Federal Perkins Loans and FFEL/DL Stafford Loans:
A Brief Comparison
Summary
Currently undergraduate, graduate, and professional students have the option,
consistent with student eligibility requirements and institutional participation, of
borrowing to finance the costs of their higher education using three types of federal
education loans authorized under the Higher Education Act (HEA): Perkins Loans,
Subsidized Stafford Loans, and Unsubsidized Stafford Loans. Perkins Loans are
low-interest, fixed-rate loans made available to students with financial need under the
Federal Perkins Loan program. No interest accrues on Perkins Loans while students
are enrolled in school at least half-time, nor during grace or deferment periods.
Subsidized Stafford Loans are low-interest, variable-rate loans made available to
students on the basis of their financial need. The federal government subsidizes the
loans by paying the interest that accrues on the loans while students are in school, and
during grace and deferment periods. Unsubsidized Stafford Loans are low-interest,
variable-rate loans made available to students regardless of their financial need. The
federal government does not pay the interest that accrues on these loans. Both
Subsidized Stafford Loans and Unsubsidized Stafford Loans may be awarded under
either of two competing federal loan programs: the Federal Family Education Loan
(FFEL) program, and the William D. Ford Direct Loan (DL) program.
The HEA is expected to be considered for reauthorization during the 109th
Congress, and during debate over reauthorization, consideration may be given to
amending the terms and conditions of existing federal education loan programs. The
Congress also might consider whether it is optimal to continue offering federal higher
education loans through multiple programs. The Administration has called for
terminating the Federal Perkins Loans program, having determined it to be
duplicative of the Subsidized Stafford Loans available under the FFEL and DL
programs, and because of its shrinking role in financing students' higher education
costs.
This report provides a brief introduction to and comparison of key aspects of
Perkins Loans and Stafford Loans. Following a brief summary of these loan
products, the report compares Perkins Loans and Stafford Loans according to
selected criteria. This report is intended to provide the interested reader with a basic
understanding of Perkins Loans and Stafford Loans and to highlight some of their key
similarities and differences. It will be updated consistent with programmatic
changes.