What Is a Perkins Loan?

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Definition

A Perkins loan is a type of a low-interest federal student loan designed to help undergraduate and graduate students with financial needs pay for college. While Perkins loans were discontinued in 2017, some borrowers may have outstanding debt.

Key Takeaways

The Perkins loan program was created to help students who demonstrated financial need pay for college.
It was a low-interest federal student loan program with a fixed 5% interest rate.
The Perkins loan program was discontinued in September 2017. While new loans aren’t being made, some borrowers may have outstanding balances.
Borrowers with Perkins loans may be eligible for student loan forgiveness announced by President Biden in 2022, but only if their loans are held by the U.S. Department of Education.

How a Perkins Loan Works

Perkins loans are low-interest loans that were awarded to undergraduate and graduate students based on financial need. The loans are funded by the federal government and were disbursed to the school, which then gave the money to the student.

Note

Under Biden’s loan forgiveness plan, Perkins loans are eligible for forgiveness only if they’re held by the U.S. Department of Education.

The Perkins loan program was created in 1958 when Congress saw a strong need for a more educated workforce during the Cold War. The Perkins loan program ended in September 2017, but many borrowers still have outstanding loans.

The interest rate on a Perkins loan is fixed at 5%, and there is a nine-month grace period after you graduate or leave school before repayment begins. You have up to 10 years to repay the loan in full.

Note

Unlike other types of loans, Perkins loans also offer cancellation benefits. If you work in certain public service professions—such as teaching, nursing, or law enforcement—you may be eligible to have all or part of your loan forgiven. Also, if you become disabled or die, your loan debt will be discharged and your family will not be responsible for repayment.

Example of a Perkins Loan

Let’s say Perkins loans were still around today and you attended a school that had a Perkins loan program. If you met the financial need requirements, you could have received per year up to $5,500 as an undergraduate or up to $8,000 as a graduate student. The exact amount would have depended on your level of need, the other types of aid you were receiving, and how much money your school had to give out.

How To Get a Perkins Loan

While you can no longer get new Perkins loans, borrowers seeking them in the past needed to demonstrate financial need and had to be enrolled in an undergraduate or graduate degree program at an eligible school. Eligible schools included public and private colleges and universities that participated in the Perkins loan program.

Eligible borrowers needed to be enrolled in at least half-time status to receive a Perkins loan. The maximum loan amount was $5,500 a year for undergraduate students and $8,000 a year for graduate students.

Your school's financial aid office would determine your eligibility for a Perkins Loan and how much you could borrow. It would ultimately depend on your financial need and how much award money the school had available to give out.

Perkins Loan vs. Pell Grant

Both Perkins loans and Pell grants are decided based on your Expected Family Contribution (EFC), which is determined by the FAFSA form you fill out when applying for financial aid each year. Your EFC is the amount your family can reasonably be expected to contribute toward your education costs based on their income and assets.

Students with higher EFCs will generally not be eligible for either form of aid, while those with lower EFCs may qualify for both forms of aid depending on the cost of attendance at their chosen school.

Note

The biggest difference between these two types of aid is that Perkins loans must be paid back—unless you qualify for cancellation—while Pell grants are gifted money that doesn’t have to be paid back.

Lastly, federal Pell grants are only available to undergraduate students, while Perkins loans were available to both undergraduate and graduate students as long as they met other eligibility requirements, such as being enrolled at least half-time each semester.

Perkins Loan	Pell Grant
For low-income students with demonstrated need	For low-income students with demonstrated need
Both undergraduate and graduate students are eligible	Only undergraduate students are eligible
Must be paid back	Don’t have to be paid back

Alternatives to a Perkins Loan

Although the Perkins loan program is no longer available, there still are a number of options for students who need financial assistance to pay for college.

Stafford Loans

One option is to take out a federal Stafford loan. Stafford loans have fixed interest rates, come in subsidized and unsubsidized options, and offer a number of repayment options, making them ideal choices for many students.

Direct PLUS Loans

If you need financial help for graduate school or a professional program, a Direct PLUS loan could be worth looking into. It’s a type of direct loan, meaning it’s offered by the federal government.

Grants and Scholarships

Another option is to apply for a grant or scholarship. There are a number of organizations that offer grants and scholarships specifically for students who are struggling to pay for college.

Frequently Asked Questions (FAQs)

Do I have to pay back a Perkins loan?

All borrowers are required to repay their Perkins loans in full unless they qualify for student loan forgiveness or cancellation. Interest generally accrues on your unpaid balance from the date your first payment is due until your loan is paid in full.

What is the difference between a Perkins and Stafford loan?

The most significant difference between these two popular federal student loan programs is that Stafford loans come in both subsidized and unsubsidized varieties, and must be repaid beginning six months after you graduate or drop below half-time enrollment. In comparison, all Perkins loans were subsidized and had a nine-month grace period before repayment kicked in. Lastly, the Perkins loan program has been discontinued, while the Stafford loan program is still in effect.

How do I know if I have a Perkins loan?

If any of your loans have the word “Perkins” in the title, then it’s a Perkins loan. Other types of Perkins loans went by names including National Direct Student Loan (NDSL) and National Defense Student Loan (Defense Loan). If you’re not sure, log into your StudentAid.gov account to view your federal student loans. You can also call your lenders and ask what types of loans you have.

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Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

Federal Student Aid. “Chapter 3: Participating in the Perkins Loan Program.”
Federal Student Aid. “One-Time Federal Student Loan Debt Relief.”
Congressman Lee Zeldin. “The Perkins Loan Program: A Model of Affordable Higher Education Financing.”
Benefits.Gov. “Financial Aid Programs.”
Federal Student Aid. “Perkins Loan Cancellation and Discharge.”
Federal Student Aid. “Federal Pell Grants.”
Consumer Financial Protection Bureau. “What Is a Stafford Loan?”
Federal Student Aid. “Grad PLUS Loans.”
GovLoans.Gov. “Stafford Loans for Students.”