When it comes to financing higher education, there are several options available. One of the most popular and direct ways to secure funding is through Plus loans. Plus loans are federal loans that are available to parents of undergraduate students and to graduate and professional degree students.
For parents, Plus loans offer a convenient way to support their child’s education. They can borrow up to the total cost of attendance, minus any other financial aid received. Plus loans have a fixed interest rate and offer flexible repayment plans, making it easier for parents to manage the loan.
For graduate and professional degree students, Plus loans provide an opportunity to cover the remaining cost of their education. These loans offer a higher borrowing limit compared to other federal student loans. Plus loans also come with a fixed interest rate and flexible repayment options.
What is a Plus Loan?
A Plus loan is a type of loan that is available to graduate students and parents of dependent undergraduate students to help pay for education expenses. This loan is part of the Federal Direct Loan Program and is offered by the U.S. Department of Education.
A Plus loan can be used to cover any expenses related to education, such as tuition, fees, room and board, books, and supplies. The loan allows borrowers to finance their education and spread out the cost over a period of time. Plus loans offer flexible repayment options, making them an attractive choice for many students and their families.
Graduate Plus Loans
Graduate Plus loans are specifically available to graduate and professional students. These loans offer competitive interest rates and flexible repayment options. Graduate students can borrow up to the cost of attendance minus any other financial aid received.
Like other Plus loans, Graduate Plus loans require credit checks. However, the credit requirements for Graduate Plus loans are generally less strict than those for private loans. This makes Graduate Plus loans an accessible option for many students pursuing advanced degrees.
Direct Plus Loans for Parents
Direct Plus loans for parents are available to parents of dependent undergraduate students. These loans can help cover the cost of their child’s education at an eligible institution. Parents can borrow up to the cost of attendance minus any other financial aid received by the student.
Similar to Graduate Plus loans, Direct Plus loans for parents also require credit checks. However, the credit requirements for these loans are typically more lenient compared to private loans. This makes Direct Plus loans for parents a viable option for many families who need assistance in funding their child’s education.
| Loan Type | Borrower | Maximum Loan Amount |
|---|---|---|
| Graduate Plus Loans | Graduate and professional students | Cost of attendance minus other aid |
| Direct Plus Loans for Parents | Parents of dependent undergraduate students | Cost of attendance minus other aid |
The Difference Between Graduate PLUS Loans and Direct PLUS Loans
When it comes to financing education, there are two types of PLUS loans available: Graduate PLUS loans and Direct PLUS loans. While they are similar in many ways, there are a few key differences to be aware of.
1. Eligibility
Graduate PLUS loans are specifically designed for graduate and professional students who are pursuing an advanced degree. On the other hand, Direct PLUS loans are available to both parents of undergraduate students and graduate students.
2. Borrower
Graduate PLUS loans are only available to graduate and professional students who are borrowing to fund their own education. On the other hand, Direct PLUS loans can be taken out by either the parent of an undergraduate student or the graduate student themselves.
3. Interest Rates
The interest rates for Graduate PLUS loans and Direct PLUS loans may differ. It is important to check the current rates with the loan provider or the U.S. Department of Education.
4. Loan Limits
Graduate PLUS loans have higher loan limits compared to Direct PLUS loans. This allows graduate and professional students to borrow more money to cover the higher cost of advanced degree programs.
5. Repayment
When it comes to repayment, both Graduate PLUS loans and Direct PLUS loans offer various options such as income-driven repayment plans, deferment, and forbearance. However, the repayment terms and options may vary slightly between the two types of loans.
It is important to carefully review the terms and conditions of each loan option to determine which one is the best fit for your unique financial situation and educational goals.
Eligibility for Plus Loans
Graduate students, as well as parents of dependent undergraduate students, may be eligible for Plus Loans. These loans provide financial assistance to cover the cost of education beyond what is covered by other forms of financial aid.
Graduate Students
To be eligible for a Plus Loan as a graduate student, you must meet the following requirements:
- You must be enrolled at least half-time in a graduate or professional program at an eligible institution.
- You must be a U.S. citizen or eligible non-citizen.
- You must not have an adverse credit history.
It is important to note that Plus Loans for graduate students do not require a demonstrated financial need.
Parents of Dependent Undergraduate Students
Parents who want to borrow a Plus Loan on behalf of their dependent undergraduate student must meet the following criteria:
- The student must be enrolled at least half-time in an undergraduate program at an eligible institution.
- The parent borrower must be a U.S. citizen or eligible non-citizen.
- The parent borrower must not have an adverse credit history.
In addition, the student must have completed the Free Application for Federal Student Aid (FAFSA) to determine their eligibility for other types of financial aid.
It’s important to understand the terms and conditions of Plus Loans, as they have different interest rates and repayment options compared to other federal student loans. Before applying for a Plus Loan, be sure to carefully review the requirements and consider other financial aid options available to you.
