Perkins Loan Forgiveness Could Wipe Away Some (or All) of Your Debt

 May 20, 2020
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Perkins Loan forgiveness
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Imagine having some — or even all — of your student loans wiped away over the next four to five years. With Federal Perkins Loan forgiveness, it’s possible.

If you have a Perkins Loan from before the program expired on Sept. 30, 2017, then you may be able to access this opportunity and have your balance forgiven over a period of five years, or get partial forgiveness in even less time. Here are the details:

Perkins Loan forgiveness occurs over time

The Federal Perkins Loan cancellation program is not a fit for everyone because not all Perkins Loans are eligible for forgiveness. Even if you do meet all of the eligibility requirements, cancellation isn’t automatic.

Here are four facts to keep in mind:

  • You must have taken out a loan before the program expired on Sept. 30, 2017.
  • You must request forgiveness from your school or your school’s servicer.
  • Your loan can’t be canceled the same year it was disbursed.
  • You must continue to make loan payments until your request has been processed.

Another important note: Perkins Loan forgiveness is applied for on an annual basis and awarded in increments over four or five years. The path to full and partial cancellation is gradual.

Full cancellation: Under many cases, your original principal loan balance will be forgiven according to the following schedule. Note that for each year you qualify for forgiveness, any interest you accrued during that year will also be forgiven.

Year Forgiveness
1 15%, plus interest
2 15%, plus interest
3 20%, plus interest
4 20%, plus interest
5 30%, plus interest
Total 100%

Partial cancellation: One type of eligibility for Perkins Loan forgiveness cancels up to 70% of the loan amount for AmeriCorps VISTA or Peace Corp volunteers.

Year Forgiveness
1 15%, plus interest
2 15%, plus interest
3 20%, plus interest
4 20%, plus interest
Total 70%

On the plus side, you can apply for pre-cancellation deferment if you’re not yet eligible but soon will be. This is helpful for new graduates who are short of 12 months of experience in an eligible profession. It keeps them from making payments on their Perkins Loans until they can start claiming forgiveness.

Perkins Loan forgiveness is a match for certain jobs and circumstances

Perkins Loan forgiveness is awarded to borrowers for one of two reasons: Their professional calling entitles them to cancellation, or other special circumstances are at work.

The following 13 vocations are eligible for loan cancellation.

  • VISTA or Peace Corps volunteer: up to 70%
  • Firefighter: up to 100%
  • Law enforcement or corrections officer: up to 100%
  • Nurse or medical technician: up to 100%
  • Librarian with a Master’s degree in a Title I school or public library serving Title I schools: up to 100%
  • Attorney in a federal public or community defender organization: up to 100%
  • Employee of a nonprofit child- or family-services agency: up to 100%
  • Employee in a Head Start educational program: up to 100%
  • Staff member in a state-regulated child care program: up to 100%
  • Provider of early intervention services for people with disabilities: up to 100%
  • Special education teacher in a public school or educational service agency: up to 100%
  • Full-time teacher in certain subjects in a teacher shortage area or educational service agency serving low-income students: up to 100%
  • Faculty member at a tribal college or university: up to 100%

A borrower working in a forgiveness-eligible profession will need to gain a year of professional experience before applying. A teacher would need to complete one academic year before filling out cancellation forms.

Certain professions, such as firefighter and librarian, were added to this list in August 2008. But your pre-2008 work experience in the field won’t make you eligible for the Federal Perkins Loan cancellation program.

Depending on your job, there might be more requirements. For example, teachers might need to teach a certain academic subject to be eligible.

There are other scenarios in which you could become eligible for Perkins Loans cancellation:

  • Permanent disability or death of the borrower
  • Bankruptcy, if you can prove undue hardship
  • School closing before you completed your program
  • Service in armed forces in a hostile fire or imminent danger area

For any of these scenarios, you’ll need to include supporting documentation. In the case of a borrower’s death, for example, a relative would need to send along a copy of a death certificate to finalize loan forgiveness.

No matter the reason you’re applying for Perkins Loan cancellation, it’s wise to check in with your school or your school’s loan servicer periodically. Then you can ensure that any changes in your situation or profession don’t affect your eligibility.

