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Do Not Consolidate Perkins Loan
By Anita Cherry
Federal Perkins Loan formerly called the National Defense and National Direct Student Loan has s a low-interest rate of (5 percent).
Perkins loans are for undergraduate and graduate students with "exceptional" financial need. The loan is a Financial Aid from the US Department of Education. Your school contributes a share to this loan. The lender is your school. You should pay it back to the school and not to the government. Perkins loans are awarded depending on the applicants needs and also on the availability of the funds.
Perkins Student loans are awarded to persons who apply for financial assistance to attend the university. Your school will either pay the loan amount to you directly either by check or credit to your account. Usually you'll get the loan in two installments during the academic year.

The amount you can borrow depends on the schools funding level and on the level of your need. For an undergraduate it is usually $4000 for each year and the total amount up to $20,000. For graduate or for professional study it is usually $6000 with a total of $40,000 which includes Perkins loan you borrowed as an undergraduate.

Eligibility criteria for Perkins loans

•You should be enrolled in an eligible school at least during half time of the program.
•You should be an US citizen, permanent resident or eligible person with non citizen status.
•You should have satisfactory academic improvement.
•You should not have any unresolved defaults or overpayments owed on Title IV educational loans and grants.
•To get this loan you must complete the Free Application for Federal Student Aid (FAFSA).
•You should start repayment nine months after you leave school or graduate.
•Your monthly payment will depend on the total amount that you borrowed and the period of the amount.
•If you qualify as a low income individual during the repayment period, the repayment period can be extended for up to an additional 10 years and adjusted according to your income. It has low interest rate and a lot of flexibility in terms of repayment. There is not prepayment penalty for paying Perkins loan ahead of schedule. As against a Stafford loan Perkins loan do not have any fees and have a longer grace period. Perkins loan cannot be bought by another lender but can be included in a consolidation loan. They are not combined but are repaid to each school separately.

Should you consolidate a federally backed Perkins loans?
My answer to this question is an emphatic no. Some lenders would advice you to consolidate because it would enable them to make more money if you consolidate a higher loan balance with them and include the Perkins loan. For Perkins loan the government pays the interest and if you consolidate a Perkins loan you will loose that subsidy. The interest rate on Perkins loan is fixed at 5% and it won't go up by July 1 st, when the other loans like Stafford loans rise. Perkins loan gives


a nine month grace period after they graduate and not six months like some of the other loans and you will forfeit a longer grace period.
Many Perkins loan can be cancelled under various conditions including if the student later becomes a teacher at an elementary or high school that serves low-income families. Perkins loan can be cancelled up to 100% in the event of the loan holder's death .If you become permanently and totally disabled after you receive this loan, and submit a properly documented written request, the school will cancel the entire loan. You can also cancel a part or full loan in many conditions like if you are a full time law enforcement officer for an eligible local, State or Federal law enforcement agency; or a full time corrections officer for an eligible local, State or Federal corrections agency, A full time nurse providing health care services, or a full time medical technician providing health care services, A full time employee of an eligible public or private nonprofit child or family service agency who is providing or supervising the provision of services to high-risk children who are from low-income communities and the families of such children.

Among the entire educational loans available Perkins loan is considered to be the best.


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This page was updated on Nov 2009 and is Copyright © 2003 by Global Com Consulting Inc.