Understanding Parent Loans
When it comes to financing a graduate education, parent loans, also known as PLUS loans, can provide an attractive solution for families. These loans are specifically designed to help parents assist their graduate students in meeting their education expenses.
Parent PLUS loans are federal loans that are available to parents of dependent undergraduate students and graduate students. Unlike other types of student loans, these loans are borrowed by the parents, not the students themselves.
One of the main benefits of parent PLUS loans is that they allow parents to borrow larger amounts of money compared to other student loans. This can be especially helpful when the cost of a graduate program is high. Additionally, parent PLUS loans have flexible repayment options, including income-driven repayment plans.
It’s important to note that parent PLUS loans do require a credit check, so parents should ensure they have a good credit history before applying. However, if a parent is denied a parent PLUS loan due to adverse credit history, the student may be eligible for additional federal loans.
When considering a parent PLUS loan, it’s essential for parents to carefully review the terms and conditions, including interest rates and fees. Parents should also consider the impact borrowing a parent PLUS loan could have on their own financial situation and ability to save for retirement.
In conclusion, parent PLUS loans are a valuable tool for parents looking to support their graduate students’ education. Understanding these loans and their terms can help parents make informed decisions and ensure they are taking advantage of all available resources to fund their child’s education.
How to Apply for a Plus Loan
Applying for a Parent Direct Plus Loan is a straightforward process that starts with filling out an application. Below are the steps to apply for a Plus loan:
Step 1: Complete the Application
First, the parent borrower must complete the Direct Plus Loan application, which can be done online or by paper. The application requires basic personal and financial information.
Step 2: Submit the Application
After completing the application, the parent must submit it to the Loan Servicing Center. If applying online, the submission can be done electronically. If applying by paper, the parent must mail the application.
Step 3: Await Credit Check
Upon submission, the parent borrower’s credit will be checked by the Loan Servicing Center. This is to determine their eligibility for a Plus loan.
Step 4: Sign Master Promissory Note
If approved, the parent must sign a Master Promissory Note (MPN) to formally agree to the terms and conditions of the loan. This can be completed electronically or by signing a paper MPN.
Step 5: Complete Entrance Counseling (If Required)
In some cases, the parent borrower may be required to complete Entrance Counseling. This is a counseling session that provides important information about their rights and responsibilities as a Plus loan borrower.
Once these steps are completed, the parent borrower will receive notification regarding the status of their Plus loan application. If approved, the funds will be disbursed to the school to cover the cost of the student’s education.
Completing the Free Application for Federal Student Aid (FAFSA)
If you are considering applying for a PLUS loan, whether you are a graduate student or a parent of an undergraduate student, it is important to complete the Free Application for Federal Student Aid (FAFSA) first. The FAFSA is a form that determines your eligibility for federal financial aid, including PLUS loans.
The FAFSA can be filled out online at the official government website, studentaid.ed.gov. It requires personal and financial information, including your Social Security number, tax returns, and income information. The FAFSA is available for completion on October 1st of each year and should be submitted as soon as possible to ensure you receive the maximum amount of aid.
When completing the FAFSA, be sure to indicate that you are interested in applying for a PLUS loan. This will ensure that the loan information is included in your financial aid award package. After submitting the FAFSA, you will receive a Student Aid Report (SAR) that summarizes the information you provided and includes your Expected Family Contribution (EFC).
If you are a graduate student, you will also need to complete entrance counseling and sign a Master Promissory Note (MPN) before receiving a PLUS loan. These requirements help you understand the terms and conditions of the loan and your responsibilities as a borrower.
For parents of undergraduate students applying for a PLUS loan, the process is slightly different. After completing the FAFSA, the parent can apply for the PLUS loan online at the official government website, studentloans.gov. The parent will need to sign in using their own FSA ID, which is different from the student’s FSA ID used to complete the FAFSA. The parent borrower will be required to complete a credit check to determine eligibility for the PLUS loan.
It is important to note that a credit check is required for a PLUS loan, and certain credit criteria must be met. If the parent borrower does not meet the credit requirements, they may still be able to receive a PLUS loan by obtaining an endorser or appealing the credit decision.
In summary, completing the FAFSA is the first step in applying for a PLUS loan. Be sure to indicate your interest in a PLUS loan on the FAFSA and complete any additional requirements specific to your situation. By completing the FAFSA and meeting the necessary criteria, you can access the financial assistance you need to pursue your education.
Choosing a Lender for Plus Loans
When it comes to obtaining a Plus loan, parents have the option of borrowing directly from the federal government or choosing a private lender. Each option has its own advantages and considerations to take into account.
Direct Plus Loans
A Direct Plus Loan is a federal loan option available to parents of dependent undergraduate students. This type of loan is provided directly by the U.S. Department of Education. One advantage of choosing a Direct Plus Loan is that it offers fixed interest rates. This means that the interest rate will not change over the life of the loan, providing parents with stability and predictability.
