The Difference Between Stafford & Perkins Loans

Funding your education is no easy feat, but the financial rewards of earning a degree make it worthwhile. Most students look to the federal government for financial aid assistance through grants and loans by filling out the Free Application for Federal Student Aid, or FAFSA, form. The federal government offers low-cost student loans for students who meet certain criteria. Both the Stafford and Perkins loan programs maintain their own requirements for eligibility, loan limits, interest rates and repayment terms.

Eligibility

Both Stafford and Perkins loans provide low-cost loan options for undergraduate, graduate and professional students. You must be enrolled at least half-time working toward a degree or a certificate. Statistically, subsidized Stafford loans primarily go to students with adjusted gross incomes listed on their FAFSA of less than $50,000, with a quarter of the funds going to students listing income between $50,000 and $100,000. Your adjusted gross income may come from your own income or from that of your parents, depending on your student status. Unsubsidized Stafford loans are available to all students regardless of financial need. Perkins loans are awarded to students exhibiting exceptional financial need. Not all schools offer Perkins loans. Your eligibility for a Perkins loan is based on your estimated family contribution from your student aid report and varies from institution to institution.

Borrowing Limits

Stafford loan limits vary depending on your current year and student status. Independent students receive higher loan limits than do dependent students. You’ll receive more aid as you increase your college level, with freshmen receiving the least amount of funds. The Federal Student Aid website provides graphs for Stafford loan borrowing limits sorted by year as well as the total aggregate limits based on your student status -- dependent, independent or professional. The total you may borrow as an undergraduate student for a Perkins loan is $27,500 at the time of publication. Graduate or professional students may borrow up to $60,000.

Interest Rates

Each loan is made to you based on your agreement to pay back the money with a predetermined amount of interest. This interest rate is described in the paperwork and master promissory note you sign before receiving the funds. Perkins loans have interest rates of 5 percent, as of the time of publication, and the interest is deferred until you begin repayment. Stafford loans are currently at a 6.8 percentage rate for subsidized and unsubsidized loans. Subsidized loans defer interest until repayment. Unsubsidized loans accrue interest while you are in school.

Lenders

Federal Family Education Loan Program Stafford loans are managed by private lenders and guaranteed against default by the federal government. You are notified who your lender is in these instances. Some schools participate in the Federal Direct Student Loan program. This program is managed directly by the federal government. Perkins loans are managed by your school. The government provides a set amount of funds to each participating school. The school awards those funds based on need. You pay the Perkins loans back to your school when your loan goes into repayment status.

Repayment

Stafford loans go into repayment status six months after you graduate or drop below half-time status. Perkins loans go into repayment nine months after you graduate or drop below half-time status. Both loan programs offer deferment and forbearance options for students who cannot pay their loan payment due to financial hardship or need. Perkins loans have a ten-year repayment limit. Stafford loans also have a ten-year repayment limit but do offer extended loan limits with loan consolidation.

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