Federal Plus Loans - Information on Federal PLUS Loans for Students and Parents
Many students receive financial aid packages which cover a percentage--but not all--of their education costs. Federal PLUS loans are awarded to cover the difference between the student's current financial aid and their total education cost. This can greatly reduce a family's immediate out-of-pocket college expenses.
PLUS loans have higher interest rates than other Federal loans, and are not subsidized by the government. Additionally, payments must be made toward the loan while the student is still in school.
Unlike other Federal loans, there are no borrowing limits to Federal PLUS loans, and no lifetime borrowing caps. The amount of the loan is calculated by subtracting the total amount of financial aid the student is receiving (such as scholarships, grants, or other loans) from the student's total education costs. So, if a student is receiving $10,000 in financial aid in a given year, but their total education costs are $15,000, they would be eligible for a $5,000 PLUS loan.
Federal PLUS Loans differ for undergraduate and graduate students. If the PLUS loan is for undergraduate education, the loan is actually made to the parents, rather than the students. The parents, then, are responsible for repaying the loan. If the PLUS loan is for graduate school, on the other hand, the loan is made to the student, and repayment is the responsibility of the student alone.
Direct PLUS Loans and FFEL PLUS Loans
PLUS Loan funding comes through one of two lending channels: the William D. Ford Direct Loan Program, and the Federal Family Education Loan program (FFEL). The Direct Loan Program allocates federal money to schools, which can then lend it directly to the student or family. The FFEL operates through private lenders. The FFEL program charges higher interest than the Direct Loan Program. For PLUS Loans for Undergraduate studies, the interest rate through the Direct Loan Program is fixed at 6.41%.
PLUS Loans are also subject to an 4.204% origination fee.
Unlike Stafford and Perkins Loans, there is no grace period for PLUS Loans. Repayment begins 60 days after disbursement, while the student is still in school. There are several repayment plans available, which may include even or increasing payments over 10 years, income-sensitive payments, or--for loans over $30,000--even or increasing payments over 25 years.
How to Apply
Unlike other Federal loan programs, the FAFSA is not required for a PLUS loan. However, the FAFSA is required to process any other financial aid given to the student, and the amount of the PLUS loan is based on this financial aid. So even though the FAFSA isn't directly required, it's still a good idea to fill one out annually.
The application process varies depending on whether you're applying for a Direct PLUS Loan or a FFEL PLUS loan. Applications for Direct Loans are provided directly by the school. For FFEL Loans, talk to your financial aid office. They will provide you with a list of participating lenders.
Students must be enrolled half-time or more in order to qualify for a Federal PLUS Loan. A credit check is administered at the time of application. Parents who do not qualify for a PLUS Loan can apply for additional funds from the Stafford Loan program.