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Direct PLUS Loans are a type of federal student loan available to graduate or professional students (Grad PLUS loans) and parents of dependent undergraduate students (Parent PLUS loans). They are designed to help cover education costs not fully met by other financial aid. Here are some key points about Direct PLUS Loans:
- Borrower Eligibility:
- Grad PLUS Loans: Available to graduate or professional students enrolled at least half-time in an eligible program at an accredited school.
- Parent PLUS Loans: Available to biological or adoptive parents, or in some cases, stepparents of dependent undergraduate students.
- Credit Check Required: Applicants must undergo a credit check. Direct PLUS Loans require the borrower to not have an adverse credit history. If there is an adverse credit history, the applicant might still receive a loan through additional requirements or by obtaining an endorser without such a history.
- Loan Amount: The maximum loan amount is the school’s cost of attendance (as determined by the school) minus any other financial aid the student receives.
- Interest Rates: Direct PLUS Loans have fixed interest rates, which are typically higher than those of Direct Subsidized and Unsubsidized Loans. The rate is set by the federal government and can change each year for new loans.
- Fees: There is a loan fee on Direct PLUS Loans, deducted from each loan disbursement. This fee is a percentage of the loan amount and can vary based on federal budget legislation.
- Repayment Terms: Repayment generally starts once the loan is fully disbursed. However, for Parent PLUS Loans, parents can request to defer payments while the student is enrolled at least half-time and for six months after the student graduates or drops below half-time enrollment. For Grad PLUS Loans, repayment starts six months after the student graduates, leaves school, or drops below half-time enrollment.
- No Subsidy: Unlike Direct Subsidized Loans, the interest accrues from the time the loan is disbursed until it’s paid in full. If interest is not paid during deferment or forbearance, it will capitalize.
- Loan Consolidation: Borrowers of Direct PLUS Loans can consolidate them with other federal student loans into a Direct Consolidation Loan.
- Eligibility for Income-Driven Repayment and Forgiveness Programs: Grad PLUS Loans are eligible for most income-driven repayment plans and forgiveness programs like Public Service Loan Forgiveness. Parent PLUS Loans, when consolidated, may become eligible for income-contingent repayment.
- Application Process: To apply for a PLUS Loan, one must complete the Free Application for Federal Student Aid (FAFSA) and the loan application process, which includes a credit check.
Direct PLUS Loans can be a useful resource for covering the full cost of higher education, but it’s important for borrowers to be aware of the higher interest rates and fees compared to other federal student loans, and to plan accordingly for repayment.