From what I understand, Perkins loans currently have a slightly higher rate (5% vs 4.29%) and no loan origination fee.
Trying to figure out which one is better. I guess if I pay the loan off after graduation, the Perkins loan is better because there’s no origination fee. The longer I hold the loan, the subsidized Stafford loan becomes better because of the lower rate.
Any other considerations?
I don’t think that you can now (Perkins loan program was extended, was supposed to be discontinued) just take the Perkins or choose which of the loans to take and not the other. My understanding is that direct Stafford loans have to be exhausted first, sub and unsub, and unmet need remaining after that, to be awarded a Perkins loan.
I think the Perkins loan has a 9 months grace period after graduation before repayment begins.
I received a preliminary award letter that lists a Federal Perkins loan, Direct Subsidized Loan and work study. I also received a subsequent merit award and being asked which loans to offset the merit award. Here’s an example:
Work study: $4k
Perkins: $3.5k
Direct subsidized: $3.5K
I subsequently got a merit award of $5K and was asked which bucket(s) from the above to take the $5K.
I was thinking the Work study bucket and another $1K from one of the loans. Not sure which loan I should use, so I asked the question.
Is this something new with the Perkins? That you can’t take it unto you exhaust all Direct Loans first?
@kelsmom? True?
If your child takes a Perkins, and then does something like the Peace Corps, a portion of the Perkins is actually cancelled.
@thumper1, I’m trying to find some information about this on Dept of Education website. But the above link mentions the change under the heading “Undergraduate Borrowers”.
https://www.congress.gov/bill/114th-congress/house-bill/3594/text/plk
quote Loans for new undergraduate federal perkins loan borrowers.–Through September 30, 2017, an institution of higher education may make a loan under this part to an eligible undergraduate student who, on the date of disbursement of a loan made under this part, has no outstanding balance of principal or interest on a loan made under this part from the student loan fund established under this part by the institution, but only if the institution has awarded all Federal Direct Loans, as referenced under subparagraphs (A) and (D) of section 455(a)(2), for which such undergraduate student is eligible.
[/quote]
My daughter was offered a grant, a Perkins loan, a subsidized Stafford loan, and an unsubsidized Stafford loan. She is permitted to decline the unsubsidized Stafford loan and still take the Perkins.
I see that. But is there a choice now? My kid (oddly) got a Perkins loan, and Direct Loan. She was able to choose which ones she wanted to take. She was awarded both…but she choose the Perkins, and a small portion of the Direct Loan.
Awarded all…but choose the Perkins over the other loan.
Is that no longer permitted?
@thumper1: Why did she favor the Perkins loan first?
@mommdc the school must offer the Stafford loans first, but does that mean that the student must accept the entire Stafford loan before accepting the Perkins? As I mentioned above, my daughter was offered a Perkins loan, as well as a subsidized Stafford and an unsubsidized Stafford, and her FA portal allows her to decline the unsubsidized portion of the Stafford and keep the others.
The above talks about “new borrowers”.
@thumper1, @twogirls, did your daughters get a Perkins loan last year?
My daughter got a Perkins in 2006 and 2007…oddly. Guess we were considered low income at HER college…and we did have two kids in college at the time.
My kid chose the Perkins because it was subsidized, and her Direct Loans were not.
Ah yes- she got a Perkins loan and a subsidized loan last year. OK thanks that explains it. I am a bit shocked that we qualify for a Perkins loan, but I guess it’s like what Thumper posted- we have 2 in school and at her school, we qualify.
This ‘exhaust the Stafford loans first’ was part of them putting the Perkins loans back last year after the program expired. Remember the big bruhaha in the fall, and some in congress didn’t want to renew the program? Whether the schools are going to enforce it is unclear, but the way it was to be used was Stafford first (sub and unsub) and then Perkins. Schools set up their portals so you can accept or decline in any order you want to, so it may be hard for them to enforce the ‘Stafford first’ rule. In the example OP gave in post #2, it doesn’t look like her school interpreted the ‘Stafford first’ the same way I read about it as the unsubsidized loans weren’t even offered, and I thought they had to be.
What my daughter did was took the subsidized Stafford and the Perkins, and did not take the unsubsidized Stafford. The origination fees was $25/sem, so not a big deal. As to which loan, Perkins or Stafford Subbed to reduce, I don’t think it matters much. If you expect to take loans every year and pay them back over 10 years, the Stafford with the lower rate is probably better, even with the origination fee and the shorter (6 month) grace period.
We did receive an unsubsidized loan as well. But on the merit offer, we were not able to offset the unsubsidized against the merit award amount.
I’m also thinking about the work study. Would there be any reason not to offset the merit aid against the work study?. I think there’s a good chance my kid may get some kind of job. If so, is there value to it being a work study job? To me, the loans have value because I can choose (and probably will) pay them off soon after school ends.
Work study income is NOT counted when need based financial aid awards are calculated by colleges. Also, WS jobs tend to be flexible and understanding when it comes to the student having exams, etc. and of course…they are on campus which also means no car is needed to get to a job.
If you don’t need the loans, then keep the work study. If you need the actual cash to pay the tuition bill, work study is not as helpful as you only get paid as you work. That’s okay for second semester, but not so great for the first unless you (or student) have a little cash on hand to pay that first semester bill.
It looks like you’ll have about $11k on the bill that isn’t covered, $5.5k for each semester (this may include some COA that is not billed to you, like travel, books, living expenses), and the loans would cover this amount. If you can pay it, or pay half, get rid of one of the loans and take the work study. Use the work study earnings to pay that uncovered amount for second semester (or take the loans then).
There are several ways to work it.
I wonder if the merit has a need component if they won’t let you offset the unsub loan with it.
This is actually a tougher decision than I originally thought. Although I feel I can afford these schools, the loans would certainly help. I’d probably pay them off shortly after payments would begin (certainly within a few years). So, I believe that favors keeping the Perkins loan first. I do believe my son will get a part-time job in college (I’d prefer no more than 10 hours a week), but I’m not sure he’d need work study. In high school, he’s worked as a life-guard and worked in a music store (he’s a musician), so I believe those specialty type of jobs would be available. However, you never know. I guess I’m leaning toward offsetting the merit aid with the work study first and the rest from the direct loan.
Thanks for the input.
Work Study income is not considered in the need based financial aid calculations for the year of the FAFSA. Other earnings are. In addition, work study jobs are on campus, more convenient, and are understanding if a stusent has exams, etc.
Having said that…my musician kid earned more money working off campus as an usher for a major orchestra. His jib didn’t conflict with classes…but sometimes did with concerts at his school.
At my kids’ schools, lifeguards were quite highly paid and the school seemed to always need lifeguards. It is very possible that a lifeguard position at the school could be work study funded.
So…if your kiddo was offered work study, I would suggest he accept it as part of his package. He doesn’t have to do it if something better comes along.