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Important changes to came into effect on July1, 2008 for all Undergraduate Stafford Loans. Notably, the Stafford interest rate has dropped from 6.8% to 6.0% for subsidized loans!

A Federal Perkins Loan is a low-interest (5 %) is a need-based student loan offered by the U.S. Department of Education loan for both undergraduate and graduate students with financial need to fund their post-secondary education. The loan is made with government funds, and your school contributes a share. Because your school is your lender, you must repay this loan to your school.

Students that have been awarded a Perkins Loan for a specific academic year will be mailed a packet which will include a Promissory Note outlining the terms and conditions of their loan,
and a Statement of Rights and Responsibilities form. You will be required to complete and return these documents with you signature to the Business Affairs Office/Perkins Student Loans.

The loan is disbursed on a term-by-term basis, and applied to the Student's Billing Account, which will include other student aid disbursements (such as Pell Grants, Supplemental Grants, Federal Direct Loans, and any other grants and scholarships) the student may have acquired.

For each year your Financial Aid award includes Perkins Loan funds, the process will be repeated.

In addition to your EFC score, eligibility requirements for the Federal Perkins Loan are as follows. Students must:

• Be a United States citizen or an eligible non-citizen with a valid social security number

• Demonstrate exceptional financial need

• Be working toward a degree or certificate in an eligible program

• Have a high school diploma, GED or pass an approved ability-to-benefit (ABT) test

• Register with the Selective Service if you're a male between 18 and 25

• Maintain satisfactory academic progress

Perkins Loan Limits

Depending on the level of the schools funding, when you apply and your specific financial needs, The loan limits you can borrow as an undergraduate student are up to $4,000 per year with a lifetime maximum loan of up to $20,000. For the graduate or professional student, the loan limit you can borrow up to $6,000 per year with a lifetime limit of $40,000 (including undergraduate loans).

Your school will usually disburse your Perkins Loan to you directly (usually by check) or credit your account. In most cases you'll receive Perkins Loan in at least two payments during the academic year. Your school is required by law to notify you in writing whenever it credits your account with your Perkins Loan funds.

Repaying your Perkins Loan

Under the Perkins Loan Program Students have nine months after they graduate If they have been attending school at least half time before they must begin repaying their Perkins Loan (There are circumstances where you might have longer than nine months, such as being on active duty with the military). Being on active duty is a period of time referred to as a grace period. At the end of your grace period, you will be required to start repaying your loan.

If you, leave school, or drop below half time status you must begin repayment immediately.

Students approved for the Perkins Loan Program are not charged any fees to take out a Perkins Loan. However, skipping, making partial or late payments, might incur late charges. If you continue not making payments as required, you might have to pay collection costs as well.

Perkins Loans Tax Incentives

Students should contact their financial advisers regarding tax incentives for higher education expenses, including, but not limited to a deduction for student loan interest. Deductions for student loan interest benefits applies to federal and nonfederal loans used to pay for postsecondary education costs. The maximum deduction is up to $2,500 a year. Refer to IRS Publication 970, Tax Benefits for Higher Education which will explain these credits and other tax benefits.

Perkins Loan Deferment / Forbearance

Students, under certain conditions, may receive a "deferment" or "forbearance" on their loan, as long as the loan isn't in default. During a deferment, students can temporarily postpone payments without interest accruing or accumulating on their loan.

A Perkins Loan Deferment is not automatic. Students must apply for their deferment through their school directly, usually by completing a deferment request form provided by your school or college. Its important for you to file your deferment request on time or you'll incur late charges. For more specific details regarding loan deferments you can contact your school's financial aid office and they'll provide you with all the necessary information for you to complete your loan deferment application.

Students must continue to make scheduled payments until they're notified that their deferment or forbearance has been granted. Otherwise, they could become delinquent and go into default. The federal government pays the interest while your Perkins Loan is in any type of deferment period which can save the student thousands of dollars of the duration of their loan.

If you perform a service that qualifies you for loan cancellation the school that made your loan must automatically defer your Federal Perkins Loan(s) during any that period.

In the case where a student isn't eligible for deferment, they can apply for forbearance which will postpone or reduce their payments. Alternately your repayment period might be extended. Interest continues to accrue through the forbearance.

Forbearance may be granted in intervals of up to 12 months at a time and up to 3 years. In order for a student to receive forbearance they must apply in writing to the school that issued loan loan or to the agency the school employs to service your loan.

You'll be expected to provide documentation in support of your application and to show cause why you should be granted forbearance.

Cancellation Prior to Disbursement

If a student has signed the promissory note agreeing to the loan's terms he is still eligible to legally cancel the loan.

According to law, the school issuing the loan must notify the student in writing whenever it credits a students account with your Perkins Loan funds. The school is required to notify you no less than 30 days before, and no later than 30 days after the school credits your account with your Perkins Loan funds. Within 14 days after the date your school sends you this notice, or by the first day of the payment period, whichever is later, You may cancel all or a portion of your loan if you inform your school. Contact your school financial department directly if you are unsure of the first day of the loan repayment period.

If your school has presented you with a Perkins Loan in the form of a check, you may also refuse the funds by returning the check which will effectively cancel your loan.

Special Cancellation

Under certain circumstances the Federal Perkins Loans can be canceled. For example, Federal Perkins Loans can be canceled if the borrower dies or becomes totally and permanently disabled, A loan, as long as you're not in default can also qualify for cancellation under other certain conditions. The table below sets out acceptable cancellation provisions.

For more specific information contact your financial aid office directly as only the school may cancel, grant deferment or forbearance and make other decisions concerning your Federal Perkins loan.

Federal Perkins Loan Discharge/Cancellation Summary
 

Disability:

As of October 7, 1998, all Perkins Loan borrowers are eligible for all cancellation benefits regardless of when the loan was made or the terms of the borrower's promissory note. However, this benefit is not retroactive to services performed before October 7, 1998.

Beginning July 1, 2002, a borrower who is determined to be totally and permanently disabled will have his or her loan placed in a conditional discharge period for three years from the date the borrower became totally and permanently disabled. During this conditional period, the borrower doesn't have to pay principal or interest. If the borrower continues to meet the total-and  permanent disability requirements during, and at the end of, the three-year conditional period, the borrower's obligation to repay the loan is canceled. If the borrower doesn't continue to meet the cancellation requirements, the borrower must resume payment.

Total and permanent disability is defined as the inability to work and earn money because of an injury or illness that is expected to continue indefinitely or to result in death. For more information on qualifying for this discharge, review your promissory note* and contact your loan holder.
 

Perkins Loan Special notes: The Perkins Loan also offers better cancellation provisions than the Stafford or PLUS loans. See the section on loan forgiveness for more details. Perkins Loans are eligible for Federal Loan Cancellation for teachers in designated low-income schools, as well as for teachers in designated teacher shortage areas such as math, science, and bilingual education. A percentage of the loan is cancelled for each year spent teaching full-time.

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