Posted on | May 24, 2012
The Federal Perkins Loan is an undergraduate and graduate need based loan program for students. This type of loan is offered by the United States Education Department in collaboration with schools, colleges, universities, etc. This article will discuss the history of Perkins loans as well as the basic concepts necessary for a working understanding of the same.
FAQ: Who is Perkins?
Carl D. Perkins is the man The Federal Perkins Loan program was named after. He was a member of the United States Congress, representing the state of Kentucky. He was the chairman of the Committee on Education and Labor. As such he was able to spearhead the following bits of legislation:
- Economic Opportunity Act of 1964
- Headstart Program
In recognition to his contribution in making sustainable education attainable to the masses Congress saw it fit to name the following after him:
- Carl D. Perkins Vocational and Technical Education Act
- Federal Perkins Loan
- Carl Perkins Bridge
FAQ: Source of Perkins Loan Funding
The Perkins loan is known as a “subsidized loan”. This means that the federal government provides the funds and then hands over the same to the school, university or college for administration. One positive effect of the subsidy is that interest does not accrue prior to payment of the loan.
FAQ: Originator vs. Lender
The named lender in a Perkins loan is the school. However part of the funds are actually provided for by the Federal government. Another part is shouldered by the school and the repayment amounts of existing lenders. This means that the actual originator of the loan is the government and the school but the administration of the loan that is given to the latter. However some experts are of the opinion that since the administrator is given a wide degree of discretion then they step into the shoes of the originator and not merely administer the loan.
FAQ: Who Is the Lender and What Can It Collect?
The administrator steps into the shoes of a lender and collects installment payments. The interest payment for Perkins loans is fixed at 5% and is usually payable for a maximum period of 10 years. A grace credit of 9 months is given. No origination fee or closing cost is chargeable for this type of loan.
FAQ: What Does It Mean to Be “Need Based”?
A Perkins loan is “need based”. This means that only students who show actual financial need or hardship will qualify for this loan. This effectively shuts the door to middle to high income earners. It is important to note that student grantees of Federal Pell grant are prioritized and that only those who have at least a half time (6 to 8 hours) student status can qualify.
Perkins Loan: What Is the Award Limit?
There are three very important rules to consider when discussing the award limits of a Perkins loan. First, the loanable amount depends greatly on the financial need of the borrower with due consideration to other types of financial aid given to the same student. Second, if the student will pursue undergraduate studies the loanable limit per year is $4,000 and a total maximum amount of $20,000. If the student will pursue graduate studies the loanable limit per year is $6,000 and a total maximum amount of $40,000 (this already includes undergraduate loans).