Direct PLUS Loans
Direct PLUS Loans are federal student loans that are based upon credit, require a separate application beyond the FAFSA, and can provide up to the cost of attendance in aid for any particular school year.
There are two types of Direct PLUS Loans:
- The Direct PLUS Loan for Parents
- The Direct PLUS Loan for Graduate and Professional Degree Students
Parents of dependent undergraduate students can apply for the first type of PLUS Loan, while graduate and professional students can apply on an independent basis for the second type of PLUS Loan.
Basic Facts About PLUS Loans
Here are the basic fundamentals of PLUS Loan funding:
- Require separate and distinct application beyond the FAFSA
- Students must still complete the FAFSA to become eligible
- Department of Education is the lender
- Based on credit history
- Have a fixed interest rate of 7.9%
- A 4% fee is deducted proportionately each time a loan disbursement is made
- Qualified borrowers can obtain up to the cost of attendance in aid
- No payments due while attending class at least via “half-time”
- Six month grace period
- 10 to 25 year loan terms
- Flexible repayment plans—deferment, forbearance, etc.
In general these types of federal student loans are considered “Parent Loans” for undergraduate students, and a cheaper alternative to private student loan funding if you are attending class as a graduate student.
Overall I recommend to student and parent borrowers to utilize these types of loans before they decide to apply for private student loan funding, as they can offer a cheaper alternative that has more flexible repayment terms when all is said and done.
