Federal Perkins Loans

Federal Perkins Loans are low interest loans (5 percent) for both undergraduate students and graduate students with financial need. Federal Perkins loans are made through your school, so the school actuallly provides the loan, not the federal government. The funds for the loan come primarily from the federal governemnt, but your school will contribute funds as well.

Eligibility for a Federal Perkins Loan is determined based on your "Expected Family Contribution" (EFC). This is a calculation of how much money the government believes your family is able to pay. To find out what your EFC is, you need to begin the application process by submitting a FAFSA form. About 6 weeks after you submit this form (or 2-3 weeks if you submit it by the web) you will get a "Student Aid Report" that will show you your eligibility.

The maximum loan you can receive for one year is $4000, with a maximum total of $20,000 for your entire time as an undergraduate student. For graduate students, the maximum amount per year is $6000, with a maximum total of $40,000 (including the amount you received as an undergraduate). Loan amounts are paid to you directly by the school, or credited to your account.

There are no fees with Federal Perkins Loans (other than the interest), but you will be charged late fees if you miss a payment, and collection costs if they are required to obtain payments from you. You do not need to begin repaying the loan until 9 months after you graduate, or 9 months after you begin attending school less than half time. This period is used as a grace period, in order to allow you to find employment and be in a postion to begin repayments. Payback of the loan is done over a 10 year period.

Interest paid on a Federal Perkins Loan can be used as a deduction on your federal tax return. The maximum tax deduction allowed per year is $2500. For more information, refer to the IRS web site as http://www.irs.gov.

Your school is required to notify you in writing of each deposit to your account (or to send you a check). You may cancel the loan at any time by providing a notice in writing to your school. Once you provide such notice, you will receive no more funds, and if you provide such notice within 14 days of the last deposit to your account (or the date of the last check), you may return that last deposit (or check). All other funds you may have received prior to that, however, still constitute a loan and still need to be repaid.

Source: The Student Guide, published by the US Department of Education. Note that federal financial aid programs are subject to change. Check with the school(s) of your choice to get the very latest information.