In-Depth Perkins Loans
- What is a Perkins Loan?
The Perkins Loan is an educational loan provided by the Federal Government. To be considered for a Perkins Loan, you must complete the FAFSA. The Perkins Loan is a need-based student loan designed to assist students with educational expenses who have exceptional financial need while attending college. The interest rate on the Perkins Loan is 5%. If you receive a Perkins Loan, you will be given a 9 month grace period after finishing school or dropping below half-time enrollment status. Repayment on the Perkins Loan will begin after the grace period.
- What is a Master Promissory Note?
MPN stands for Master Promissory Note. The Master Promissory Note is a binding legal document between you and the lender. By signing the MPN, you are agreeing to all of the terms and conditions set forth by the lender. These terms and conditions include the interest rate as well as deferment and cancellation conditions. Signing the MPN also enables you to receive multiple loans in different academic years under the same program.
- Is there anything else I need to do in order to receive my Perkins Loan?
As a condition of your loan, you must sign a copy of your repayment schedule. The repayment schedule and a copy of your MPN will be provided by your school (or its billing service). You must request this information if you have not already done so.
- When do I begin repayment on my Perkins loan?
When do I begin repayment on my Perkins loan? Repayment of your Perkins loan begins after your grace period. There are two kinds of grace periods for Perkins loans – an Initial Grace Period and a Post-deferment Grace Period. Under the Initial Grace Period, a Perkins borrower has a nine-month grace period during which no payments are required and interest does not accrue on your Perkins loan balance. Under the Post-deferment Grace Period, a Perkins borrower has a 6 month grace period following the end of a period of deferment. Neither the deferment nor the grace period is counted as part of the 10-year repayment period. Except for hardship deferments on loans made before July 1, 1993, all deferments for all loans made under the Federal Perkins Loan Program have post-deferment grace periods of 6 consecutive months. Your grace period begins on the date you graduate or drop below half-time.
- What are the repayment terms on my Perkins loan?
Your repayment period begins immediately after your grace period ends. You have a maximum of 10 years (120 months) to repay your total Federal Perkins Loan amount. You may pay without penalty all or any part of the loan principal and accrued interest at anytime before it becomes due. For example, you may choose to make payments during the grace period. Payments made during your grace period will be applied to your principal balance which decreases your outstanding loan amount and reduces the amount of interest you will pay over the life of the loan.
- Who do I repay my Perkins Loan to?
Your school is your lender for your Perkins Loan. Your contact for all repayment activities will be your school or its designated billing service.
- What does deferment mean?
If a borrower returns to college, or is unemployed for an extended period of time, or is on active military duty, he or she may request that their loans be placed on deferment. A lender does not have to grant deferment. But if the lender does grant a deferment, the borrower can temporarily postpone repaying a loan.
- What does forbearance mean?
If a borrower is experiencing financial hardship due to reasons outside of his or her control (for example, illness or underemployed), he or she may request of their lender a temporary delay in paying back the loan. If the lender approves the request, the borrower will be given temporary relief on the principal payments. This is known as forbearance. However, interest charges will still be incurred and will be added to the total balance due.
- How do I apply for a deferment or forbearance on my Perkins Loan?
To apply for a deferment or forbearance on your Perkins Loan, you must complete and submit a Deferment or Forbearance Request Form. You can obtain the form from one of the following sources: • Your financial aid office or school's billing service • The Internet NOTE: It is important to note - once you have submitted your forms you must continue to make on-time payments until your deferment or forbearance has been granted.
- Do I have to pay interest on my Perkins loan while I am in school?
Interest does not accrue on your Perkins Loan while you are in school, during your 9-month grace period or during approved deferment periods. Interest does accrue during forbearance. You are responsible for paying your interest during forbearance. If you do not pay your interest as it accrues, you will be responsible for paying it when the forbearance ends.
- What will my monthly payments be when I graduate?
Your monthly repayment amounts will vary depending on the total amount of your loans. The following repayment chart will provide you with some repayment examples.
- What does it mean to consolidate a federal loan?
If you have multiple federal student loans, you may determine that you want to combine them into one loan. This combined loan is called a consolidated loan. If your federal loans are in a grace period or in repayment, you may be eligible to consolidate your student loans. When you consolidate multiple loans into one loan, a few things will happen. The new loan will have a fixed interest rate. The new loan will enable you to make a single student loan payment each month (instead of the multiple payments you had been making). Your monthly payment will be lower (however, you will pay more in total interest by doing this). If you do combine more than one student loan, the amount you owe on each loan is added together and the interest rate is recalculated. The new interest rate is equal to the weighted average of all the loans being consolidated. This new interest rate will be fixed, meaning that the interest range will never change again. Before you consolidate your federal student loans, be sure to determine whether it makes sense to do so. In some cases consolidation is a prudent course of action. In others, it is not.
