Perkins Loans are disbursed directly to the student by the college or university where the student is attending. Because of the school having control over the purse strings, Perkins loans are also considered a form of campus-based aid. Often, the school disburses the loan in two payments during an academic year.
Borrowing limits for the 2008-2009 academic year for undergraduates is $4,000 a year and $20,000 in aggregate. For graduates, borrowing limits are $6,000 and $40,000, respectively. The $40,000 borrowing limit includes any Perkins loans received for undergraduate study.
Like Pell grants, FSEOGs and Stafford loans, Perkins loans require the student to complete a Free Application for Federal Student Aid (FAFSA). However, Perkins loans are more competitive than Stafford loans because:
Relative scarcity of subsidies. The federal government subsidizes the interest on Perkins loans (and subsidized Stafford loans) while students are in school. Since the federal government's budget is limited for these programs, the loan dollars are relatively scarce.
Interest-free loans until loan repayment begins. From the student's or parent's perspective, a subsidized Perkins loan is more attractive simply because it is a free loan. Students aren't charged interest on a Perkins Loan until the loan repayment period begins.