What is a Perkins Loan Cancellation Program (PLCP)? Who all gets Qualified for PLCP?

In the United States, student loans are one of the fastest-growing forms of mortgage debt. Outstanding student loan debt is estimated at over $1 trillion, including more than 43 million borrowers. According to savingforcollege.com, the total debt per borrower is estimated to be about $33,500.

Loans come in multiple ways. Banks and other financial institutions provide private loans. Refinance loans are structured for persons who’ve already graduated and have repayment loans. On the other hand, federal loans are issued by government-subsidized loan programs. The Perkins Loan, a program that started in 1958, was one of these.

What Is a Perkins Loan for Masters Program?

A Perkins loan was offered by the Perkins Loans Program of the federal government and was a low-interest loan option made available to all undergraduate and graduate students who displayed an outstanding need for financial assistance.

The program launched in 1958. Eligibility was assessed on the basis of information submitted by the student in the form of the Free Application for Federal Student Aid (FAFSA) and loans were granted directly from the financial assistance office of the school. This suggests that, with the government serving as the subsidizing body, the school was the lender. Interest payments were made while the borrower was in education by the state.

Around 500,000 loans were issued to students until the scheme ended on Sept. 30, 2017.5 Final disbursements were made on June 30, 2018. The program was replaced by Federal Direct Loans, also referred to as Stafford Loans.

The cumulative amount of Perkins loans that borrowers could take out as an undergraduate was $27,500; borrowers could get an extra $32,500 as a grad student. Perkins loans always bear a 5 percent interest rate and do not have penalties, unlike most government loans.

How Does Perkin Loan Cancellation Program Works in a Masters Program?

For the length of the 10-year maturity term, Perkins Loans bear a fixed interest rate of 5 percent. The Perkins Loan Scheme has a grace period of nine months, such that borrowers begin repayment in the tenth month, after graduated, fall below half-time status, or drop from their college or university. Because the government subsidizes the Perkins Loan, interest does not start to accrue until the borrower starts repaying the loan. The debt cap for undergraduates is $5,500 a year as of the 2009-2010 academic year, with a cumulative lifetime loan of $27,500. The cap for graduate students is $8,000 a year, with a $60,000 lifetime limit (including undergraduate loans).

For people who chose to serve in a variety of various public service professions, including early childhood education, primary and high school teaching, speech therapy, nursing, law enforcement, librarian, public defense attorney, firefighting, and some active duty military positions, Perkins Loans are liable for Federal Loan Cancellation. Further limitations on the setting of employment can apply, depending on the area of employment. 

For instance, teacher forgiveness may be limited to identified low-income schools or particular areas of teacher shortage such as math, science, and bilingual education, and nurse forgiveness includes jobs in a non-profit medical facility. For any year spent teaching full-time, a portion of the loan is forgiven (as long as the loan remains in good standing). This cancellation also extends to Volunteers with the Peace Corps. Cancellation usually takes place on a graduation scale: 15% for year 1, 15% for year 2, 20% for year 3, 20% for year 4, 30% for year 5. Both figures are based upon the sum of the initial debt. Therefore, after 3 years of operation, one will have 50 percent of their initial debt cancelled.

On September 30, 2017, Congress failed to renew the Federal Perkins Loan scheme, essentially terminating the loan program.

Who Qualifies for Perkin Loan Cancellation?

Perkins loan cancellations (full or partial) are available if you are a:

  • Full-time educator representing children from low-income households in a selected primary or high school
  • Full-time instructor in any math, science, foreign language, bilingual education, or other areas designated as fields of teacher shortage in any school
  • Full-time special education teacher at a public or other non-profit elementary or secondary school (including educating students with disabilities)
  • Full-time skilled specialist provider of disabled early intervention programs
  • A full-time employee of a governmental or non-profit organization providing high-risk children and their families with programs from low-income communities
  • A full-time nurse or medical technician;
  • Full-time law enforcement officer or correction officer
  • A full-time member of staff in the education component of the Head Start Program
  • Vista or Peace Corps volunteers (up to 70 percent )
  • An active service member of the U.S. Armed Forces (up to 50 percent in areas of hostilities or imminent danger)

What if I Don’t Qualify for Loan Forgiveness?

If you do not qualify for Perkins Loan forgiveness, a 10-year repayment period is set for your loan. Unless you consolidate the loan, you will not place a Perkins Loan on an income-driven repayment plan.

So, can you merge your loan from Perkins? If you are likely to work in a qualified career, you can aim to make the payments as agreed upon. That way, you can begin to cancel your debt within the year if you start a new career.

But if you cannot balance payments, merge the loan so that you can position Perkins Loans on an income-driven repayment schedule.

And, of course, you will still refinance a private student loan with a Perkins Loan. But it suggests that you are giving up the perks of a federal student loan, including the ability to cancel the loan.

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