What Was a Perkins Loan?

A Perkins loan was a type of educational financial aid provided through the U.S. government's Perkins Loan Program. The federal program provided low-interest loans to undergraduate and graduate students who demonstrated exceptional financial need. This need was determined both by the educational institution's own guidelines and by the information provided by the student on the Free Application for Federal Student Aid (FAFSA) form used to apply for all government loans. Begun in 1958, the Perkins Loan Program was providing loans to about 500,000 students and 1,400 schools when it expired in September 2017.

The Perkins Loan Program expired at the end of September 2017.

How a Perkins Loan Worked

Perkins loans were actually granted through the financial aid office of the educational institution the student was attending. The loan was paid either directly to the student (usually by a check) or the loan amount was applied towards institutional charges and qualified educational expenses.

Technically, Perkins loans were only subsidized by the government—that is, the government paid the interest that accrued on them while the student was pursuing a degree. The school was the actual lender, and therefore the loan was repaid to the school.

The Perkins Loan Program had borrowing limits depending on when the student applied, the student's financial need and the school's funding level. Students could 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 Perkins loans. The interest rate for Federal Perkins Loans was 5%. 

Other than interest, there were no other fees or charges associated with a Perkins loan. But like all loans, if a borrower missed a payment, or payment was sent in late, they would most likely have been charged a late fee, or collection costs, depending on the lender's educational institution issuing the loan. 

Repayment on the loan began nine months after the student graduated, left school, or dropped below half-time status.

Perkins Loans vs. Other Federal Student Loans

Although the Perkins Loan Program was allowed to expire, the U.S. Department of Education continues to help students finance higher education through the William D. Ford Federal Direct Loan Program. Unlike the Perkins program, the government itself is the lender in this case; hence the name "direct loans."

Four types of federal direct loans are available as of February 2019:

  • Direct Subsidized Loans are made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school. The size of the loan increases with each collegiate year, starting at $3,500 and rising to $5,500 for dependent students.
  • Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need. The size of the loan increases with each collegiate year, starting at $5,500 and rising to $7,500 for dependent students. The annual range is $9,500 to $12,500 for independent undergraduate students; graduate students can borrow up to $20,500.
  • Direct PLUS Loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other types of financial aid. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an adverse credit history must meet additional requirements to qualify.
  • Direct Consolidation Loans allow borrowers to combine all of their eligible federal student loans into a single loan with a single loan servicer.