Low Interest Loan Options With Federal Perkins Loans

Federal Perkins Loans are loans offered by the United States (U.S.) government for students who are in financial need. Named after U.S. House of Representatives from Kentucky, Carl D. Perkins, Perkins loans carry a fixed interest rate of a flat 5% over a ten year repayment period. Unlike Stafford Loans that allow a 6-month repayment grace period, Perkins loans offer a generous 9 month grace period. This means students will not have to begin repayment until the 10th-month post-graduation or withdrawal from college. These are subsidized loans, meaning interest does not accrue until after their 9 month grace period of the loan has ended. In certain situations, the loan payment may be postponed by receiving a deferment or forbearance or even canceled. Note that if payment is due and not paid on time, a late fee may be incurred. If payments continue to go delinquent you risk defaulting on your student loan.

The U.S. government provides a limited amount of Perkins loan funding to each school. The dispersion of these funds is completely up to the school, as determined by the students they view as being the most in need of the financial aid. Schools combine federal and personal funds to students qualifying for the loan. Unlike other federal loans, Perkins loan borrowers do not have to pay insurance or origination fees.

Qualification requirements for Federal Perkins loans.

Before a student applies for a Perkins loan, there are a few minimum qualifications that must be met.

• Completion of Free Application for Federal Student Aid (FAFSA) form
• Must be enrolled in school as at least a half-time student in a degree program
• U.S. citizenship, eligible non-citizen or permanent residency is required
• Must maintain satisfactory academic progress
• Must have no history of previous loan defaults on educational loans or grants
• Must be registered with selective services

Once a Perkins loan has been awarded for a specific academic year, students will be mail a packet. Included in the packet is a promissory note stating the terms and conditions of the loan and a Statement of Rights And Responsibilities form. Make sure to read the terms carefully before signing and returning the forms for the Business Affairs office. Once accepted for the Perkins loan, loan payments are dispersed on a term-by-term basis through the school's financial aid office and may be paid to the student via check, or a credit to the student's account.

Remember that promissory note you signed and returned to the Business Affairs office? That's a legally binding document that states you are agreeing to make payments on the loan in accordance with the terms on the notice. You'll have a 9 month grace period from your graduation before the loan amount will be required to be paid back.

Perkins loans cannot be bought or sold by other lenders, a common practice in the loan business. What private lenders CAN do is provide Student Loan Consolidations, a process in which multiple loans are paid off by the lender. Instead of paying several loan institutions, you make one fixed monthly payment to the consolidator, often at a lower monthly payment over the separate loan accounts. The advantage of consolidation student loans may include lower monthly payments, lower interest rates, and more attractive loan conditions and terms.

When you graduate from college or leave mid-term (before graduation) or drop below the half-time enrollment status, your account will be placed in repayment status for the Perkins loans borrowed up to that point. You'll receive repayment forms in the mail. One is the Schedule of Repayment Statement (also known as the Truth in Lending Disclosure Statement) while the other is a copy of the Promissory Note of the loan. A signed copy of the Schedule of Repayment Statement must be completed and returned to the Perkins Student Loans.

A "default" on a student Federal Perkins loan is where the loan amount goes unpaid for several consecutive months. If payments cannot be made promptly, students must request a deferment, forbearance, or even cancellation. If a payment goes unfulfilled, additional interest and late fees may be added to the payment total. If a student defaults on their Perkins loan, the entire balance may be immediately declared payable. They may be charged all collection fees, interest, late charges, and other fees associated with the default. The loan will be referred to outside collection agencies and reported to the credit bureau organizations. Defaulting on your Federal Perkins loan can instantaneously destroy your credit and cause you to lose all eligibility to qualify for future financial aid loans, including Stafford Loans and Pell Grants.

If you've defaulted on your Federal Perkins loan, not all hope is lost! You may rehabilitate your loan by entering into a written agreement and making 12 good faith, on-time, monthly payments in an amount determined by your college or university. Once the good faith period has ended and all payments made on time, the Perkins loan may be successfully declared rehabilitated. Once you reach the rehabilitated status, you are once again eligible for Title IV aid under the original terms of your loan contract. Please note that a loan cannot be defaulted and rehabilitated more than one time.

The Federal Government has set-up various financial aid options for students in need of assistance. Like any loan, the responsibility is on the student to ensure the amount borrowed is paid back on time and in full. Consistently paying your loans will ensure that the students of the future will have the same privileges as the students of today through the access of Federal Perkins Loans.