Most students need a combination of several different types of financial aid to pay for their education. When Stafford loans and other financial sources aren't sufficient to cover costs, Perkins loans are sometimes available.

The college decides on the amount of the loan, up to $4,000 per year for undergraduate students, with a lifetime limit of $20,000. Graduate students can borrow a maximum of $6,000 for each year of graduate or professional study, with a lifetime limit of $40,000, including any undergraduate Perkins loans. Although these are the maximum amounts allowed by law, actual awards are usually less because schools try to use their limited funds to assist as many eligible students as possible.

Interest rates are fixed at 5 percent for the life of the loan, which cannot exceed ten years. No interest payments are required while you're a student, as long as you attend at least half time. There's a nine-month grace period after you graduate, drop below half-time status, or leave school. Repayment begins at the end of the grace period and is made directly to the college.

Terms of the Loan

You may be able to receive a deferment or forbearance on a Perkins loan by applying to your college. During a deferment, you can temporarily postpone payments without accruing interest. If you're not eligible for a deferment, you may qualify for a forbearance, which allows you to reduce or postpone payments for a limited period of time. Interest will accrue during this period and you'll be responsible for paying it.

Part of your Perkins loan may be forgiven or canceled if you work full-time in certain occupations. For example, you may be eligible for loan cancellation if you teach full-time at a low-income school or in certain subject areas where there's a teacher shortage. See the financial aid officer at your college for details about the occupations that may qualify you for loan cancellation.