The College Perkins Loan Crisis: Part 1

It is absolutely essential that you understand all of your financial options before jumping into any student loans.

After all, we are witnessing the “perfect storm” of a poor job market keeping graduates from finding employment that will allow them to pay off student loans, while the cost of college rises faster than inflation. Ever-increasing numbers of students are being forced to take out loans to pay for their education.

The federal Perkins loan is being severely hindered by this crisis, as are the college prospects for those who need it the most.

– Scott

Is the College Perkins Loan Nearing Crisis Levels?

The Perkins loan is a low-interest federal loan for college students of families that demonstrate some degree of financial need.

The loan is intended to give students the opportunity to afford a college education, and it is highly beneficial for many who would otherwise be unable to pay for post-secondary schooling.

Unfortunately, reports that student borrowers in the US are defaulting on nearly $1 billion worth of Perkins loans, which in turn is jeopardizing the ability for other families in need to pay for a college education for their children.

Here’s how the Perkins loan works…

The loan was developed by US Representative Carl D. Perkins as a part of the Higher Education Act of 1965.

Families may apply for a Perkins loan individually, or it may be allocated by institutions of higher education in financial aid packages that are offered to accepted students.


The loan carries a fixed-interest rate of only five percent, and a nine month grace period for repayment after the student has left college.

Whereas most federal loans are distributed and collected by the federal government, Perkins loans are administered by the colleges themselves on a revolving basis.

What that means is colleges use the money they collect from previous Perkins loan borrowers to pay out the loan to future classes of collegians. Hence, an institution’s ability to provide Perkins loans to needy college applicants is dependent on the repayment of said loan by past borrowers.

With students defaulting on $964 million in Perkins loans in 2011, the outlook appears murky at best for families who will rely on the loan in the future, and for those currently struggling to pay back their debt.

The process has become a vicious cycle. Eligible students who qualify for Perkins loans are often the ones with the least ability to pay them back. This leads to fewer available funds for other deserving applicants.

And for those Perkins loan borrowers who struggle to find employment after graduation, the added danger of collections and litigation fees can lead to a landslide of expenses.

Simply put, a student who defaults on a Perkins loan after they leave school could be facing the prospect of lifelong debt.

In our next report we will detail some of these post-graduation dangers that Perkins loan borrowers face, and some other (safer) ways that you and your family can approach paying for college.

To your college admissions and funding success,

Scott Weingold

Co-Founder, College Planning Network LLC

Publisher, – The free educational resource of College Planning Network

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Editor's Note: Scott Weingold has been ranked the #1 “College Financial Aid Expert Worth Knowing About” in the entire country by  He has co-authored the book, “The Real Secret To Paying For College. The Insider’s Guide To Sending Your Child To College – Without Spending Your Life’s Savings.” Scott also publishes a popular free online newsletter, “College Funding Made Simple" which reveals insider’s tips, methods, and strategies for beating the high cost of college.

Scott is the co-founder and a principal of the widely renown College Planning Network, LLC – the nation’s largest and most reputable college admissions and financial aid planning firm. CPN is a proud member of the Better Business Bureau, the National Association of College Funding Advisors, the National Association for College Admission Counseling, the National Association of Student Financial Aid Administrators and the Student Affairs Administrators in Higher Education.

Scott, along with his college funding advisory team, helps thousands of families throughout the country with their college planning needs and offers a series of free educational webinars and workshops on “How To Pay For College Without Going Broke In The Process!” He's been featured or mentioned in The Philadelphia Inquirer, Yahoo News,, Voice America with Ron Adams, Crains Cleveland Business, and on Cleveland Connection with James McIntyre.  Scott has published numerous articles and is a professional speaker who has addressed thousands of audiences online and offline throughout the United States.  His actionable insights and candid, open approach have earned him & his team numerous media interviews, citations, and speaking opportunities, and his free online video workshop is one of the Internet’s most widely viewed pieces in the college funding space.