Perkins Loan Repayment: How to Repay These Federal Loans

 April 8, 2020
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Federal Perkins Loan

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Perkins loans, a type of federal student loan based on extreme financial need, are no longer available. The program ended in September 2017, and federal law required colleges to disburse the last Perkins loans by July 2018. About 1,700 colleges participated in the program.

If you were an undergraduate or graduate who took out Perkins loans before they were discontinued, you’re still required to repay them. But because of low (and fixed) interest rates and lots of forgiveness options, there are many ways to make Perkins loans repayment more manageable.

Here’s what you need to know:

Basics of Perkins loan repayment

While the Perkins loan program — formerly known as national defense student loans or national direct student loans — has expired for new borrowers, anyone who took out these loans before it ended is still responsible for making payments. But the program was a relatively generous one, with many ways to ease the burden of loan bills. Here’s how Perkins loan repayment works:

  • The repayment term for Perkins loans is 10 years. The maximum loan amount was $5,500 a year for undergraduates and $8,000 a year for graduate students, though the amount you received was based on financial need and availability.
  • The grace period for borrowers who graduated, left school or dropped below half time was nine months, compared with six months for other types of federal student loans. That means you had more time to prepare for repayment and fit loan bills into your budget.
  • Perkins loans had no origination fees, unlike direct loans and PLUS loans from the federal government. The origination fee on other loan types generally comes out of the loan disbursement, meaning you see less money than you originally borrowed. Perkins loans let you keep the total principal balance without having to pay extra fees.
  • Interest rates are fixed, meaning they don’t change over time. They’re 5%, which is lower than some other federal loan types.
  • Payments may be made monthly or quarterly. There aren’t prepayment penalties for paying off your loan early.
  • While funding for Perkins loans comes from the government, your school or the school’s loan servicer collects student loan payments and helps you navigate repayment. That may make it easier for you to get help or communicate about your loans since you can call the school’s financial aid office for guidance.

Options for handling Perkins loan repayment

One of your main priorities is to make Perkins loan payments on time, every time, to protect your credit score. Missed or late payments will have a negative impact on your credit, which can prevent you from taking out other loans in the future at favorable rates. If you’d like to change your repayment plan or amount, check your options below.

Option Key Fact
Change your repayment plan Not all plans, such as income-driven repayment, are available to Perkins loan borrowers.
Delay your payment The government pays the interest charged during a qualifying deferment, so interest won’t accrue.
Pursue cancellation If you work in a qualifying public service job, you could see up to 100% of your balance canceled.
Weigh consolidation and refinancing Before you yield exclusive Perkins loans benefits by consolidating or refinancing, make sure you’re confident you won’t use them.

Change your repayment plan

As a federal Perkins loan borrower, you don’t have direct access to income-driven repayment plans if you need a lower monthly payment. You’ll need to speak with your school to learn about repayment options for Perkins loans.

But you can consolidate Perkins loans into a single direct consolidation loan to qualify for income-driven repayment if you need it. The catch is that you’ll give up unique Perkins loan benefits, such as loan cancellation for those in certain public service jobs (more on available cancellation programs later).

Double-check whether you’re better off keeping your Perkins loans as they are before consolidating them. If you qualify for Perkins loan cancellation, not consolidating Perkins loans may mean getting forgiveness on your loans within five years, even if you can’t get an income-driven payment in the meantime. For others who wouldn’t qualify for Perkins loans cancellation, consolidating to get a more flexible repayment schedule might be worth it.

Delay your payment

When you defer Perkins loans, you put payments on pause during a period when you’re unable to make them. You can defer Perkins loans for a number of reasons, including unemployment, economic hardship, cancer treatment and graduate fellowships. Contact your school’s financial aid office to discuss your options.

Interest won’t accrue during Perkins loan deferment. You may also receive a six-month post-deferment grace period, during which you’re not required to make payments.

