<p>First time posting on the FA forum!</p>
<p>Ds is a college freshman. Last year as part of his FA, he was offered $798 in a subsidized Stafford loan. For next year, that has been replaced with $1K in a federal Perkins loan. Two questions:</p>
<p>1) Any idea why they'd change it from Stsfford to Perkins?</p>
<p>2) Is Perkins interest-deferred, like the subsidized Stafford?</p>
<p>TIA</p>
<p>I don’t know why they changed it, but Perkins is subsidized too.</p>
<p>Thanks, jahaba. That’s what they told ds, but I couldn’t find that info anywhere.</p>
<p>It is subsidized, and I believe there is no charge for the loan whereas there is an origination fee for Stafford? I don’t know what the interest rates are for the two and if one is better than the other. The thing is, if you get a Perkins, you can still get your full Stafford, though unless you have some unmet need as determined by FAFSA, you may not get the subsidization on any of it. It gives you a buffer. You cannot get a Perkins on your own. The school has to give it to you and they generally have a limited number.</p>
<p>I found that the interest rate is 5%.</p>
<p>There may be nothing to the change from the subsidized Stafford to the Perkins but thought I’d ask in case there’s something well-known to everyone but me! I’ll have ds call and ask the FA office. It might be something as simple as all new students get the Stafford and all returning students get Perkins.</p>
<p>ETA: Yeah, cpt, I think we did pay a small fee for last year’s Stafford.</p>
<p>The Stafford subsidized rates are going up to 6.8% in 2012, so if you are eligible any subsidized Staffords, you should apply for them (not the unsubs) and stash the money.</p>
<p>I would take a subsidized Stafford over a Perkins for 11-12. Sub Stafford interest rate is 3.4%; Perkins is 5%. It used to be that Perkins had a better interest rate than Stafford sub, but not for 10-11 or 11-12. Some schools may still award Perkins first in their packaging, which may be why your child was offered Perkins rather than Stafford sub. I would call the school to find out why he has Perkins rather than Stafford.</p>
<p>Yes, I’ll have him ask. Is it OK to ask them to make the switch? Is that even possible?</p>
<p>Again, I’m assuming they might do the more-attractive Staffords for the new students they’re still trying to woo. The school has been totally generous and awesome to work with, but I am curious about the change.</p>
<p>The Perkins loan has limited availability - the school just has so many Perkins dollars to award and no more. They often have less Perkins funds than they have eligible students. Stafford does not have limited availability so the school can award as much Stafford as a student is eligible for to as many students as are eligible. They do not have to save Stafford money to attract students. </p>
<p>I am actually in a similar situation as an older student. I was awarded $4000 in Perkins and $1800 sub Stafford. The Stafford is the better loan this year so I am thinking of asking them to switch loans. My hesitation is that if I take summer classes next year I would be able to get the sub Stafford in the summer whereas the Perkins probably would not be available to me (as they will probably not have any). Decisions decisions. Well I have a couple of months to think about it.</p>
<p>If you are unlikely to need the Stafford in the summer I would ask them to change it. I am guessing it is as Kelsmom said, the programs are just set up to do it that way (which in prior years would have been a good thing).</p>
<p>As swimcatsmom stated, the Perkins funding is limited, and it is given to the neediest students. I think that is why Perkins is often awarded before sub Stafford in the packaging routines (at larger schools awarding is done by computer using rules programmed in). So often both full Perkins and sub Stafford are offered.</p>
<p>I agree … if you will not need more than $5500 in loans for the year, it would be wise to use the sub Stafford. If however, you need both the Perkins and the $5500 Stafford for the year, you may want to keep the Perkins as it gives the student a higher overall loan eligibility for the year.</p>
<p>I think the Perkins has a 9 month deferrment after graduation, to the stafford 6 mon, not a big difference, but something.
Perkins, depending on career, also has payment forgiveness but it usually after paying them back for quite a few years.</p>
<p>I found Perkins isn’t always available year to year, even when your money situation is the same. Sometimes I will read about students not getting them because more “in need” students came to the school and they didn’t have any funds left. We had them offered at some schools, not others, one year, not another.</p>
<p>If I’m figuring correct, a $5500 Stafford subsidized loan has an origination fee of $220. The difference in interest rate for a Perkins is 1.6%. Are both loans interest-free during college? What about during the grace period?</p>
<p>Considering the origination fee on the Stafford and higher interest rate on the Perkins, are both equal in cost for approximately the first two years of repayment with the Stafford’s lower interest rate making it a better deal if repayment takes more than two years?</p>
<p>S has been offered both if he decides he needs.</p>
<p>The origination fee is $27.50 (5500*0.995). It’s $5 per $1000.</p>
<p>There is a fee & a rebate, so the net charge is the one-half per cent. The loan is a certain amount, and the student gets the net proceeds … so on a $5500 loan, the student would receive $5472.50.</p>
<p>Just wanted to tell everyone thank you for your help. Ds contacted the FA office and got it changed from a Perkins to the subsidized Stafford. To help others, here’s what his FA office said about why they offered what they did:</p>
<p>“Perkins loans are typically awarded across the year to students with higher financial need because they have good repayment benefits (9 month grace period instead of 6 months and can have a certain percentage forgiven after graduation depending on a student’s employment after graduation: law enforcement, teaching (certain areas), nurse, Peace Corps, US Armed Forces). However, at this time, the Subsidized Stafford Loan does have a better interest rate than the Perkins Loan.”</p>
<p>Between both years we’re talking less than $2K, so we’re OK with the small orignation fee.</p>
<p>
Heavens no. Where did you get those numbers? The origination fee for Stafford loans is nowhere near that high, thank goodness!. it is only .5%.</p>
<p>I thought that seemed high. I didn’t read far enough down on the finaid.org site (I added bold):</p>
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</p>
<p>If the loan fees were phased out last July, will the loan net 100% to the student? Now that I’m re-reading, it appears so. Please correct me if I’m wrong.</p>
<p>No. Only the origination fee is phased out. There is still a 1/2 % fee (the default fee maybe) so you get 99.5% of the amount borrowed.</p>
<p>The Perkins program expires next year, and no one knows what if anything will replace it. Also, as noted above, the subsidized stafford interest rates go up next year. With this Congress, you can safely assume that any program that relies upon Federal subsidies will get worse, not better, for students.</p>
<p>The only good sign is that the US Dept. of Education announced a phased-in crackdown of those for-profit colleges that only exist to soak up Federal Pell grants and student loans. If those colleges don’t show that their grads can pay back the loans, the college will become ineligible. Hopefully, this policy will make the colleges clean up their act, or will result in the federal monies being diverted to legitimate colleges. However, some Republican members of congress are trying to block the proposal.</p>
<p>Swimcatsmom–do the unsubsidized staffords have a different set of fees? That’s is what my d is getting - unsubsidized. So will she still get 99.5 percent of the amount borrowed (paid to the school of course)?</p>