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The Biden Administration has extended the student loan repayment pause until the end of August.
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Perkins loans that aren’t held by the US government do not qualify for Biden’s new student-loan forgiveness.
To qualify for up to $20,000 in forgiveness, you must consolidate your loans into Direct loans.
This may not be the best option for everyone, since some Perkins loans are forgiven after five years.
If you have privately-held Perkins loans, you might miss out on President Biden’s $10,000 student-loan forgiveness, $20,000 if you received a Pell Grant.
Unlike federal student loans, some Perkins loans are serviced by the school you attended, but the federal government pays for interest accrued while you’re still in school. The Perkins loan program ended on September 30, 2017, so schools can no longer give out this type of loan.
Generally, only student loans serviced by the federal government are eligible for Biden’s new student-loan forigiveness, which is why your Perkins loan may be ineligible. If your Perkins loans are held by one of the following servicers, you have federally-held Perkins loans:
FedLoan Servicing (PHEAA)Great Lakes Education Loan Services, Inc.EdfinancialMOHELAAidvantageNelnetOSLA ServicingESCIDefault Resolution Group
To get up to $20,000 in student-loan forgiveness for your privately-held Perkins loan, you must consolidate into a Direct loan. Here’s how to do it.
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How to fill out a Direct loan consolidation application
The first step is to fill out a Direct loan consolidation application at studentaid.gov. You’ll need to login to start the application, but you can also use a read-only or demo application to prepare for the real application.
You’ll need to provide:
Your full name and any former namesYour Social Security numberYour date of birthYour permanent addressYour telephone numberYour email addressYour employer’s name, address, and phone number
You’ll also need to provide two references — two adults who live in the US who do not live with you, and who have known you for at least three years. You’ll need to provide the following information about your references:
Phone numberEmail addressMailing address
After filling out your information and providing references, the next section in the application is titled Loans I want to consolidate. Here’s what this part of the application will look like:
This is the part of the Direct consolidation application where you choose which loans you want to consolidate.
studentaid.gov
Only consolidate loans that are not Direct loans.
Once you’ve finished with that section, you’ll fill out the next section, titled Loans I don’t want to consolidate. You’ll list any other student loans you want the federal government to consider when deciding your maximum repayment period.
Choose your new servicer
After choosing the loans you do and don’t want to consolidate, you’ll be asked to choose a new federal student loan servicer.
Here’s a list of federal loan servicers, and details about each one from the Better Business Bureau:
Federal loan servicerBBB accreditationBBB ratingCustomer ratingComplaints closed in the last 3 yearsGreat Lakes Educational Loan Services, Inc.Not accreditedN/A1/5 stars61EdfinancialAccredited since 2008B+1/5 stars75MOHELAAccredited since 2010A+1.1/5 stars42AidvantageNot accreditedC-1/5 stars34NelnetAccredited since 2005A+1.4/5 stars291OSLA ServicingNot accreditedN/A1/5 stars16ECSINot accreditedB-1/5 stars68
Sign a new promissory note
Just like you did when you went to college, you’ll have to sign a promissory note, an agreement between you and the government stating that you will pay your debts.
Your Direct consolidation application will include a hard credit inquiry, which means you might see a temporary drop in your credit score.
What are the cons of consolidating my Perkins loans?
You need to consolidate your student loans into a Direct loan to receive Biden’s $10,000 to $20,000 student-loan forgiveness, but it may not be the best option for you.
Perkins loans — both federally-held and privately-held — are forgiven after five years of full-time work in the following professions:
Teacher at a public or nonprofit school (some part-time teaching work qualifies for forgiveness)Nurse or medical technicianQualified professional provider of early intervention services for the disabledFaculty member at a tribal college or universitySpeech pathologist with a master’s degree working in a Title I-eligible elementary or secondary schoolLibrarian with a master’s degree working in a Title-I eligible schoolLaw enforcement or corrections officerAttorney employed in a federal public or community defender organizationEmployee of a public or private nonprofit child- or family-services agency providing services to high-risk children and their families from low-income communitiesStaff member in the education component of a Head Start programStaff member in the education component of a pre-K or childcare program that is licensed or regulated by a stateMilitary service in the US armed forces in a hostile fire or imminent danger pay areaAmeriCorps VISTA or Peace Corps volunteer cancellation
How do I decide whether or not I should consolidate my Perkins loans?
Sonia Lewis, the Student Loan Doctor, says, “There’s a catch-22 here. Most people that have taken out Perkins loans are eligible for cancellation after five years, whether they know about it or not.”
If you work in any of the professions listed above, Lewis recommends checking to see how many payments you have left until cancellation. If you’re closer to total student-loan forgiveness than you thought, it might be worth skipping consolidation and waiting for your Perkins loans to be wiped out.
If you don’t work in one of the above professions and a $10,000 to $20,000 decrease in your student loan principal balance can significantly lower your monthly payments or the life of your loan, Lewis recommends consolidating your privately-held loans into Direct loans.
In addition to the $10,000 to $20,000 in forgiveness from Biden’s plan, you’ll be eligible for the following federal protections:
Access to income-driven repayment plans that can lower your monthly payments if you experience financial hardshipsPayment pauses, such as the pandemic payment pauseLoan discharge if you die before you pay off your student loans; private student loan debt is inherited by your next of kinAccess to future rounds of student-loan forgiveness, if any, and improved repayment programs