Information on the Federal PLUS Loan
Financial Assistance for Parents and Grad Students
The federal government administers two types of PLUS Loans: the PLUS Loan for Parents and the PLUS Loan for Graduate and Professional Students. Low interest rates combined with flexible loan repayment plans make these very appealing federally sponsored loans. They are available through the Direct Loan Program or through the Federal Family Education Loan Program (FFELP). Find out how each works to make college education more affordable for people just like you.
Parents of dependent college students bear a burden of the cost of college, too. Traditionally parents refinanced their homes, borrowed on home equity and downsized on luxury items. As the cost of a college education has sharply risen the federal government has made significant motions to make financial aid more affordable and accessible for a larger population.
Before you take out a second mortgage, here’s a better strategy:
Get approved for a PLUS Loan for Parents and you may be able to pay off the outstanding balance on your college student’s education.
Find Out if You’re Eligible for Parent PLUS Loans
Parents of dependent undergraduate college students, you are eligible, urged and invited to apply for your fair share of a federal PLUS Loan. Subtract the student loans and other aid your child has received that is put toward tuition. The balance remaining is the value of the loan you may be eligible to receive. This means you are able to completely and affordably finance education.
Apply for a Parent PLUS Loan by contacting your child’s college financial aid office. Ask for a Parent PLUS Loan application. Depending on the type of program your school uses your lender will either be the Department of Education (Direct Loan Program) or a private student loan provider (FFEL Program).
Grad PLUS Loans
Only since 2006 have the Grad PLUS Loans been a viable alternative. Imagine graduate school—the stress of amassing even more student loan debt. For costly and lengthy programs of study, such as Law and medicine, you’re looking at hundreds of thousands of dollars in debt following graduation. The Grad PLUS Loan does not eliminate that debt, but the loans do make borrowing to finance that education much more affordable and attractive than private loans.
Are You Eligible for Grad PLUS Loans?
Before you apply for the PLUS Loan for Graduate and Professional Students make sure you are eligible. Under this aid program you must be:
- Graduate or professional student.
- Enrolled in a program at least half time.
- Working toward a degree.
- Independent of parents.
- Have a good credit history.
As a borrower in the Grad PLUS Loan program you may be approved to borrow an amount equal to the cost of your tuition, minus other student loans, scholarships and grants.
Fail to file your annual Free Application for Federal Student Aid (FAFSA) and you eliminate any chances of getting money with the Grad PLUS Loan . File the FAFSA and make sure you squeeze every drop of federal money you can first from the Stafford Loans, subsidized and unsubsidized if both apply.
PLUS Loans and Your Credit History
The primary hitch to either PLUS Loan is the credit check requirement. These are not need-based loans—they are available to anyone that qualifies. Parents and grad students: If you are trying to borrow on a PLUS Loan with bad credit you’ll be denied as a sole borrower. Bad credit does not exclude you from loans, though.
Manage your bad credit situation by borrowing a PLUS Loan with a credit-worthy co-signor. Your co-borrower may be a trusted friend or relative. And this is not an uncommon practice. Make it work for you. The good news is that once you begin repayment many lenders will release the co-borrower once you have made a series of on time payments. Use this as a chance to improve your credit situation.
Repaying PLUS Loans
Interest rates, or the annual cost of borrowing money, are the same for both PLUS Loans:
7.9% fixed for Direct Loans and 8.5% fixed for FFELP loans. Parent and graduate borrowers also may choose from four loan repayment terms: standard, graduated, extended, and income sensitive.
- Parents, you must begin repayment of Parent PLUS Loans almost immediately, usually once the loan is completely disbursed or within about 60 days.
- Grad students, you may defer payments on Grad PLUS Loans as long as you remained enrolled in school at least half time.
What if you encounter financial troubles, such as inability to maintain monthly payment schedules, lose your job or incur other more serious personal costs, or get sick or become temporarily disabled, among a host of other financial impediments?
The federal loan programs all include financially friendly repayment options:
- The Federal Student Consolidation Loan allows you to combine your federal loans into one loan, including either of the PLUS Loans. You’ll slash the amount of money you pay each month on student loans, saving you from potentially risky financial situations such as student loan default.
**Don’t wait until you’ve defaulted on a loan before you seriously consider consolidation, that’s unnecessary—you have flexible loan repayment choices. Take our consolidation self-assessment quiz. Find out right now if you are a candidate for loan consolidation.
- Use loan deferment and forbearance when you have short-term financial problems like those listed above. Apply directly through your lender. If approved you’ll be free and clear of loan payments for a certain length of time, usually long enough to get back on your feet or make other long-term financial choices.
It doesn’t matter if you’re a parent of a college student or a grad student, the federal PLUS Loans are a must before you borrow with any private student loans. Both offer flexible and affordable college finance plans you just can’t beat.
