DEFINITION of Perkins Loan
The Perkins Loan Program provides low-interest student loans to undergraduate and graduate students who demonstrate exceptional financial need. The Perkins Loan is made through the student's school's financial aid office. The school is the lender, and therefore the loan is repaid to the school. The loan is paid either directly to the student (usually by a check) or the loan amount is applied towards school charges and expenses.
BREAKING DOWN Perkins Loan
The Federal Perkins Loan Program has borrowing limits depending on when the student applies, the student's financial need and the school's funding level. Students can borrow up to $5,500 per year for each year of undergraduate study - up to $27,500 - and $8,000 for each year of graduate or professional study - up to $60,000, including any undergraduate Federal Perkins Loans. The interest rate for Federal Perkins Loans is 5 percent.
Other than interest, there are no other fees or charges associated with a Perkins loan, but like all loans, if you miss a payment, or a payment is sent in late, you will most likely be charged a late fee, or collection costs, depending on the lender's educational institution issuing the loan.
Repayment on the loan begins nine months after the student graduates, leaves school or drops below half-time status. Not all schools offer Perkins loans so it is important to ask ahead of time about the possibility of applying for this type of loan.