Another advantage is that Direct Plus Loans do not require a credit check. This can be beneficial for parents who may not have a strong credit history or who have faced financial challenges in the past. Additionally, these loans offer flexible repayment plans, allowing parents to choose a plan that best fits their financial situation.
However, it’s important to keep in mind that Direct Plus Loans come with an origination fee, which is a fee charged by the government for processing the loan. This fee is deducted from the loan amount before it is disbursed to the school. Parents should also be aware that interest begins accruing on the loan as soon as it is disbursed.
Private Lenders
Another option for obtaining a Plus loan is through a private lender. Private lenders, such as banks or credit unions, offer Plus loans that are not affiliated with the federal government. One advantage of choosing a private lender is that they may offer lower interest rates compared to Direct Plus Loans. By shopping around and comparing offers from different lenders, parents can potentially save money on interest costs.
However, it’s important to carefully consider the terms and conditions offered by private lenders. Unlike Direct Plus Loans, private loans may have variable interest rates, which means the rate can change over time. This can make it difficult to budget for repayment. Additionally, private lenders may require a credit check and may have stricter eligibility criteria compared to Direct Plus Loans.
Before choosing a private lender, parents should thoroughly research and compare options. They should consider factors such as interest rates, repayment terms, and customer reviews to ensure they are selecting a reputable lender that offers the best possible terms for their Plus loan.
In conclusion, when choosing a lender for Plus loans, parents should carefully consider both the advantages and drawbacks of Direct Plus Loans and private lenders. By weighing these factors, parents can make an informed decision that best meets their financial needs and goals.
Interest Rates and Repayment Options
When it comes to PLUS loans, it’s important to understand the interest rates and repayment options available to borrowers. These loans, offered through the Direct Loan program, are designed to help parents pay for their child’s education.
Interest Rates
The interest rates for PLUS loans are fixed, meaning they do not change over the life of the loan. Currently, the interest rate for Direct PLUS loans is set at 6.28% for the 2021-2022 academic year. It’s important to note that this rate can vary each year, so it’s essential to stay updated on the current rates.
Repayment Options
PLUS loan borrowers have several repayment options to choose from. The standard repayment plan is the most common, where borrowers make fixed monthly payments over a 10-year period. However, there are also extended, graduated, and income-driven repayment plans available.
The extended repayment plan allows borrowers to extend their repayment period up to 25 years, reducing their monthly payments but increasing the total amount of interest paid over the life of the loan.
The graduated repayment plan starts with lower monthly payments that gradually increase every two years. This option is ideal for borrowers who expect their income to increase over time.
Income-driven repayment plans set the monthly payments based on the borrower’s income and family size. These plans can help make loan payments more manageable for borrowers with lower incomes.
| Repayment Options | Loan Term | Monthly Payments | Total Interest Paid |
|---|---|---|---|
| Standard | 10 years | Fixed | Varies |
| Extended | 25 years | Lower at first, increases over time | Higher |
| Graduated | 10 years | Lower at first, increases every two years | Varies |
| Income-Driven | Varies | Based on income and family size | Varies |
It’s crucial for parents to carefully consider their financial situation and choose a repayment option that best suits their needs and ability to repay the loan.
In conclusion, PLUS loans offer fixed interest rates and a variety of repayment options. Understanding the interest rates and repayment options is essential for parents who are considering taking out a PLUS loan to fund their child’s education.
Deferment and Forbearance Options
When repaying a Direct Parent PLUS loan, there may be times when you encounter financial difficulties and are unable to make your monthly payments. Fortunately, there are deferment and forbearance options available to assist you during these challenging times.
A deferment allows you to temporarily postpone making payments on your loan. This option may be available if you meet certain criteria, such as being enrolled at least half-time in an eligible educational program, experiencing economic hardship, or being on active duty military service.
During a deferment period, you are not required to make monthly loan payments, and the government may pay the interest that accrues on your Direct Parent PLUS loan. This can help prevent your loan balance from ballooning during the deferment period.
Another option is forbearance, which allows you to temporarily postpone or reduce your monthly loan payments. Unlike deferment, interest continues to accrue on your Direct Parent PLUS loan during forbearance. This can result in a higher loan balance over time.
Forbearance is typically granted in cases of financial hardship, illness, or other qualifying circumstances that make it difficult for you to make your loan payments. It is important to note that forbearance is not automatic and must be requested from your loan servicer.
While deferment and forbearance options can provide short-term relief, it is important to understand that they should only be used as a last resort. Extended periods of deferment or forbearance can lead to a larger loan balance and higher overall interest costs.
If you are experiencing financial difficulties, it is recommended that you contact your loan servicer to discuss your options. They can provide guidance on the best course of action based on your individual circumstances.
