There are a lot of great federal aid options out there, for every type of student. The Perkins loan may just be one of many types of federal loans, but it comes with a lot of perks that make it worth an in-depth look. I'll go through all the information you need about this loan program, before telling you how to get your own Perkins loan.
Like the Direct Subsidized and Direct Unsubsidized programs, Perkins are government-backed, low-interest loans that are meant to help students pay for school. Certain federal aid programs don't require students to demonstrate financial need as an eligibility requirement, like Direct Unsubsidized loans. The Perkins is meant for students who demonstrate exceptional financial need, however; as such, there are some extra perks built into the loans.
Before I talk about some of the benefits of the Perkins loans, I'll talk briefly about how loans usually work. Then, I'll go into more Perkins loans details, and explain how this loan program differs from the norm.
When you take out a loan, by definition, you're borrowing a sum of money (a principle) from a person or institution (a lender), with the promise that you'll pay this money back at a later date. You'll likely also agree to repay extra money in addition to the principle (interest), over a certain time period (the length of the loan).
People usually pay back their student loans by making monthly payments after they graduate. A part of the payment covers accrued (accumulated) interest, whereas the rest of it goes towards paying back the principle.
Interest accrues on your loan at a certain rate, usually starting when the loan amount is given out to you (disbursed). The higher your interest rate, and the longer it takes you to pay back your loan, the more interest will accrue. Standard repayment terms for federal student loans (unless the loans are quite small) are 120 monthly payments, or 10 years.
Finally, interest can also capitalize, or be added to your principle amount. What this ultimately means is that interest is now accruing on a new, larger principle; the bigger the principle, the more interest will accrue. The rate of capitalization depends on your loan, but some student loans capitalize at graduation.
As you might have deduced by now, one method of saving money on your loans is to minimize the amount of interest that accrues and/or capitalizes. You'll see in the next section why Perkins loans make this process a little bit easier on student borrowers.
Interest may just come to pennies a day, but it can add up to a significant amount over time.
In the previous section, I noted that interest usually starts accruing when the loan is disbursed. If I take out a loan my freshman fall, interest will accrue through all 4 years of college. When I graduate, I'll owe my principle + 4 years of interest - and depending on the type of loan, this interest may capitalize when I graduate.
With Federal Perkins loans, you won't see any interest accrue while you're in school, during grace period, or during a period of deferment. The grace period for a Perkins loan is also a bit longer than the standard: 9 months vs. 6 months, which means another 3 months of no interest post-graduation.
Here's an example of how loan repayment might play out. In this example, I have both a Perkins loan and an unsubsidized loan, both disbursed at the beginning of my freshman year. Even though the interest rate is higher for the Perkins loan, you end up paying out a lot more for the unsubsidized loan:
Perkins Loan
Unsubsidized Loan
Interest Rate
