA) to determine their eligibility. Schools then awarded these funds to students with the greatest demonstrated need among those who qualified for federal student aid. Both undergraduate and graduate students could receive Perkins Loans.
Why Did the Perkins Loan Program End?
The Federal Perkins Loan Program officially expired on September 30, 2017, due to a lapse in congressional reauthorization. While the program is no longer accepting new borrowers, existing Perkins Loans remain active, and borrowers are still obligated to repay them according to their original terms. The funds that were previously available through the Perkins Loan program are now often channeled through other federal student aid programs, such as Direct Subsidized and Unsubsidized Loans.
What If You Still Have a Perkins Loan?
If you have an outstanding Perkins Loan, your school or its designated loan servicer will continue to manage your loan. Here’s what you should know:
- Loan Servicer: Your school may service the loan itself or contract with a third-party loan servicer. You’ll need to know who your servicer is to make payments and discuss repayment options.
- Repayment Options: While Perkins Loans don’t have the same income-driven repayment plans as Direct Loans, you may still have options if you’re struggling to make payments. Contact your loan servicer to discuss deferment, forbearance, or potential repayment adjustments based on your financial situation.
- Loan Cancellation: If you believe you qualify for loan cancellation based on public service or other eligible employment, you’ll need to work directly with your loan servicer to apply and provide the necessary documentation.
Common Misconceptions About Perkins Loans
- “Perkins Loans are forgiven automatically”: This is not true. Loan cancellation for Perkins Loans required specific employment and an application process.
- “Perkins Loans are the same as Direct Loans”: While both are federal student loans, they have different funding mechanisms, interest rates, and repayment/cancellation provisions.
The Perkins Loan program played a significant role in making higher education accessible for many students. Although it is no longer active, understanding its features and implications is important for those who benefited from it.
Sources:
Federal Student Aid – Perkins Loan
U.S. Department of Education – Federal Perkins Loan Program