Federal PLUS Loan

The Federal PLUS loan is available to undergraduate and graduate students.

The Federal PLUS loan is a loan parents can borrow on behalf of their dependent undergraduate children who are enrolled at least halftime. As with the unsubsidized loan, borrowers are responsible for the interest that accrues on PLUS loans throughout the life of the loans.

Recent legislation now allows graduate students to borrow through the Federal PLUS program. Formerly, this program was only available to the parents of undergraduate, dependent students. The Graduate PLUS program is a non-need-based federal loan that allows graduate students to borrow up to the full cost of attendance, minus any other financial aid they are receiving.

Before a Federal PLUS loan can be credited to the student's account, the borrower must complete a PLUS Master Promissory Note (MPN). For PLUS loans, borrowers are required to apply online each academic year. Borrowers can electronically sign their PLUS MPN via the U.S. Department of Education PIN number. If a borrower does not wish to receive any of the loans offered on their award letter, the borrower must notify the Office of Financial Aid in writing or via Web for Students.

The interest rate is variable, capped at 9.25 percent. The parent or graduate borrower is responsible for the interest that accrues immediately upon the PLUS loan disbursement. Interest may be paid quarterly while the borrower is enrolled at least halftime. The parent or graduate borrower may also elect to defer all interest payments until completion of the student's degree program. If this option is chosen, interest will be capitalized and added to the principal at the time of repayment.

Federal PLUS loans currently have a fixed interest rate of 8.5%. This rate is in effect from July 1, 2007 to June 30, 2008.

For undergraduate borrowers, the repayment period begins on the date the last disbursement is made. Moreover, a PLUS loan borrower's first payment of interest and principal is due within 60 days after the loan is fully disbursed, unless a deferment condition applies. Parents are responsible for any interest that accrues on the loan. For graduate borrowers, repayment is deferred as long as the student in enrolled half-time.

Description

• Federally funded.
• Fixed interest rate. Interest rate of 8.5% (may be increased based on legislation currently pending in Congress).
• Interest begins accruing immediately, may be paid periodically or capitalized.
• Existing PLUS Loans can be consolidated.

Eligibility

• Borrower must be a U.S. citizen or eligible non-citizen of the U.S.
• Available only to students enrolled in graduate level programs.
• Non-need-based. May borrow the cost of attendance minus other aid.
• Student enrolled at least half-time in degree or certificate program.
• Basic credit check: Borrower cannot be 90 days or more delinquent on the repayment of any debt or the subject of a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment or write-off of a Title IV debt during the last five years.

Terms

• Borrower must complete the Free Application for Federal Student Aid (FAFSA) to apply.
• Borrower must first accept all Federal Stafford Loans (Subsidized and/or Unsubsidized) before borrowing through the Graduate PLUS program.
• Repayment of principal and interest begins 60 days after loan disbursed; however, payments can be deferred while borrower is enrolled at least half-time.

Graduate PLUS vs Private/Alternative Loans

The credit check for the Graduate PLUS loan will not be as stringent as that of most private/alternative loans, which often look at debt to income ratio. If a student has limited or no credit history, he/she may find it difficult to qualify for an alternative student loan. Graduate PLUS loans accept borrowers with limited or no credit history.

• Graduate PLUS Loans can be consolidated with other Federal loans (Subsidized/Unsubsidized), which allows students to have only one payment after graduation (private/alternative loans cannot be consolidated with federal loans).
• Interest Rate: The interest rates for many alternative loans are lower than the Graduate PLUS loan fixed interest rate of 8.5%. Rates on alternative loans are not fixed rates and generally do not have maximums. The prime rate or LIBOR rates on which alternative loans are typically based may go higher or lower than the fixed rate. Fixed rate loans can be easier to pay at repayment.
• Fees: Graduate PLUS loans may charge up to a 3% origination fee of the original loan amount. Alternative loans can have lower fees depending on the borrower's credit history and income.