<p>My daughter requested a loan and was offered a Perkins loan. From what I can find, it looks like the interest rate is 5% and no interest accrues while she is in school. She was not offered a Federal Direct Subsidized Loan, which appears to have an interest rate of 3.4% and also does not accrue interest while she is in school. I believe she would be eligible for a Federal Direct Subsidized Loan, but I am not sure. If she is eligible, does the amount that is subsidized vary according to how much Pell Grant she received? She will be a junior and received a partial Pell Grant (not the full amount). Thank you in advance for your help.</p>
<p>Usually college offer you the Direct Loans(sub & unsub) first, follow by Perkins Loan</p>
<p>The direct subsidized loan is need based (as is the Perkins loan). The maximum direct sub for a dependent freshman is $3500 (as long as there is $3500 unmet need). If she does not have a direct sub loan in her aid award, she can ask for one. In the short term the Perkins is the better deal, but in the long term (assuming a 10 year pay off), the direct is probably the better deal.</p>
<p>Origination fee: Perkins has no origination fee. Direct sub has a 1% origination fee.
Interest rate: Perkins 5% Direct sub: 3.4%
Grace period:Perkins has a 9 month grace period after the student graduates or drops below half time. During the grace period no interest accrues.
Direct has a 6 month grace period after the student graduates or drops below half time before repayment is due but, for direct loans disbursed after July 1 2012, interest will accrue during this grace period.</p>
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This may vary by school, but our experience has been the complete opposite. At our schools, for students with need, the unsub loan was the very last thing to be offered. In the early part of the FA cycle our schools offered Perkins first to high need students (0 EFC). (This was because up until a couple of years ago they were the best loan with the lowest rate.) If a student still had need after Perkins had been awarded, they were then offered direct sub. Only then were they offered unsub loans. But Perkins funds were generally exhausted very early in the FA cycle meaning very few students were offered Perkins at all. In that case they were offered sub (if they had need) and then unsub. </p>
<p>Funny how schools vary.</p>
<p>I did not realize that no interest accrues during the grace period with the Perkins loan, but does with the Subsidized Direct Loan, and also was unaware of the origination fee with the Direct Loan. That will help her decide which is better for her. She was awarded a $5500. Perkins Loan. Can she also get a Subsidized Direct Loan? She is a junior, by the way, and she does have additional unmet need.</p>
<p>Edit: I just read your response. I guess you are saying that she can also get an Subsidized Direct Loan?</p>
<p>Wow, I didn’t even realize Perkins loans came that big. If she is a junior, her direct sub loan limit should be $5500. I would have thought she should be eligible for a direct sub of up to $5500 or her unmet need, whichever is the lower figure. However, schools set their own policies for awarding the Perkins (it is what is called campus based aid). I have heard some odd policies over the years that different posters have confronted (one this year had to accept an unsub loan if they wanted the Perkins which I and other posters had never heard of before and all thought was disgraceful). You would really to check with your school for their rules.</p>
<p>In the short term the Perkins would be a better deal with the lack of origination fee and the waived interest in the grace period. In the long term, the sub direct is probably still the better bet unless your daughter expects to be able to pay the loan of very quickly.</p>
<p>Okay, thanks for all your help. I was really surprised by the amount of the Perkins loan, too. My son received them once or twice, but only for a few hundred dollars. I will tell my daughter to check with the financial aid office to see about her eligibility for other loans. She has not had to borrow much up to this point, so between us we may be able to pay the loans off sooner than the full term.</p>