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Federal loans are popular among students who need financial assistance for their higher education. They are also an apt choice for parents who wish to support their child’s education. Now, federal loans are further divided into multiple types, direct PLUS loans being one of the most opted-for loan types.
These loans are not based solely on the need or requirement of a student; one can use them to cover a wider range of education-related expenses.
Unlike other options, it conveniently covers tuition, fees, boarding costs, study material, and all other miscellaneous expenses. The application requires a stringent credit check, and you will also enjoy support from the federal government.
This comprehensive guide will help you to learn everything you should know about Direct PLUS loans, including what Direct Plus loans, Grad PLUS loans, Parent PLUS loans, how a PLUS Loan Works, how to qualify for a PLUS Loan, how you can avail of them, pros and cons, and repayment options!
What are Direct PLUS loans?
Federal direct PLUS loans are financial support offered by the US government to students who need assistance in covering their educational expenses.
It is one popular category under federal student loans that offer higher loan amounts, unlike federal subsidized or unsubsidized loans. It means, this loan conveniently covers the full cost of education, including total fees, boarding expenses, and all other charges you pay in the name of education.
These loans are strictly based on your creditworthiness and not on your financial needs. However, even students with an adverse credit history can get these loans if they manage to find a co-signer.
The highlight feature of direct PLUS loans is that they offer flexible repayment options. The loan borrower can explore and choose from multiple options, like fixed monthly installments or income-driven repayment plans.
Moreover, there are multiple plans for forgiving student loans, making them less of a financial burden.
What are Grad PLUS loans?
As the name suggests, the grad PLUS loans are a part of the federal direct PLUS loan program that is specifically designed for graduate students. These loans are for students who wish to pursue higher education or a professional course and need financial assistance for the same. Unlike the other federal loans, the graduation PLUS loans can cover all the education-related expenses, including books and school supplies.
To apply for this loan, the borrower has to prove his creditworthiness or get an endorser to co-sign the loan. Furthermore, it is significant to note that the interest rate for student grad loans is fixed, and it is significantly higher than the other loans.
The graduate PLUS loan also offers flexible repayment plans, giving borrowers an opportunity to either pay a fixed monthly amount or adjust the installment according to their income. It is certainly a promising option for students and parents to ensure finances never become a hurdle in academics.
What are Parent PLUS loans?
Parent PLUS Loans are another option in the federal student loan category offered by the US government to ensure deserving students can pursue their higher education.
These loans are apt to cover a wide range of education-related expenses, including fees, boarding, school supplies, and more. To be eligible for the federal parent PLUS loan, there is a need to qualify for a stringent credit check.
However, the arrangement of a co-signer may still help you in getting your loan application approved.
It is significant to note that the parent PLUS loan interest rate is fixed and decided at the time of signing the final loan agreement. It means, your monthly payment will also be predictable throughout the life of the loan, making financial management easy and convenient.
Repayment options offered under this loan are flexible and borrower-friendly with an option to choose from standard, graduated, or extended plans. Overall, parent student loans are a reliable solution for parents who wish to support their child’s education without getting financially troubled.
How Does a PLUS Loan Work?
A PLUS Loan, whether it is a Parent PLUS or a Grad PLUS Loan, works in the same way. Both these loans are baked by the US government, and here are the steps to apply for these parental and student loans.
Application Process
To begin the process, you will have to file the FAFSA parent PLUS loan form. Visit fafsa.gov, or you can apply through the school’s website. You will have to go through a strict credit check to get your application approved. However, you may even have to look for a co-signer with an excellent credit score to prove your overall creditworthiness.
Loan Amount
The amount of financial aid you can get through the PLUS loans is higher than the other federal loan options. It typically covers all the tuition, fees, boarding costs, and expenses related to school supplies or books. It is significant to note that though you can get a higher loan amount, the final amount will be decided by your preferred school.
Interest Rate and Fees
The grad PLUS loan interest rate or the interest rate for a parent PLUS loan is fixed and decided at the time of signing the loan agreement. Additionally, the origination fee incurred for these loans is approximately 4.2%, deducted at the time of funds disbursement.
Disbursement
As these loans offer additional costs apart from the basic tuition, the disbursement is also diverse. The amount to cover tuition, fees, and other supplies will be directly disbursed to the school. If there are additional funds allotted for miscellaneous expenses, they will be disbursed to the borrower’s account.