Remember, staying proactive and informed about your loan options is key to successfully managing your Direct Parent PLUS loan.
Loan Limits and Disbursement
PLUS loans, also known as Direct PLUS loans, are types of loans that parents can take out to help pay for their child’s education. These loans have higher limits compared to other types of federal student loans, making them an attractive option for families who need more funding.
The maximum amount that can be borrowed through a PLUS loan is determined by the total cost of attendance at the child’s school. This includes not only tuition but also other expenses such as housing, books, and transportation. The school’s financial aid office will provide information on the specific cost of attendance and the maximum loan amount that parents are eligible for.
It’s important to note that parents can apply for a PLUS loan for each academic year that their child is enrolled in school. The loan limits and disbursement will vary each year based on the cost of attendance and other factors.
Once a parent is approved for a PLUS loan, the funds are typically disbursed directly to the child’s school. The school will apply the loan funds to the child’s tuition and fees first. If there is any remaining loan amount, it will be disbursed to the parent to cover other education-related expenses.
It’s important for parents to understand that a PLUS loan is a debt that they are responsible for repaying. The loan repayment process typically begins after the final disbursement is made, although some parents may choose to defer repayment while their child is still in school.
Parents should carefully consider their financial situation and ability to repay the loan before taking out a PLUS loan. They should also explore other financial aid options such as scholarships, grants, and work-study programs to minimize the amount of debt they accumulate.
Understanding the Cost of Attendance
When considering a loan for graduate school, it is crucial to understand the cost of attendance. This includes tuition, fees, books, supplies, room and board, transportation, and personal expenses. By understanding the full picture of expenses, both the graduate student and the parent borrowing a PLUS loan can make informed financial decisions.
Tuition and Fees
Tuition and fees are the cost of enrolling in the graduate school or program. This can vary depending on the institution and the specific program of study. It is important to research and understand the tuition and fee structure before taking out a loan.
Books and Supplies
Books and supplies are additional costs that are often overlooked. Graduate students should budget for the necessary textbooks, course materials, and any specialized equipment required for their program.
Room and Board
Room and board refers to the cost of housing and meals. This can include on-campus housing, off-campus housing, or living with family. It is essential to consider the cost of rent, utilities, food, and other household expenses when calculating the overall cost of attendance.
Transportation
Transportation costs can vary depending on the location of the graduate school and the mode of transportation used. It is important to consider expenses such as gas, public transportation, car maintenance, or flights when budgeting for the cost of attendance.
Personal Expenses
Personal expenses include any additional costs not covered by tuition and fees, books and supplies, room and board, and transportation. This can include clothing, entertainment, medical expenses, personal care items, and other miscellaneous expenses. It is wise to budget for these expenses to ensure a realistic understanding of the total cost of attendance.
By understanding the cost of attendance, both the graduate student and parent borrowing a PLUS loan can budget accordingly and make educated decisions about their loan amount and repayment plan. It is essential to consider all components of the cost of attendance to avoid any financial surprises and ensure a successful graduate school experience.
Credit Requirements for Plus Loans
Plus loans, also known as Parent PLUS loans for parents or Direct PLUS loans for graduate students, are federal loans that can help cover the cost of education. These loans have some specific credit requirements that borrowers must meet in order to be eligible.
Credit Check
When applying for a Plus loan, the borrower’s credit history will be checked. This credit check is used to assess the borrower’s likelihood of repaying the loan. It is important to have a good credit history and a strong credit score to increase the chances of approval for a Plus loan.
Adverse Credit History
If the borrower has an adverse credit history, they may still be able to receive a Plus loan by obtaining an endorser who does not have an adverse credit history or by documenting extenuating circumstances.
An adverse credit history includes having a current delinquency of 90 or more days on any debt, as well as having more than $2,085 in total outstanding debt that is in collections or charged off in the past two years.
Please note: “An adverse credit history does not include having a credit score below a specific threshold.”
It is important to understand the credit requirements for Plus loans before applying. If you have any concerns about your credit history, it may be beneficial to speak with a financial aid advisor to explore your options.
Applying for Plus Loans with a Co-Signer
For parents who want to help their graduate student pay for school, applying for a Direct Plus Loan can be a great option. However, if a parent does not have a strong credit history or has a low credit score, they may need a co-signer to qualify for the loan.
What is a Plus Loan?
A Plus Loan is a federal loan available to parents of dependent undergraduate students or graduate students. It allows parents to borrow money to cover the cost of their child’s education. Unlike other federal student loans, a credit check is required for Plus Loans.
How Does a Co-Signer Help?
If a parent’s credit history or score is not strong enough to qualify for a Plus Loan, having a co-signer can increase their chances of approval. A co-signer is someone who agrees to be legally responsible for repaying the loan if the parent is unable to do so.
