Clarity On Loans : Perkins Loans and Direct Subsidized Loans

Hi everyone!

My name is Edward and I’m an incoming freshmen about to start this fall at UCSB. I’m currently looking for advice about accepting my student loans; I am covering all of my college costs by myself.

My current quarterly cost (3 Quarters/1 Academic Year) is approximately $1700 not including the costs of books and I was wondering if students usually take loans more than the amount on their balance (For textbooks and extras).

I’m also looking for advice on which loans to take. I’m predicting that I will need around $5500 in loans and right now I’m currently offered 3 types of loans from my school:

Perkins Loan : $2000
Direct Subsidized Loan: $3500
Direct Unsubsidized Loans: $2000

I realize the first 2 loans are probably the best options, and they seem to cover the costs that I need to pay. My question is, what is the difference between the Perkins Loan and Direct Subsidized Loans other than their interests and grace periods?

The Perkins loan is made through your school, has a 9 month grace period, a 5% interest rate, and no origination fee.

The Direct loans are administered through the school but are loans from the federal government and will be serviced by a servicing company. The interest rate is set every year but this year is 3.7%. There is a 1% origination fee. For the subsidized portion, the government will pay the interest that accrues while you are in school. There is a 6 month grace period.

You have to decide if you think having the Perkins loan subsidized while you are in school and no origination fee is a better deal than the Direct unsubbed loan (I think it is, but you have to do your own math). One minor consideration is that if you do both Perkins and Direct loans, you’ll have two sets of paperwork.

For sure though, I’m going to have to take the Direct subsidized loans(which seems to be the best of the 3, correct me if I’m wrong) which won’t be a problem since if there’e extra, I can just repay the loan immediately. Does the Perkins loan have interest during my academic years? If not, isn’t taking the Perkins Loans over the Direct Unsubbed Loan an easy choice because the 1% origination fee of $2000 is much cheaper than the 3.7% (total of 15.8% over 4 years) of $2000?

The Perkins and the Sub loans do not accrue interest to you while you are in school.