Repayment
The repayment of the student grad loans is convenient and borrower-friendly. You can choose the standard fixed payment plan or decide your installment amount at a later stage, according to your income. If the borrower is a student, there is a provision to let the government pay your interest, till you are in school and for an additional grace period as well.
These simple steps determine the working of PLUS student loans. It is advisable to go through all the terms and conditions carefully before signing the final agreement to enjoy a smooth loan journey.
How to Qualify for a PLUS Loan?
As already discussed, PLUS loans are college loans for parents who wish to support their children’s higher education. You would have to fulfill the qualifying criteria and complete different loan application process steps to avail of these loans.
Step 1: FAFSA
Fill out your free application form for student aid on fafsa.gov. This form is the first step to initiate your loan application, which helps determine the overall financial aid for students.
Step 2: Credit Check
For a PLUS loan, whether you want a parent PLUS loan or a grad PLUS loan for students, there is a need to pass a stringent credit check. This step is to ensure that the borrower doesn’t have a poor credit history and is capable of repayment.
Step 3: Basic Eligibility
For student PLUS loans, the borrower must be a graduate or professional student enrolled at an eligible school. Additionally, for the parent PLUS loans, the borrower must be the legal parent of the student.
Step 4: Added Requirements
Apart from the above requirements, there are a few additional factors that the borrower must qualify to get their loan application approved.
- The borrower should not have any defaults to his name.
- The applying student must be a US citizen or an eligible citizen having a valid security number.
If you qualify for all these terms, you can apply for the grad PLUS loans as a student or a parent.
Pros and Cons of PLUS Loans
Like any other loan type, PLUS loans also have their perks and disadvantages. Let us discuss the Pros and cons in detail for better understanding.
| Pros | Cons |
| Mandatory credit checks may complicate approval. | Mandatory credit checks may complicate approval. |
| High loan limits cover full fees and education costs. | Higher interest rates increase total repayment amounts. |
| Accessible for parents supporting education. | Origination fee deducted before disbursement. |
| Fixed interest rates allow for predictable payments | Parents bear repayment responsibility, adding financial pressure. |
| Loan forgiveness programs can reduce financial burden. | Difficulty finding a co-signer may hinder approval. |
| Flexible repayment plans based on income. |
Thus, it is crucial to keep the considerations in mind and weigh the pros and cons carefully to enjoy the financial aid that the PLUS loans offer.
Repayment Options for Direct PLUS Loans
Direct PLUS loans are known for their flexible and borrower-friendly repayment plans. Some of the options you can choose from are listed below.
Standard Repayment
Under this plan, the monthly payments are fixed for over a decade. This plan ensures that the borrower pays a fixed cost every month and gets rid of the loan at the earliest. The only drawback of this plan is that the monthly payment can turn out to be higher.
Graduated Repayment
Under a graduated repayment plan, the payments start at a lower monthly installment but keep increasing every two years. So, if you expect your income to grow in the coming years, a graduate repayment plan is apt for you.
Extended Repayment
Under this repayment plan, the borrower can extend the period in which they will repay the loan. The borrower can extend it for up to 2.5 decades, lowering the monthly payment but increasing the overall interest cost.
Income-Driven Repayment
Another promising repayment plan is income-driven repayment. This plan calculates your monthly payment on the basis of your income and your personal expenses. This way, you will not feel the financial pressure, but your overall interest amount might increase significantly.
It is crucial to choose the repayment plan carefully, keeping a realistic expectation about your income. Moreover, you can also seek professional help to decide the loan terms, like the repayment plan and the overall loan period.
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Conclusion
Amongst all the student loan options, the Direct PLUS loans are versatile and accessible for students and parents. Firstly, the loan limit is higher, so you can get more funds to cover each and every expense related to your studies. Secondly, unlike other loan types, these loans have US government backing, making them less of a financial burden.
With all these perks, these loans have a few considerations, like strict credit checks and high interest rates. Thus, it is essential to explore and research every term related to direct PLUS loans carefully to enjoy a smoother loan lifespan.
You can also seek professional help and understand the terms, benefits, and potential drawbacks to make informed decisions and use these loans for robust academic success.