Having a co-signer with a strong credit history can reassure lenders that the loan will be repaid even if the parent faces financial difficulties. This can make the parent a more attractive candidate for the loan and increase the likelihood of approval.
Who Can Serve as a Co-Signer?
A co-signer can be any creditworthy individual who is willing to take on the responsibility of the loan. This could be a spouse, relative, or even a close family friend. However, it’s important to choose someone who has a good credit history and understands the potential consequences of being a co-signer.
How to Apply for a Plus Loan with a Co-Signer
To apply for a Plus Loan with a co-signer, both the parent and the co-signer will need to complete the loan application together. The co-signer will need to provide personal and financial information, just like the parent.
It’s important for both parties to understand that if the loan is approved, both the parent and the co-signer will be legally obligated to repay the loan. This means that if the parent is unable to make payments, the co-signer will be responsible for repaying the loan in full.
Applying for a Plus Loan with a co-signer can be a good solution for parents who want to support their graduate student’s education but may not meet the credit requirements on their own. By working together, parents and their co-signers can increase their chances of getting approved for a Plus Loan and provide the financial support needed for a higher education.
Repaying Plus Loans
Once a parent or graduate has received a Direct PLUS Loan, repayment begins shortly after the loan is fully disbursed. Here are some important things to know about repaying Plus Loans:
Repayment Options
Parent and graduate borrowers have several options for repaying their Plus Loans. They can choose to begin making payments immediately after the loan is disbursed, or they can defer repayment until after the student graduates or drops below half-time enrollment. Additionally, borrowers can enroll in an income-driven repayment plan, which bases monthly payments on their income and family size.
It’s important to note that interest begins accruing on Plus Loans as soon as the loan is disbursed, regardless of the chosen repayment option. This means that borrowers who choose to defer repayment will have a larger loan balance when they enter repayment.
Loan Servicers
Plus Loans are typically serviced by a loan servicer, who is responsible for managing the repayment process. Borrowers will receive information from their servicer about how to make payments, how to set up a repayment plan, and how to address any questions or concerns about their loan.
It’s important for borrowers to keep their loan servicer informed of any changes in contact information or financial circumstances that may impact their ability to make payments. Open communication with the loan servicer can help prevent any issues that may arise during the repayment process.
In conclusion, repaying Plus Loans is an important responsibility for parent and graduate borrowers. Understanding the repayment options available and maintaining open communication with the loan servicer can help ensure a smooth and successful repayment experience.
Options for Loan Forgiveness and Discharge
While Plus Loans are a great option for parents and graduate students to finance education, there are also options available for loan forgiveness or discharge. These options can help borrowers in difficult financial situations or who are unable to repay their loans.
Loan Forgiveness Programs
There are several loan forgiveness programs available for Plus Loan borrowers, including the Public Service Loan Forgiveness (PSLF) program and the Teacher Loan Forgiveness program. These programs are designed to forgive a portion or all of a borrower’s loan balance after a certain number of qualifying payments have been made.
The PSLF program, for example, forgives the remaining balance on the borrower’s Direct Plus Loan after they have made 120 qualifying payments while working full time for a qualifying employer. The Teacher Loan Forgiveness program, on the other hand, forgives up to $17,500 of a borrower’s Direct Plus Loan if they have been employed as a full-time teacher for five complete and consecutive academic years at a low-income school or educational service agency.
Loan Discharge
In certain situations, borrowers may be eligible for loan discharge, which means their loan is legally considered canceled, and they are no longer required to repay it. Some situations that may qualify for loan discharge include the death or permanent disability of the borrower or the closure of the school the borrower attended.
If a borrower passes away, their Direct Plus Loan will be discharged, and their family will not be responsible for repaying the loan. In the case of permanent disability, the borrower may be eligible for a Total and Permanent Disability Discharge, which cancels their loan obligations. Additionally, if the school the borrower attended closes while they are enrolled or shortly after they withdraw, they may be eligible for Closed School Discharge.
| Loan Forgiveness Program | Description |
|---|---|
| Public Service Loan Forgiveness (PSLF) | Forgives the remaining balance on a borrower’s Direct Plus Loan after 120 qualifying payments while working full time for a qualifying employer. |
| Teacher Loan Forgiveness | Forgives up to $17,500 of a borrower’s Direct Plus Loan after five complete and consecutive academic years of full-time teaching at a low-income school or educational service agency. |
It’s important for Plus Loan borrowers to be aware of these options for loan forgiveness and discharge. By taking advantage of these programs, borrowers can potentially have a portion or all of their loans forgiven, providing them with much-needed financial relief.
Defaulting on Plus Loans
If you have taken out graduate or parent Plus loans, it is important to understand the consequences of defaulting on these loans. Defaulting occurs when you fail to make your loan payments for a certain period of time, typically 270 days for Direct Plus loans.
