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Exit information Loan definitions A loan is money you borrow that you must pay back with interest. The dollar amount you borrowed is called the principal. Interest is a percentage of the principal which is added to the principal and which you pay as the fee for borrowing the money. In the case of Federal Perkins Loans the interest rate is 5 percent as described in your Promissory Note. When you enter Repayment, you pay back the money you borrowed in monthly payments or installments. If you borrowed money from more than one Perkins Loan fund, you will be making a payment on each loan every month. Payment schedules are set by the rulemaking body of the Federal Department of Education at either a minimum of $40.00 per month, or in cases where a $40.00 payment won’t pay your principal and interest off in ten years, the minimum payment needed to retire your loan within ten years. If you have two loans you may have a split payment. You will make one minimum payment defined by how much you borrowed and the payment will split between your two accounts. You may be eligible for deferments or forbearance, all of which suspend your payments for a prescribed period of time. You may qualify for cancellation benefits depending on your employment. Cancellation means a portion of what you owe is deleted for service in areas such as nursing or teaching. If you don’t pay your loan as scheduled or file timely paperwork proving you qualify for benefits, your loan will become past due, then delinquent and then in default. [these topics are fully covered in another section of this manual]. Your Federal Perkins Loan was made from a revolving fund. This means the money loaned to you has to be repaid and put back in that fund in order to make loans to other students who need financial help to go to College. The United States government is the guarantor for Perkins Loans. This means if you don’t voluntarily repay your loan, ultimately your loan will be returned to the government for collection.
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