- Should I consolidate my Perkins loan?
Consolidating your Perkins Loan offers you the benefits of extended repayment and the convenience of single-billing. However, if you choose to include your Perkins Loan in a Federal Consolidation Loan, the following will occur:• You could lose certain deferment and forbearance options, including the deferment of your interest during your grace and approved deferment periods• You will forfeit your Perkins Loan cancellation options• Your interest rate will be combined with your Stafford or Federal Direct Subsidized and Unsubsidized Loans. You will lose your original 5% fixed rate.
- Can I cancel my Perkins loan?
A borrower may have all or part of his or her loan (including interest) canceled for engaging in teaching, public service, service in the Peace Corps or Americorps*VISTA, or service in the military. In addition, loans may be discharged if the borrower becomes disabled or dies, or in certain cases involving bankruptcy.
- How can I apply for cancellation of my Perkins loan?
If you feel you are entitled to a partial or full cancellation on your Perkins loan, you should contact your school’s business office or billing service. Your school will most likely ask you to complete a cancellation form as well as submit to them supporting documentation. Your school will determine, based on the documentation you submit, whether you are entitled to have any portion of your Perkins loans cancelled.
- What is Loan Forgiveness?
In certain circumstances you may be eligible to apply for loan forgiveness. Loan forgiveness means that the federal government will cancel all or part of your Federal Direct Subsidized and/or Unsubsidized loan for:• Performing volunteer work; • Serving in the military• Teaching or practicing medicine in certain types of communities; • or, • Meeting other criteria specified by the forgiveness program. To see if you are eligible for loan forgiveness, visit: http://studentaid.ed.gov/PORTALSWebApp/students/english/discharges.jsp?tab=repaying
- What is Public Service Loan Forgiveness?
If you borrowed a Direct Loan, or have consolidated your loans into a Direct Consolidation Loan, you may be eligible for Public Service Loan Forgiveness. Under this program, any remaining debt after 10 years of full-time employment in public service will be forgiven. Only payments made on or after October 1, 2007 count toward the required 120 monthly payments. For more information on the Public Service Loan Forgiveness program, visit: http://studentaid.ed.gov/students/attachments/siteresources/LoanForgivenessv4.pdf
- What happens if I default on a loan?
Defaulting on a loan has very serious negative consequences. The following are some of the consequences you may face. Your loan may become due and you will have to pay off the entire amount.
Your loan may be turned over to a collection agency and you may be responsible for collection costs.
You will be ineligible for any more Financial Aid.
Your credit score will be negatively affected.
The IRS will be notified to intercept any refunds.
Your wages may be garnished.
You may be susceptible to litigation.
You will lose the right to defer your loan payments.
Your college may withhold academic transcripts.
- When am I in default on my Perkins Loan?
For Perkins Loan borrowers, if you fail to make one full payment on the day your Perkins Loan is due your loan will be considered in default.
- What happens to my loan if I move or change schools?
As a Federal Loan borrower, it is your responsibility to notify your school and/or servicer of certain changes. You must notify your financial aid office if you: • Reduce your enrollment status to less than half time • Withdraw from school • Stop attending classes • Fail to re-enroll for any term • Change your expected graduation date • Change your name, local address, permanent address, or email address You must notify your school and/or servicer if you: • Change your address or telephone number • Change your name (for example, maiden name to married name) • Withdraw from school or begin attending less than half time • Transfer from one school to another • Change employer or employer’s address or telephone number change • Have any other change in status that would affect your loan (for example, the loss of eligibility for an unemployment deferment by obtaining a job) Remember: It is your responsibility to repay your loan(s) on-time and to communicate any change in status to your financial aid office and servicer.
- Do you have any suggestions for what I should be doing now to prepare myself for repaying my loans?
• Prepare a realistic budget and stick to it • Contact your lender or servicer if you have not received repayment information. Effective July 1st, 2010, all new Stafford Student Loans and PLUS Loans are Direct Loans through the US Department of Education. If you have loans prior to July 1st, 2010, you may have a bank as a lender. It is important you know who your lender is. It is your responsibility to make your payments on time. • Open all of your mail Your lender may transfer or sell your loan. It is the responsibility of the lender to notify you if such a transaction occurs. This notification is usually communicated by mail.