The Federal Perkins Loan program, which provided low-interest loans to college students with an exceptional financial need, expired on September 30. Members of the U.S. Senate did introduce a bill to extend the program. However, their efforts were blocked on the Senate floor.
Many low-income students depend on a Federal Perkins Loan to cover educational expenses. Without it, students may be forced to turn to more expensive financial aid options.
What are Perkins Loans?
Perkins Loans are available to low-income undergraduate, graduate, and professional students. The loans were designed to fill the gap for students to cover their total cost of attendance wherever financial aid fell short.
Attributes of Perkins Loans include:
- A lower interest rate — just 5.00% — compared to other federal student loans.
- Nine-month grace periods. These are longer than other federal student loans which typically have six-month grace periods.
- Loan amounts up to $5,500 a year for undergraduates, or $27,500 throughout their whole college careers.
- Loan amounts up to $8,000 per year for graduate or professional students, or up to $60,000, which includes amounts borrowed as an undergraduate.
The funds behind the Federal Perkins Loan initiative were limited, so competition for the loans was stiff. Not everyone who was eligible for a Perkins Loan received one.
Perkins Loans do differ significantly from other forms of aid. For instance:
- Perkins Loans have different repayment options and loan forgiveness opportunities than Direct Loans.
- Borrowers make payments on Perkins Loans directly to their college, rather than a federal loan servicer.
Why is the Federal Perkins Loan program ending?
The Perkins Loan program was scheduled to end September 30, 2017. However, there was bipartisan support to extend the program through 2019.
Democratic Senator Tammy Baldwin and Republican Senator Rob Portman introduced the bill to keep the program in place. The Senators attempted to pass the bill via a faster process that required unanimous consent.
However, Republican Senator Lamar Alexander objected, killing the bill.
“It is time for our country, through legislation by this Congress and attempted to pass it through an expedited process requiring unanimous consent, to move on to a simplified federal student aid program, that has only one federal loan for students, one federal grant for students and one work-study program for students,” said Alexander on the Senate floor.
Alexander and other members of the Senate stated that the Perkins Loan program added to an already overly complex federal loan system.
What happens now?
The expiration of the Federal Perkins Loan program might sound dire. However, it doesn’t necessarily mean that the program is gone for good.
Even though Alexander objected to the bill, he said he and Baldwin would work together to come up a long-term solution to make college more affordable.
It is likely that politicians on both sides of the aisle will work to introduce another bill that would reinstate and extend the program. But, they have not yet established a timeline. It could be weeks or even months before they introduce a new bill.
Alternatives to a Federal Perkins Loan
If you are a current student and rely on Federal Perkins Loans to cover your education costs, you don’t need to panic. Senator Alexander said that all students who have a Perkins Loan would keep it for the rest of the school year.
If you’re a new student or don’t already have a Perkins Loan, make sure you submit your Free Application for Federal Student Aid to access other federal grants and federal student loan options.
Finally, if you exhaust all federal student aid options and the Perkins Loan program is still unavailable, you can take out a small private student loan. Although private student loans tend to have higher interest rates, they can give you the money you need to stay in school. Keep in mind, private student loans do not have the same benefits as federal student loans.
Need a student loan?Here are our top student loan lenders of 2019!
|1 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
2 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust 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.
Information advertised valid as of 2/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.23% – 13.23%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.50% – 10.11%*,4||Undergraduate and Graduate|
|4.25% – 13.25%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.42%8||Undergraduate, Graduate, and Parents|