Question on Perkins Loan

[golgi]

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Does the Perkins Loan accrue interest while in-school (like the subsidized fed loan)? Also, does the Perkins Loan continue to accrue interest during grace and deferment (again like the fed subsidized loan)?


Thanks!

 

[kas23]

Let me correct your question; UNsubsidized federal loans accumulate interest while in school, grace, deferment, etc....

To answer your question; Perkins loans are Subsidized, they accumulate no interest while in school, grace, deferment. But buyer beware, Perkins loans are evil, stay away from them. Since the current interest rate is below 5%, when you consolidate your loans, the Perkins loans will screw you and drive up your final consolidated rate. Now, if the interest rate was above 5% (which it is not currently and will not be next year), it will do the opposite.

 

[grw0o]

Let me correct your question; UNsubsidized federal loans accumulate interest while in school, grace, deferment, etc....

To answer your question; Perkins loans are Subsidized, they accumulate no interest while in school, grace, deferment. But buyer beware, Perkins loans are evil, stay away from them. Since the current interest rate is below 5%, when you consolidate your loans, the Perkins loans will screw you and drive up your final consolidated rate. Now, if the interest rate was above 5% (which it is not currently and will not be next year), it will do the opposite.

So are you saying it's cheaper to take an unsubsidized Stafford and let that gain interest during med school then the Perkins? Since the Perkin's aren't a whole ton, maybe it would be better not to consolidate that and just pay it separatly from the Stafford's because of their high interest rate.

Is the stafford rate right now like 3.4%?

 

[Etomidate]

So are you saying it's cheaper to take an unsubsidized Stafford and let that gain interest during med school then the Perkins? Since the Perkin's aren't a whole ton, maybe it would be better not to consolidate that and just pay it separatly from the Stafford's because of their high interest rate.

Is the stafford rate right now like 3.4%?

I would consolidate Stafford loans to lock in the low rates and leave the Perkins loans alone. If you add Perkins loans to your consolidation, it will increase your interest rate.

The Stafford rate is currently 2.77% and will likely increase to at least 4.5% on July 1.

I disagree with kas23 that Perkins loans are evil. Since they due not accrue interest in school or deferment, the 5.5% doesn't even affect you until far down the road. Also, since many medical students max out their Stafford loans ($38,500/year), and other loans are needed to live, Perkins loans are usually a better deal than private loans.

 

[kas23]

I disagree with kas23 that Perkins loans are evil. Since they due not accrue interest in school or deferment, the 5.5% doesn't even affect you until far down the road. Also, since many medical students max out their Stafford loans ($38,500/year), and other loans are needed to live, Perkins loans are usually a better deal than private loans.

I'll tell you why Perkins loans are evil, and it all depends on what percentage of your loans are Perkins. An example, and this is my situation; I have X amount of loans to pay back. 77% are Stafford and 13% are Perkins. Due to the high percentage of Perkins loans in my total amount I have to pay back, it bumped up my consolidated rate from 2.875% to 3.125%. Now I am stuck with a rate that is 0.25% higher than it would have been if I decided to take minimal Perkins loans. And this increased rate will follow me for 30 years.

I could have chose to not include my Perkins loans into my consolidation and my rate would have been 2.875%, but then I would have had to pay the Perkins loan back over 10 years. The monthly payments for just the Perkins loan would have been 1/2 of what I now have to pay monthly for everything! I could not have afforded to paying that much back for just a single loan. Plus I have another private loan that definitely deserves to be paid back much quicker than any of my other loans.

 

[GeneGoddess]

Hey Kas - you know that GL is offering consolidation via AES and they are consolidating the Perkins at the prevailing Stafford rate (2.875% for me).

 

[kas23]

Hey Kas - you know that GL is offering consolidation via AES and they are consolidating the Perkins at the prevailing Stafford rate (2.875% for me).

Yeah, I know. They are not actually consolidating the Perkins at the prevailing stafford rate. That would be illegal. What they are doing is calculating your final consolidation rate IF you were to have your Perkins counted with the Stafford rate, and then they are giving you this rate via a rate reduction (just like the rate reductions of the electronic withdrawal and consecutive payments - same concept) of the final calculated rate. It has the same final effect, but the difference is that it is legal. Companies can give rate reductions all they want (and they have to do this to stay competitive).

It is not that I have many reasons for NOT going with GL/AES, but I have many reasons for going with another company. I really don't have much debt load, so I am not going to stress over the details. Such details would be AES being bought-out by a larger company. These mergers happen everyday in the business world - just open up the business section of the paper. Although this is not "selling" the loan per se (since selling the loan would be forbidden by the GL contract), but this action would void all rate-reductions giving by GL/AES. Since you cannot void a final consolidation rate, but you can void rate-reductions, the benefit of counting Perkins at the Stafford rate would go down the toilet.

Plain and simple, I don't want to take the extra risk and I am already very satisfied with the payment plan of the company I am going with. And I can defer for 3 years. I don't need GL to help me with trying to defer (since my deferment is not based on economic hardship).