PLUS loans are federal loans given to graduate students and parents of undergraduate students. Once called the Parent Loan for Undergraduate Students, these loans are now known simply as Parent PLUS and Grad PLUS loans.
Parent PLUS loans are given to the biological or adoptive parents of undergraduate students. In some cases, a stepparent may also be eligible for this type of loan.
Graduate PLUS loans may be taken out by graduate and professional students.
Basics of PLUS Student Loans
Fees and rates: PLUS loans have a low fixed interest rate of 7.9 percent. Interest accrues during the time in school, but borrowers typically defer payments until six months after they graduate. Most repayment plans last 10 years. There is a 4 percent fee for taking out a new PLUS loan, which is deducted from the total loan amount. For example, if a student or parent takes out a $10,000 PLUS loan, a $400 fee is deducted. Only the remaining $9,600 of the loan is dispersed.
PLUS loan limits: Unlike other federally backed loans, there is no maximum amount of a PLUS loan. It can be used to cover all education expenses that are not covered by other financial aid. Total education expenses are estimated by each school. They can include more than tuition itself and may cover costs such as living expenses and textbooks.
Assume the school estimates its annual cost of attendance to be $40,000, and assume the student receives $10,000 in grants and other loans. This leaves a cost of $30,000, which would be the maximum amount allowed under a Parent PLUS or Grad PLUS loan for that year.
Applying for a PLUS loan: In order to receive a PLUS loan, it is not necessary to complete a Free Application for Federal Student Aid (FAFSA). However, it is still recommended that every student submit a FAFSA to learn about eligibility for other loans like a Stafford loan or Perkins loan.
PLUS loans have their own applications, which can be completed on the Federal Student Aid website. Applicants are subject to a credit check and won’t be eligible for a PLUS loan if they have a bad credit history. If a student is denied a PLUS loan, he or she can try applying with a co-signer.