A teacher who is transitioning from leading math classes to history classes, for example, might find themselves no longer eligible for this program.

Eligibility can also be lost if you refinance or consolidate your Perkins Loans, so be careful when considering these options. Even a lower interest rate from refinancing could pale in comparison to the benefits of the Federal Perkins Loan cancellation program.

How to apply for Perkins Loan forgiveness

If you default on your Perkins Loan because you neglected to turn in your loan cancellation request on time, you could still have it canceled.

To file your forms on time, keep the lines of communication open with your school or your school’s loan servicer. Not sure where to start? Ask your school’s financial aid office.

In many cases, the school handles its applications on campus.

If your school outsources its loans to a servicer, you’ll need to track it down. The look of each servicer’s one-page application form varies, but they ask for the same basic information.

Here are three examples of Federal Perkins Loan cancellation forms:

You could also be directed to a loan servicer that allows you to search for your particular school’s forms.

Regardless of where you apply, make sure to select the form that relates to your specific profession. Generally, you’ll need to include proof that you’re licensed or certified to work in your field. You’ll also need the signature of your employer.

There will also be forms specific to personal situations, such as attending a school that closed before you had the opportunity to graduate.

In the unfortunate event that you need to apply for loan forgiveness due to disability, you can complete your application at DisabilityDischarge.com.

The website, run by Nelnet via the Federal Student Aid office, directs you to print and mail your form, along with supporting documentation from your physician or a government agency to the Department of Education.

Federal Student Aid

Why the Federal Perkins Loan cancellation program may be worth it

Maybe you’re not thrilled about working in a forgiveness-eligible profession right out of college. But don’t rule it out.

Think of the benefits of sticking with that job. You can gain valuable experience toward your next job while also working toward loan forgiveness, one year at a time.

A teacher or librarian who has their eyes fixed on working at a prestigious private school, for example, might be better served by starting out at a public school in a low-income neighborhood.

Whether you’re a potential fit for Perkins Loan forgiveness, see if you’re eligible for other forms of relief, including other student loan forgiveness programs.

Christina Majaski contributed to this report.

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Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount

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2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Student Loan Refinance Interest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Let us know if you have any questions and feel free to reach out directly to our team.


3 Important Disclosures for SoFi.

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Fixed rates range from 3.49% APR to 7.99% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.


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Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

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You can choose between fixed and variable rates. Fixed interest rates are 2.99% – 8.24% APR (2.74% – 7.99% APR with Auto Pay discount). Starting variable interest rates are 1.99% APR to 8.24% APR (1.74% – 7.99% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.


6 Important Disclosures for LendKey.

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Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 5/17/2022 student loan refinancing rates range from 2.05% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.93% Fixed APR with AutoPay.


7 Important Disclosures for PenFed.

PenFed Disclosures

Fixed Rate Loan Terms: 5 years/60 monthly payments, 8 years/96 monthly payments, 12 years/144 monthly payments or 15 years/180 monthly payments. Annual Percentage Rate is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed rates range from 3.29% to 5.43% APR. Rates are subject to change without notice. Fixed APR: Fixed rates will not change during the term. This rate is expressed as an APR. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.


8 Important Disclosures for CitizensBank.

CitizensBank Disclosures

Education Refinance Loan Rate Disclosure:  Variable interest rates range from 1.99%-8.38% (1.99%-8.38% APR). Fixed  interest rates range from 2.99%-8.63% (2.99%-8.63% APR).

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ERL Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of May 1, 2022, the 30-day average SOFR index is 0.29%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the prime rate plus 9.00%.

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Federal Loan vs. Private Loan Benefits:  Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer. Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
 
Citizens Student Loan Eligibility: : Applicants must be enrolled at least half-time in a degree-granting program at an eligible institution.
 
Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DC, DE, FL, MA, MD, MI, NH, NJ, NY, OH, PA, RI, VA, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
 
Automatic Payment Discount Disclosure:Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount. Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on  their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan  servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to  successfully withdraw the automatic deductions from the designated account three or more times within any 12-month  period, the borrower will no longer be eligible for this discount.