Perkins Loans

Perkins Loan Information:

What is a Perkins loan? It is a low-cost, government-guaranteed loan that colleges issue to low-income students to help cover education costs.

How much can I borrow from the Perkins program? The federal government caps Perkins loans for undergraduates at $5,500 a year and for graduate students at $8,000 a year, but each college determines each student's award, so your Perkins may be less.

How much do Perkins loans cost? Perkins loans are among the cheapest education loans available. They charge no interest while the student is in school and a fixed 5 percent when the student enters repayment nine months after graduation.

Who makes Perkins loans? Colleges. Some colleges have more Perkins money than others, so if you're hoping to take advantage of this program, it pays to apply to several schools to see if you can get a big Perkins loan from one with lots of Perkins money.

How do I get a Perkins loan? You-and if you are not qualified as an independent student-your parents, must fill out a FAFSA form detailing family finances, preferably by February 15.

Does everyone get approved for a Perkins? No. Colleges may award Perkins loans only to students with "exceptional need" for financial aid. Since each school has a different amount of Perkins money to lend out, each school has a different Perkins income cutoff.

Are Perkins loan payments tax deductible? It depends on your income when you start repaying. Generally, for a single person, education loan interest is deductible only if you earn less than $70,000.

When do I have to start repaying my Perkins loan? The first bill comes due nine months after you've graduated or stopped attending school at least half-time.

What happens if I lose my job or get into other financial trouble? You can call your lender and ask to apply for forbearance, which allows you to skip some payments. But beware, the interest keeps building up, so you'll owe more when you start repaying again.

What are the advantages of a Perkins loan? Perkins loans have a low fixed interest rate, so the size of your payment won't rise if interest rates rise. They also offer free insurance, so the debt will be canceled if the student dies or becomes disabled. Perkins borrowers can get their payments deferred if they get into financial trouble. And some of those who plan on entering public service may be able to have their employers pay off some of their Perkins loans.

What are the downsides of federal loans? Unlike credit card debt and mortgages, which can be canceled if you file for bankruptcy, education loans of all types must be paid. Most bankruptcy courts will not cancel them unless your situation is extremely dire.