With the cost of college continuously on the rise, not having enough money to cover the entire cost of attendance is also going up. Whether you’re a parent, an undergraduate student or at the graduate or professional level, you may need to tap into other resources, including a direct PLUS loan.
What Is a PLUS Loan?
A PLUS loan is available to graduate or professional students and parents of dependent undergraduate students. Undergraduates can take advantage of both subsidized and unsubsidized federal student loans, as well as parent PLUS loans.
PLUS loans are available for parents to take out on their student’s behalf or for graduate and professional students to continue their education. These loans cover any financial gaps left by other types of financial aid, including grants, scholarships and other federal student loans.
Types of PLUS Loans
- Direct PLUS, also known as grad PLUS. These loans are available to graduate or professional students who are enrolled at least part-time, are eligible for federal student aid and who don’t have major credit history problems, including recent delinquencies of 90 days or more.
- Parent PLUS. These loans are for parents to borrow and pay for school on behalf of their college student. Parents take out this loan and parents-not students-are required to pay it back. Parent PLUS loans also have credit requirements.
PLUS Loan Costs
The interest rates for PLUS loans are higher compared to subsidized and unsubsidized loans. Interest rates are the same for both grad and parent PLUS loans regardless of credit history, even though a bad credit score might prevent you from qualifying for a loan. Interest rates on loans disbursed after ) are set at 5.30%, or about 2 ? percentage points higher than the interest rate on a direct subsidized loan. PLUS loan interest rates are fixed, meaning that once the loan is disbursed, the interest rate doesn’t change for the life of the loan unless you consolidate or refinance your loans.
Interest rates aren’t the only costs you’ll face if you take out a PLUS loan. You’re also on the hook for loan fees. Both the grad and parent versions have a 4.236% loan fee if your loan is disbursed between . After that, the loan fee is 4.228%.
PLUS Loan Limits
You can borrow as much as the cost of attendance minus any other types of aid you’re receiving. Once you’ve exhausted all other financial aid through grants, scholarships and other types of loans, you may consider using PLUS loans to cover the difference.
While other types of loans have limits to how much you can borrow, PLUS loans do not. The individual college or university will determine the student’s cost of attendance and then calculate how much extra funding needs to come from PLUS loans after other aid has been exhausted.
PLUS Loan Eligibility
If you’re interested in borrowing a PLUS loan as a graduate student or parent of an undergraduate student, you can qualify if:
- You don’t have an adverse credit history. Even with a bad credit score, you might qualify for a PLUS loan. The federal government says an adverse credit history includes debts of more than $2,085 that are 90 days or more delinquent; a default, bankruptcy discharge or repossession on your credit report within the last five years; a foreclosure, wage garnishment MT pawn shops or tax lien within the last five years or federal student aid write-off within the last five years.
- You’re the parent of a college student or a graduate or professional student. Student borrowers must be enrolled in college at least half-time. Other borrowers must be legal parents-biological, adoptive or in some cases stepparents-of a dependent undergraduate student who is enrolled at least part-time. Grandparents and legal guardians are not eligible to receive these loans even if they have primary responsibility for a child.