Pursue cancellation

Perkins loans come with several cancellation options, particularly for borrowers who work in public service fields. Cancellation happens incrementally, in certain percentages each year of repayment. Borrowers in these professions — and more — can qualify for up to 100% loan cancellation within five years:

  • Teachers
  • Nurses or medical technicians
  • Firefighters
  • Speech pathologists with master’s degrees working at certain eligible schools
  • Librarians with master’s degrees working at certain eligible schools
  • Law enforcement or corrections officers
  • Public defenders

Other professions are eligible for reduced amount of loan cancellation, or cancellation after a longer period of time. If you don’t qualify, look into other loan forgiveness options, including the federal Public Service Loan Forgiveness program and loan repayment assistance from employers, states and other sources.

Your Perkins loan may also be discharged if you die, become totally and permanently disabled, declare bankruptcy or attend a school that closed. It’s also available for veterans with a service-connected disability and spouses of 9/11 attack victims.

Weigh consolidation and refinancing

Consolidating Perkins loans into a direct consolidation loan will mean giving up certain benefits, such as subsidized interest during loan deferment and access to Perkins loan cancellation. But if you need to switch to income-driven repayment, or if Public Service Loan Forgiveness is a better option for you than Perkins loan cancellation, consolidating might be best.

If your loans are in default — meaning you’re more than 270 days behind on payments — you can opt for rehabilitation through the federal government to bring them current again. You’ll make nine on-time payments within 10 months and — in return — the default will come off your credit report (though late payments will still appear). You can only rehabilitate your loans once.

For borrowers who aren’t having trouble affording their Perkins loans, private student loan refinancing is an option. If your credit score and income qualify you, a private lender may replace your Perkins loans with a private loan at a lower interest rate. Since Perkins loans already come with low rates and many borrower protections, the potential benefits of refinancing Perkins loans could be limited.

Perkins loan repayment FAQ

Do you have to pay back federal Perkins loans even though the program ended? Yes. Borrowers with existing Perkins loans must still repay them.

Repayment on Perkins loans begins when exactly? You must have started repaying Perkins loans nine months after graduating or leaving school.

What is the federal Perkins loan website? The federal government maintains a short webpage about Perkins loans, but your school’s financial aid website likely has more information.

Where can I find Perkins loan customer service? Contact your school’s financial aid office for questions relating to your Perkins loan.

Can Perkins loans be deferred? Yes, under several circumstances, including unemployment and financial hardship. Get in touch with your school to find out how to defer your Perkins loans.

Can Perkins loans be forgiven? Yes, if you meet certain requirements, such as working in an eligible field.

What will consolidating my Perkins loan do? Consolidating your Perkins loan into a direct consolidation loan will disqualify you from certain Perkins loan benefits, such as cancellation of your debt after five years of payments if you work in certain jobs. But you’ll gain access to other repayment programs, such as income-driven repayment. Refinancing Perkins loans into a private student loan will mean losing the ability to take advantage of any federal loan repayment benefits.

Andrew Pentis contributed to this report.

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College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

  1. As certified by your school and less any other financial aid you might receive. Minimum $1,000.
  2. Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
  3. This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

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

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Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.47% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 2.80% APR to 11.69% 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. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

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1. Loan Example:

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  • Example: $10,000 IBR Loan with a 7% gross income payment percentage for a Senior student making $65,000 annually throughout the life of the loan.
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About this example

The initial payment schedule is set upon receiving final terms and upon confirmation by your school of the loan amount. You may repay this loan at any time by paying an effective APR of 23%. The maximum amount you will pay is $22,500 (not including Late Fees and Returned Check Fees, if any). The maximum number of regularly scheduled payments you will make is 60. You will not pay more than 23% APR. No payment is required if your gross earned income is below $30,000 annually or if you lose your job and cannot find employment.

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Citizens Bank Disclosures

  • 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 September 1, 2022, the 30-day average SOFR index is 2.23%. 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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Funding U Disclosures

Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.