Direct PLUS Loans

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What are Direct PLUS Loans?

Direct PLUS Loans are a type of federal student loan offered through the U.S. Department of Education’s Direct Loan Program. They are intended for two primary groups:
  1. Parents of dependent undergraduate students
  2. Graduate or professional students
These loans allow borrowers to take out funds that can cover education-related expenses not covered by other forms of financial aid. Unlike subsidized or unsubsidized Direct Loans, which have borrowing limits, Direct PLUS Loans can cover the full cost of attendance, minus other financial aid received.

Eligibility Criteria

For Parents

  • Must be the biological or adoptive parent of a dependent undergraduate student enrolled at least half-time at an eligible institution.
  • Must not have an adverse credit history or must secure an endorser.

For Graduate/Professional Students

  • Must be enrolled at least half-time in a graduate or professional degree program.
  • Must not have an adverse credit history or must secure an endorser.
  • Must first apply for Direct Unsubsidized Loans before applying for a Direct PLUS Loan.

Interest Rates

The interest rates for Direct PLUS Loans are set annually by the federal government. They are generally higher than the rates for Direct Subsidized or Unsubsidized Loans but are usually lower than those for private loans. Interest accrues from the time the loan is disbursed, and it is not subsidized by the government.

Fees

There is a loan origination fee that is a percentage of the total loan amount. This fee is deducted from each loan disbursement, so you receive less than the amount you borrow.

Repayment Options

For Parents

  • Standard, graduated, or extended repayment plans are available.
  • Repayment generally begins 60 days after the loan is fully disbursed, but deferment options are available.

For Graduate/Professional Students

  • Standard, graduated, extended, and income-driven repayment plans are available.
  • Repayment begins six months after graduating, leaving school, or dropping below half-time enrollment.

Application Process

To apply for a Direct PLUS Loan, you must complete the Free Application for Federal Student Aid (FAFSA) and the Direct PLUS Loan application, which includes a credit check. In case of an adverse credit history, you may need to secure an endorser or provide documentation to explain the adverse credit circumstances.

Advantages and Disadvantages

Advantages

  • Can borrow up to the full cost of attendance.
  • Federal protections and flexible repayment options.

Disadvantages

  • Higher interest rates compared to other federal student loans.
  • Requires a credit check.
Direct PLUS Loans can be a valuable resource for funding higher education, especially when other forms of financial aid fall short. However, it’s important to understand the terms, conditions, and responsibilities that come with them before applying. Before taking out a Direct PLUS Loan or any other type of student loan, it’s advisable to consult a financial advisor for personalized guidance.

FAQ

A Direct PLUS Loan is a federal student loan offered to graduate or professional students, and parents of dependent undergraduate students. It can be used to help pay for education expenses not covered by other financial aid.

Graduate or professional students and parents of dependent undergraduate students are eligible. The borrower must not have an adverse credit history, and the student must be enrolled at least half-time in a program leading to a graduate or professional degree or certificate.

To apply, you must complete the Free Application for Federal Student Aid (FAFSA) form, and then submit a Direct PLUS Loan application and Master Promissory Note (MPN) on the Federal Student Aid website.

The maximum amount you can borrow is the cost of attendance (determined by the school) minus any other financial assistance received.

The interest rate on Direct PLUS Loans is fixed and set by the federal government. It tends to be higher than the interest rates on Direct Subsidized and Unsubsidized Loans. The rate is updated annually and can be found on the Federal Student Aid website.

Yes, there is a loan origination fee on all Direct PLUS Loans. The fee is a percentage of the loan amount and is deducted from each loan disbursement.

Repayment begins 60 days after the loan is fully disbursed, but you may defer payments while the student is enrolled at least half-time and for an additional six months after the student graduates, leaves school, or drops below half-time enrollment.

Yes, under certain circumstances, you can defer payments. For parents, the deferment options are limited, but graduate and professional students can defer payments while they are enrolled at least half-time.

If you are having trouble making payments, you may be able to change your repayment plan to one that is more affordable, or you might qualify for deferment or forbearance to temporarily stop or reduce your payments.

In certain circumstances, a Direct PLUS Loan can be forgiven, discharged, or canceled. For example, if you participate in a qualifying public service job and make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer, you may be eligible for Public Service Loan Forgiveness (PSLF).

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