PLUS loans

PLUS loans
Name	Federal Direct PLUS Loan
Type	Federal student loan
Issuer	United States Department of Education
Manager	Federal Student Aid
Country	United States

PLUS loans. These are a category of federal education loans available through the William D. Ford Federal Direct Loan Program to assist with costs not covered by other financial aid. They are issued by the United States Department of Education and are designed for graduate or professional students and parents of dependent undergraduate students. The program is administered by the office of Federal Student Aid.

Overview

The PLUS loan program was established under the Higher Education Act of 1965 and later incorporated into the Direct Loan program by the Student Loan Reform Act of 1993. These loans are intended to fill the gap between a student's total cost of attendance at an eligible institution and the amount of other financial assistance received, such as Pell Grants or Stafford loans. Unlike other federal student loans, eligibility is not based on demonstrated financial need, but requires a check of the borrower's credit history. The funds are disbursed directly to the school, which applies them to the student's account for charges like tuition, room and board, and fees.

Eligibility and requirements

Eligibility for a PLUS loan is contingent upon the student being enrolled at least half-time in a program leading to a degree or certificate at a participating school that is eligible for Title IV funding. For a Parent PLUS loan, the borrower must be the biological or adoptive parent of a dependent undergraduate student, as defined by the Free Application for Federal Student Aid. For a Grad PLUS loan, the borrower must be enrolled in a program at a school like the Harvard Graduate School of Education or the Stanford Law School. A key requirement is an adverse credit check conducted by the Department of Education; a history of significant delinquencies or defaults on debts like a mortgage or auto loan can result in denial unless an endorser is obtained.

Types of PLUS loans

There are two distinct types within the program. The Parent PLUS loan is borrowed by a parent to pay for the education of a dependent undergraduate student attending an institution such as the University of Michigan or Berea College. The Grad PLUS loan is borrowed by a graduate or professional student enrolled in programs at universities like the Johns Hopkins School of Medicine or the Kellogg School of Management. Both loan types share the same fundamental terms, including interest rate structure and origination fees, but differ in the identity of the borrower and the associated repayment options.

Interest rates and fees

Interest rates for PLUS loans are set annually by Congress based on the high-yield 10-year Treasury Note auction, with a fixed rate for the life of the loan. For loans first disbursed on or after July 1, 2023, and before July 1, 2024, the rate is 8.05%. All PLUS loans also carry a loan origination fee, which is a percentage of the loan amount deducted before disbursement; this fee is also determined annually by the Bipartisan Student Loan Certainty Act of 2013. These rates and fees are typically higher than those for undergraduate Direct Subsidized Loans and Direct Unsubsidized Loans.

Application process

The process begins with the student completing the FAFSA for the relevant award year. The parent or graduate student borrower must then complete a separate PLUS loan application, which can be done online via the StudentAid.gov website. This application authorizes the credit check. The borrower must also complete a Master Promissory Note agreeing to the loan terms. The school's financial aid office, such as at Arizona State University or New York University, then certifies the loan amount based on the student's cost of attendance and other aid, leading to the Department of Education disbursing the funds.

Repayment and forgiveness

Repayment for Parent PLUS loans typically begins immediately after the final loan disbursement for the period of enrollment, though parents may request a deferment while the student is enrolled at least half-time at a place like Ohio State University. Grad PLUS loans enter a six-month grace period after the borrower ceases at least half-time enrollment at an institution like the Massachusetts Institute of Technology. Standard repayment is over ten years, but borrowers may enroll in various income-driven repayment plans, though options for Parent PLUS loans are more limited. Loan forgiveness may be available through programs like Public Service Loan Forgiveness for qualifying employment at organizations such as the American Red Cross or the Environmental Protection Agency, or via Teacher Loan Forgiveness for service in low-income schools.

Category:Student loans in the United States Category:United States Department of Education