Borrowers Confused About Payment of Different Student Loans

Not all federal student loans are equal

Shaun Plum
MoneyTips Contributor

Borrowing Student Loans

Borrowers Confused About Payment of Different Student Loans
August 30, 2016

Students receiving financial aid often receive a mix of scholarships, grants, and loans. These loans are not always the same type. Even among federal student loans, there is a difference between Direct loans and Perkins loans.

Colleges taking part in the Perkins program handle Perkins loans. Because of this, the loans are not repaid to the Department of Education like Direct loans. Instead, borrowers should make the payments on Perkins loans directly to the school. This is not always explained clearly to borrowers, and many find themselves delinquent on making loan payments they didn't realize they had to make.

Borrowers often assume a connection between the two loans, or that they are different names for the same program. A borrower will receive a deferment for their Direct loan and not realize that it does not also include their Perkins loan. After a specific number of payments, the school may contact the state's attorney general to declare the unpaid loan. The loan is then considered to be in collection, and the borrower may have to pay a high amount of fees, in addition to what they owe.

The Perkins loan program expires in September 2017, although many colleges have made a case that the flexibility offered by the program is vital in helping some students pay for their education.

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