Students may consolidate Grad PLUS Loans with other Federal Student Loans. Parents also may consolidate all of the federal loans they received to finance their child's college education into a single, fixed interest rate loan. All Parent PLUS Loans disbursed between July 1, 2006- June30th, 2007 have a fixed interest rate of 8.50%. Because new Federal consolidation loan interest rates are capped at 8.25% PLUS Student Loan borrowers should consider consolidating their loans immediately after the last disbursement check has been received.
What is required to qualify for a PLUS Loan?
The PLUS Loans require parents to have positive credit worthiness, not a positive credit score. Positive credit worthiness is defined as not being 90 days or more delinquent on any debts or if, within the last 5 years of the credit report, have been the subject of a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a Federal Student Aid debt. If parents don't pass the credit worthiness check, they still may be able to receive a loan if someone if they can find someone to co-sign for the loan.
Do PLUS Loans have a grace period similar to Federal Loans?
No. The first payment for PLUS Loans is due within 60 days after the last loan check has been allocated. Unlike Federal Loans, there is no grace period for these loans. Also unlike some Federal Loans, these loans are also unsubsidized, which means interest begins to accumulate at the time the first disbursement is made. Parents and graduate students must begin repaying both principal and interest while the student is in school. Payments may be postponed if the student is enrolled in school on at least a half-time basis. If postponement is allowed, payments are not due until the student graduates or falls below half-time status.
Is there a maximum loan amount?
No. PLUS Loans may be issued up to the total cost of attendance for the student. This may include living expenses, books, computers, etc. If the student applies and receives any other financial aid, this amount will be deducted from the PLUS Loan amount. If your cost of attendance is $10,000, for example, and you receive $4,000 in other financial aid, your parents can borrow up to $6,000. PLUS loan amounts DO NOT count toward the $138,500 Direct Loan limits for professional/graduate students.
How Does a PLUS Loan differ from a Private Loan?
To qualify for Private Student Loans, the borrower typically needs to have a favorable debt-to-income ratio and FICO score. Qualifying for the PLUS Loan does not require these factors. PLUS Student Loans can be issued if you have a bad credit score, so long as you don't have an adverse credit history (i.e., no more than 90 days late on any debt and no defaults, bankruptcies or other adverse actions).
Interest Rates and Costs for Private Loans vs. PLUS Loans
Interest rates for most Private Student Loans are adjustable or variable. This means the interest rate is subject to increase during the term of the loan. Also, the more adverse the borrowers credit score, the higher the starting interest rate. PLUS Loans come with a fixed interest rate and are not credit based. For PLUS Loans disbursed on or after July 1, 2007, the interest rate is fixed (at about 8.02 percent). Regarding fees, PLUS Student Loans fees will never exceed 4% of the total loan amount. Private Student Loan fees can be based on the credit scores of the borrower and go as high as 11%.
