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Financing a Perkins Loan Consolidation
Get Lower Rates on Your Federal Loans
Perkins Loans are federally-guaranteed student loans that are issued jointly, by the U.S. government and individual financial aid departments at colleges and universities. The low-interest, fixed-rate loans are in-place to provide supplemental funding for students with extraordinary financial aid needs for college.
Federal programs like Pell Grants and William D. Ford Federal Direct Loans provide general assistance for low and middle-income applicants. Select, economically disadvantaged students are eligible for additional loans through the Perkins program. The aid is designed to increase college access for the neediest groups of students. Perkins Loans fill gaps left after other financial aid is expended. Funding is limited, so your best bets for securing a loan are to file early, and meet federal financial aid eligibility requirements.
Over the course of a student’s post-secondary education, he or she may enter into multiple loan arrangements, with private lenders, as well as the Department of Education. Perkins borrowers may have multiple outstanding loans, but many students also carry federal Stafford Loans, and others issued through the Direct Loan Program. Students with multiple federal loans are increasingly concerned about how they will meet repayment obligations after graduation.
The good news for college students, and graduates carrying multiple individual student loans, is that the Department of Education operates an established program allowing more than one loan to be bundled together under a single, renegotiated repayment contract. Loan Consolidation applies to outstanding federal debt, whether Perkins, Stafford or Federal Direct Loans.
What you need to know about consolidating your Perkins Loan
Perkins Loans stand apart, in some ways, from the other federal student loan programs. Perkins Loans feature special benefits and perks that are not always recommended for consolidation.
The advantages realized by student who participate in the Federal Direct Consolidation Loan Program are several. By reorganizing loans under a single repayment umbrella, some of the loans may shift from the higher interest terms they originally carried, to more favorable rates offered through consolidation. It is important to recognize your current rates, and compare them to potentially lower consolidation options. If your Perkins Loans already carry low rates, it may not benefit you to consolidate.
Another consolidation benefit realized by students having difficulty keeping up with student loan payments, is restructured repayment. By extending the term of student loan repayment, or selecting an individual payment plan that matches income levels and ability to pay, borrowers who participate in the Consolidation Program sometimes have lower monthly payments on the new loans. It should be noted, however, that extending repayment terms also adds more total interest to the loan, over its entire lifetime.
The number one drawback to consolidating a Perkins Loan is the loss of loan cancellation benefits. If you are, or will be, a public school teacher, or if you teach math, science or special education subjects, you may qualify for Perkins loan cancellation. When Perkins loans are consolidated alongside other outstanding federal loans, the cancellation benefit is eliminated.
Consolidation Through the Direct Federal Loan Program
Perkins Loans may be consolidated through the Federal Direct Loan Consolidation Program, provided eligible borrowers also hold at least one Direct Federal Loan other than the Perkins that is to be consolidated. Once you consolidate through the Direct Federal Loan Program you lose the grace period provided with your Perkins Loan, which is nine months – compared to the six month periods for other loans, like Stafford.
Consolidation Through a Private Lender
Many lenders have expanded their portfolios of debt management tools to include lower-cost alternatives to student loan consolidation. If you hold private loans, and are having a hard time making payments, consult with your loan representative to help evaluate your resources, debt obligation, and ability to pay. The best consolidation or student loan repayment alternatives help students avoid default, which has significant long-term consequences.