Defaulting on Plus loans can have severe financial and credit consequences. Once you default, your loan may be transferred to a debt collection agency, which can add significant collection fees and interest to the amount you owe. The agency may also take legal action against you to collect the debt.
Defaulting on Plus loans can also damage your credit score. A default can stay on your credit report for up to seven years, making it difficult to obtain new credit, such as credit cards or a mortgage. It can also affect your ability to rent an apartment or get a job, as many employers and landlords check credit scores as part of the application process.
If you are struggling to make your Plus loan payments, it is important to explore options to avoid default. Contact your loan servicer to discuss repayment plans, deferment, or forbearance options. You may also be eligible for loan forgiveness programs if you work in certain public service fields or if you make consistent payments through an income-driven repayment plan.
Defaulting on Plus loans should be avoided at all costs. It is essential to fully understand your loan terms and responsibilities and to make your payments on time to avoid the negative consequences associated with defaulting.
Preventing Default on Plus Loans
Defaulting on a loan can have serious consequences, and Plus Loans are no exception. As a direct parent borrower of a Plus Loan, it’s important to take steps to prevent default and ensure that you are able to fulfill your repayment obligations.
Here are some key strategies to help you prevent default on your Plus Loans:
1. Understand the terms and conditions
Before accepting a Plus Loan, make sure you fully understand the terms and conditions. Familiarize yourself with the interest rate, repayment options, and any potential fees or penalties. Knowing what you’re getting into will help you plan and budget accordingly.
2. Create a realistic budget and payment plan
Take the time to create a realistic budget that accounts for all your expenses, including your Plus Loan repayment. This will help you determine how much you can afford to pay each month. Consider setting up automatic payments to ensure that you never miss a payment.
Additionally, if you’re struggling to meet your monthly payments, reach out to your loan servicer immediately. They may be able to offer you alternative repayment plans or options, such as income-driven repayment or deferment, to help make your payments more manageable.
By taking these proactive steps, you can significantly reduce the risk of defaulting on your Plus Loan. Remember, staying in good standing with your loan will not only positively impact your credit rating but also ensure that you can continue to access financial aid options for your child’s education in the future.
Plus Loans and Bankruptcy
Graduate students and parents who borrow direct plus loans are often concerned about what would happen to their loans in the event of bankruptcy. Bankruptcy is a legal process in which individuals or businesses can eliminate or repay some or all of their debts under the protection of the federal bankruptcy court.
Unfortunately, plus loans are not typically discharged in bankruptcy. This means that if a borrower files for bankruptcy, they will still be responsible for repaying their plus loans unless they can prove undue hardship. While it is possible to have the loans discharged in very limited circumstances, it is difficult to meet the requirements necessary for this to happen.
Undue Hardship
In order to have a direct plus loan discharged in bankruptcy, the borrower must prove that repaying the loan would cause them undue hardship. This can be a challenging standard to meet, as the court will consider factors such as the borrower’s current income, expenses, and future earning potential.
Some courts have ruled that to establish undue hardship, the borrower must demonstrate that they have made good faith efforts to repay the loan and that their financial situation is unlikely to improve in the future. Others have set a higher standard, requiring the borrower to show that they are unable to maintain a minimum standard of living while repaying the loan.
Bankruptcy as a Last Resort
While it may be tempting to consider bankruptcy as a way to discharge plus loans, it is important to understand the long-term consequences. Bankruptcy can have a significant impact on a borrower’s credit score and make it more difficult to borrow money in the future.
Instead of relying on bankruptcy, borrowers should explore other options for managing their plus loans. For example, they may be eligible for income-driven repayment plans, which can help make their monthly payments more affordable based on their income and family size. They could also consider loan consolidation or refinancing to potentially lower interest rates or extend the repayment terms.
Overall, while plus loans are not typically discharged in bankruptcy, borrowers facing financial hardship have options to explore before resorting to bankruptcy. It is important to seek guidance from a financial advisor or student loan expert to understand all available options and make an informed decision.
Financial Aid and Scholarships
When it comes to financing higher education, there are various options available to students and their families. In addition to scholarships and grants, loans are a popular choice for many individuals. One type of loan that can assist with covering educational expenses is the Direct PLUS Loan.
Direct PLUS Loan
The Direct PLUS Loan is a federal loan available to parents and graduate students. This loan is offered by the U.S. Department of Education and can help bridge the gap between the cost of education and other financial aid sources.
Parents can borrow a Direct PLUS Loan on behalf of their dependent undergraduate student, while graduate students can borrow this loan to finance their own education. This loan requires a credit check, and the borrower must not have an adverse credit history.
Repayment Options
Repayment for Direct PLUS Loans begins once the loan is fully disbursed. However, borrowers have the option to request a deferment while the student is still enrolled at least half-time and for an additional six months after the student graduates or drops below half-time enrollment.
