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PLUS Loans

Article on PLUS Loans

The U.S. Government recently overhauled the federal student loan process, making federal loans the largest source of student loans. Federal loans have better terms than private loans including lower interest rates, better payment postponement options, longer repayment terms, and less stringent credit requirements. Available loans include: Perkins and Subsidized Stafford loans, for those demonstrating financial need, Unsubsidized Stafford loans, distributed irrespective of financial need, and Federal Parent and Graduate PLUS loans, offering lower cost financing to parents and graduate students.

Applying for Aid

To apply for federal aid, you must first fill out the Free Application for Federal Student Aid (FAFSA). This can be completed in hard copy or online. Schools then use your FAFSA to calculate your award package for the year. Award letters are distributed with information on eligible funding options. Loans are the only sources of aid that must be repaid. All alternate funding that can be obtained should, therefore, be exhausted before accepting loans.

Federal Loans for Students Demonstrating Financial Need:

Federal Stafford Loans are for undergraduate, graduate, and professional degree students enrolled at least half-time. Subsidized - means that the U.S. Department of Education agrees to pay all of the interest that accrues on the loan during enrolment and grace periods. Perkins loans are low-interest loans offered to eligible students demonstrating financial need. Priority is given to those students displaying exceptional financial need. Perkins loans can be distributed to both full and part-time students.

Federal Unsubsidized Direct Stafford Loans

Unsubsidized Stafford Loans do not require demonstrated financial need. Payable interest accumulates on these loans from dispersal. Unsubsidized loans have the same variable interest rate as subsidized loans, adjusted each year on July 1st. Current education loan interest rates can be checked here. You can choose to pay the interest on the loan as it accrues, or you can let the interest grow & capitalize. Choosing not to repay interest as it accrues will increase the repayment of the loan.

Federal Parent PLUS & Federal Graduate PLUS Loans:

Parent Plus Loans are loans that parents can obtain to help pay for their dependent child’s undergraduate education. A FAFSA is not required for acceptance of Parent PLUS loans, as these loans become the full responsibility of the parent after dispersal. Graduate Plus Loans are loans that graduate and professional degree students can obtain to pay for their studies. Both of these loans are set with a fixed interest rate of 7.9%. Eligibility requirements include half-time enrolment and credit verification.

When it comes to financing education, it is important to be aware of all federal loan programs. When you receive your award letter, therefore, be sure to review all the options in detail, accepting all grants and additional funding before turning to loans. Loans should then be taken out in an order that meets financial need at the lowest cost, starting with Perkins and Subsidized loans. Additional information can be found about the loan application process and repayment for all of the aforementioned loans at the Federal Student Aid website.