PLUS loans, otherwise known as direct PLUS loans, serve as an accessible route to higher education financing for parents supporting undergraduate students, or students seeking graduate and professional studies. The acronym PLUS originally denotes 'Parent Loan for Undergraduate Students.'
These federal loans are allotted through the U.S. Department of Education's William D. Ford Federal Direct Loan Program. Consequently, the U.S. Government operates as the lender, providing the designation "direct" to these loans.
Required for PLUS loan ability, students must maintain at least half-time enrollment at an institute that participates in the Federal Direct Loan Program. The PLUS loan funding is primarily allocated to the tuition fees, room and board, and additional cost of the institution. Any leftover funds are directly handed over to the parent or student.
Interest rate for PLUS loans are fixed and remain invariant throughout the term. As an instance, loans dispensed between July 1, 2023, and July 1, 2024, come with an interest rate of 8.05%. Following the economic crisis, loan payments and interest on federal student loans were deferred in 2020, only to be resumed by October 2023.
To qualify for a PLUS loan, students and their guardians are required to complete the Free Application for Federal Student Aid (FAFSA), along with passing a standard credit check. Graduate or professional students at eligible schools can also independently apply for PLUS loans, which are usually termed as grad PLUS loans.
For a parent PLUS loan, dependency of the student on the parent becomes necessary. Both the student and the parent must meet standard eligibility criteria for student aid, including U.S. citizenship or a permanent resident alien status. Parents should have a clean credit history.
If parents have a tainted credit history, they might still qualify by procuring a valid endorser for the loan or by showing legitimate circumstances that led to the low credit score. Students might become eligible for loans with bigger limits when parents cannot qualify for a PLUS loan.
Grad PLUS loans function under the same eligibility norms, albeit applying only to the students. The entire amount needed for the student's education can be borrowed under PLUS loans even if the financial need is non-exemplary. PLUS loans offer low, fixed interest rates and necessitate a standard credit check for eligibility. Whilst a loan fee is charged by the government, parents must bear the responsibility of repaying the loan under all circumstances.
Repayment of a PLUS loan initiates once the disbursement of the full loan is complete. Parents have the option to start repaying the loan while their child is still enrolled or to request a delay. Deferment can yield a grace period until six months post-graduation or until the academic load of the student drops below half-time.
During this period, interest keeps accumulating and is added to the loan balance. The Department of Education provides numerous parent PLUS loan repayment schemes. For grad PLUS loans, borrowers might have added options like income-driven repayment plans that correlate with their income and family size. Typically, grad PLUS borrowers are given a span of 10 to 25 years for loan repayment, given the plan they opt for.
The PLUS in these federal higher-education loans indicates Parent Loan for Undergraduate Students. A Direct PLUS Loan procured by a parent cannot be transferred to the child, making the parent solely responsible for loan repayment. Deferment or forbearance might come in handy to temporarily lower or pause payments under certain conditions.
Grad PLUS loans allow graduate and professional students to self-finance, covering any expenses not already met by other financial aids or grants, up to the complete cost of attendance with no imposed cumulative borrowing limit.
PLUS loans, being federal direct loans for parents of university students, are also offered to graduate and professional students. These allow borrowing up to the full cost of college, subtracting any other financial aids received. Along with flexible repayment strategies, PLUS loans also come with lower interest rates, though they are higher as compared to federal student loans.