Borrowers have the choice between the standard repayment plan, graduated repayment plan, extended repayment plan, or income-contingent repayment plan. Each plan has its own benefits and eligibility criteria, so it’s important to thoroughly research and choose the one that best fits your financial situation.
| Loan type | Interest rate | Loan fee |
|---|---|---|
| Direct PLUS Loan (Parent and Graduate) | Fixed at 6.28% | 4.228% fee |
It’s important to note that interest accrues on a Direct PLUS Loan during all periods, so it’s advisable to make interest payments while in school or during deferment to avoid capitalization.
Exploring and understanding different financial aid options, such as scholarships and loans like the Direct PLUS Loan, can help make higher education more accessible and affordable for students and their families.
Alternative Financing Options
While Parent PLUS Loans and Graduate PLUS Loans are popular options for financing education, there are other alternatives that parents and graduates can consider:
Private Student Loans
Private student loans are offered by banks, credit unions, and other private lenders. These loans can be used to cover the cost of education, and they typically have competitive interest rates. However, it’s important to carefully evaluate the terms and conditions of private student loans before borrowing, as the interest rates and repayment options may vary.
Scholarships and Grants
Scholarships and grants are excellent options for financing education without taking on debt. There are numerous organizations and institutions that offer scholarships and grants based on various criteria such as academic achievement, community service, or specific fields of study. Researching and applying for scholarships and grants can help parents and graduates offset the cost of education.
It’s important to note that these alternative financing options may not be available to everyone or may have specific eligibility requirements. It’s crucial to thoroughly research and evaluate which option is the best fit for your particular situation.
Regardless of the financing option you choose, it’s essential to create a solid plan for repayment and to carefully consider the long-term financial implications.
Considering the Benefits and Drawbacks of Plus Loans
Plus loans, also known as Parent Loans for Undergraduate Students, are a form of direct graduate loans that can provide financial assistance to parents who want to help their child pay for college. These loans are a popular option for financing education, but it’s important to carefully consider their benefits and drawbacks before making a decision.
Benefits of Plus Loans
1. Higher borrowing limit: Plus loans allow parents to borrow up to the full cost of attendance, which can cover not only tuition but also other education-related expenses such as room and board, books, and supplies.
2. Flexibility in loan repayment: Parents have the option to defer payments while their child is still in school, and interest rates are fixed, providing stability to loan repayments.
3. No income restrictions: Unlike some other financial aid options, Plus loans do not have income restrictions, making them accessible to a wider range of families.
Drawbacks of Plus Loans
1. Responsibility for repayment: Since Plus loans are taken out by parents, the burden of repayment falls on them. This can be a significant financial commitment, especially for parents who may be nearing retirement.
2. Higher interest rates: Plus loans generally have higher interest rates compared to other federal student loans. This can result in higher long-term costs for borrowers.
3. Limited forgiveness options: Plus loans have more limited forgiveness options compared to other federal loan programs. Parents may not qualify for certain forgiveness programs or income-driven repayment plans.
Before deciding to take out a Plus loan, parents should carefully consider their own financial situation and how it aligns with the benefits and drawbacks of this loan program. It’s important to evaluate whether the loan is manageable in the long term and to explore other financial aid options that may be available.
Resources for Plus Loan Borrowers
As a parent borrower of a Direct PLUS Loan, it is important to be aware of the resources available to you. The U.S. Department of Education offers various online tools and resources to help you manage your loan effectively.
One valuable resource is the Federal Student Aid website, which provides information about the different types of federal loans, including the Parent PLUS Loan. This website offers detailed information on eligibility requirements, application process, interest rates, repayment options, and more.
Another useful resource is the online loan counseling provided by the Department of Education. This counseling session is designed to help you understand your rights and responsibilities as a loan borrower. It covers important topics such as loan repayment, loan forgiveness, and loan consolidation.
Additionally, you can access your loan information and manage your loan account online through the Federal Student Aid website. This allows you to view your loan balance, make payments, and apply for deferment or forbearance if needed.
Finally, it is important to stay in contact with your loan servicer, who will be responsible for managing your loan after it is disbursed. They can provide you with information and assistance regarding your loan, including answering any questions you may have and helping you explore repayment options.
By utilizing these resources, you can stay informed and make well-informed decisions regarding your Parent PLUS Loan. Remember to take advantage of the available tools and seek assistance when needed to ensure successful loan management.
Glossary of Plus Loan Terms
1. PLUS Loan
A PLUS Loan, or Parent Loan for Undergraduate Students, is a type of federal student loan that allows parents of dependent undergraduate students to borrow money to help pay for education expenses.
2. Direct PLUS Loan
A Direct PLUS Loan is a type of PLUS Loan that is offered by the U.S. Department of Education. This loan is available to both parents of dependent undergraduate students and to graduate or professional students.
