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Perkins Loans

The Perkins Loan is the best student loan available in the United States. It is a campus-based loan program that provides money to undergraduate and graduate students with exceptional financial need. Under this loan plan, the school itself serves as the lender using a limited amount of money provided by the federal government. The Perkins Loan is attractive to borrowers in another way because it provides somewhat better cancellation provisions than the Stafford or PLUS loan programs.

Unlike the Stafford Loan program, in which the loan may come from a bank or other lending institution or from the student’s school, a Perkins Loan always comes from the institution of higher learning, and must be paid back to the school.

Interest on Perkins Loans is paid by the federal government during the time when the borrower is enrolled in school. The borrower has a grace period of nine months after leaving school before payment must be made on the loan. The Perkins Loan program has no origination or guarantee fees; the interest rate is 5 percent. Borrowers are given ten years to repay the loan.

Perkins Loan Limits

The amount of Perkins Loan a specific borrower receives is set by the school’s financial aid office. There is a limit to the amount of money that can be borrowed for any one year: $3,000 annually for undergraduate students and $5,000 annually for graduate students. In any case, the borrower may receive no more than $15,000 in undergraduate loans and no more than $30,000 for undergraduate and graduate loans combined.

Expanded Lending Option

Some schools may take part in take part in the Department of Education’s Expanded Lending Option (ELO). Such institutions may offer higher loan limits for Perkins Loans. Schools that are in the ELO program may have a default rate no higher than 15 percent. The loan limits for this program are $4,000 annually for undergraduate students and $6,000 annually for graduate students. The cumulative limits increased as well, so that the borrower may receive a total of $20,000 for loans made during the undergraduate years and $40,000 for undergraduate and graduate loans combined.