3. Parent PLUS Loan
A Parent PLUS Loan is a type of PLUS Loan that is specifically available to parents of dependent undergraduate students. Parents may borrow this loan to help cover the cost of their child’s education.
4. Graduate PLUS Loan
A Graduate PLUS Loan is a type of PLUS Loan that is specifically available to graduate or professional students. This loan allows grad students to borrow money to fund their own education.
| Term | Definition |
|---|---|
| PLUS Loan | A type of federal student loan that allows parents of dependent undergraduate students to borrow money to help pay for education expenses. |
| Direct PLUS Loan | A type of PLUS Loan offered by the U.S. Department of Education, available to both parents and graduate or professional students. |
| Parent PLUS Loan | A type of PLUS Loan specifically available to parents of dependent undergraduate students. |
| Graduate PLUS Loan | A type of PLUS Loan specifically available to graduate or professional students. |
FAQs About Plus Loans
Q: Who is eligible for a graduate Plus loan?
A: Graduate students who are enrolled at least half-time at an eligible institution and meet all other federal student aid eligibility requirements may apply for a graduate Plus loan.
Q: Can parents take out Plus loans?
A: No, Plus loans are only available to graduate students.
Q: What is the difference between a Plus loan and a Direct loan?
A: Plus loans are typically used by graduate students to cover any remaining cost of attendance after other financial aid has been applied. Direct loans, on the other hand, are available to undergraduate students.
Q: Are credit checks required for Plus loans?
A: Yes, a credit check is required for Plus loans. However, the credit requirements are less strict compared to traditional private loans.
Additional Resources
If you are a graduate student considering a PLUS Loan, it’s important to have all the information you need to make an informed decision. Here are some additional resources to help you understand the benefits and requirements of a Direct PLUS Loan:
Federal Student Aid website: Visit the official website of Federal Student Aid to learn more about the PLUS Loan program and access valuable resources such as loan calculators and repayment options.
Direct PLUS Loan Master Promissory Note: Before applying for a PLUS Loan, you will need to complete a Master Promissory Note (MPN). This legally binding document outlines your rights and responsibilities as a borrower.
Graduate PLUS Loan counseling: Some colleges and universities require graduate students to go through loan counseling before they can receive a Direct PLUS Loan. This counseling session will provide important information about your loan obligations and repayment plans.
Note: It’s crucial to carefully review all the terms and conditions of the loan and consult with a financial advisor if needed. Taking on student debt is a serious decision that can have long-term financial implications.
Question and answer:
What are Plus Loans?
Plus Loans are federal loans that are available to graduate or professional students, as well as parents of dependent undergraduate students. These loans are designed to help cover the cost of education that is not covered by other financial aid.
What is a Graduate PLUS loan?
A Graduate PLUS loan is a type of Plus Loan that is available to graduate or professional students. These loans have a fixed interest rate and can be used to cover the cost of education, including tuition, books, and living expenses.
What is a Direct PLUS loan?
A Direct PLUS loan is a type of Plus Loan that is available to graduate or professional students, as well as parents of dependent undergraduate students. These loans have a fixed interest rate and can be used to cover the cost of education, including tuition, books, and living expenses.
How do I apply for a Plus Loan?
To apply for a Plus Loan, you will need to fill out the Free Application for Federal Student Aid (FAFSA). Once your FAFSA is processed, your school’s financial aid office will determine your eligibility for a Plus Loan. If you are eligible, you will need to complete a Master Promissory Note (MPN) and undergo a credit check.
What are the benefits of Plus Loans?
One of the benefits of Plus Loans is that they can be used to cover the cost of education that is not covered by other financial aid. Plus Loans also have a fixed interest rate, which can make budgeting for loan payments easier. Additionally, Plus Loans offer flexible repayment options, including deferment and income-driven repayment plans.
What are Plus Loans?
Plus Loans are federal loans that are available to graduate students, professional students, and parents of dependent undergraduate students. These loans can be used to cover educational expenses that are not covered by other financial aid.
What is the difference between Graduate PLUS loan and Direct PLUS loan?
The Graduate PLUS loan is available to graduate and professional students, while the Direct PLUS loan is available to the parents of dependent undergraduate students. Both loans have similar terms and conditions, but the eligibility requirements differ.
How can I apply for a Plus Loan?
To apply for a Plus Loan, you will need to complete the Free Application for Federal Student Aid (FAFSA) and submit the application to your school’s financial aid office. The school will then determine your eligibility for the loan and notify you of the next steps.
What is the interest rate on Plus Loans?
The interest rate on Plus Loans is fixed, meaning it will not change over the life of the loan. The current interest rate for Plus Loans is 6.28% for the 2021-2022 academic year.
Can Plus Loans be forgiven?
No, Plus Loans are not eligible for loan forgiveness programs. However, there are other repayment options available, such as income-driven repayment plans, that can make the loan more manageable.