If you need to finance education costs for yourself or your child, you may want to consider a federal direct PLUS loan. These loans are eligible for the same protections as other federal student loans and generally offer more flexibility than loans from private lenders.
Federal direct PLUS loans are available to graduate students and the parents of dependent undergraduate students in order to help them cover education costs. These loans allow you to borrow up to the cost of attendance, defer payment until after graduation, and choose from a variety of repayment plans.
If you think that, direct PLUS loans may be the right financing option for you, keep reading to learn more about how they work.
This parameter considers loan term lengths, loan limits, and loan structure optionality (fixed and variable rate offerings). For each loan type offered, each of these features was evaluated using the five-point scoring system. Then, the various scores were aggregated and averaged to establish an overall loan features score.
The Direct PLUS Loan program gets a perfect 5.0 for Loan Features, which is attributable to its highly flexible and best-in-class term lengths and loan amounts.
Like any other financial product, direct PLUS loans have
their own unique advantages and disadvantages. Here’s a closer look at some of
the pros and cons.
Federal direct PLUS loans are available to eligible grad students and the parents of dependent undergraduate students to help them finance education costs. These loans should not be confused with federal direct student loans, which may be subsidized and are only available to student borrowers.
Federal direct PLUS loans generally have more affordable interest rates than private student loans and they also typically offer more repayment options available. If you qualify for one of these loans, it likely will be your best option.
Direct PLUS loans are fixed interest rate loans, but beyond that they come with plenty of flexibility. They allow you to borrow up to the cost of enrollment, defer payments until your or your child is done with school, and choose from three different repayment plans in order to ensure that payments remain manageable.
| Loan terms | 10-25 years, depending on repayment plan |
| Repayment period | You must begin making payments when the loan is paid out, unless you request deferment, which pauses payments until six months after you or your child graduate(s) or drops below half-time enrollment. |
| Loan amount | The cost of attendance (determined by the school), minus any financial aid received |
| Loan Structure Flexibility | Fixed interest rate loan |
Although these loans do come with an origination fee and a potential for a late payment fee, in total, they have fewer fees than you might expect from a private lender. Additionally, the federal PLUS loan interest rate is fairly low compared to other payment methods, like a personal loan or credit card.
| Borrowing/Origination Fees | 4.228% on loan funds disbursed between October 1, 2021 and October 1, 2023 |
| Prepayment Fees | N/A |
| Late Payment Fees | Up to 6% of the overdue payment amount |
| Maintenance Fees | N/A |
| Fixed Rates | 7.54% |
| Variable Rates | N/A |
Qualifying for a graduate PLUS loan or parent PLUS loan is different from qualifying for most other loans. Rather than basing qualification on the strength of your financial profile, it’s largely based on financial need, citizenship status, and enrollment status. However, notably, direct PLUS loan applicants must undergo a credit check and cannot have an adverse credit history.
| Institution Type & Course Load Requirements | You or your child must be enrolled in school on at least a half-time basis and must maintain consistent academic progress |
| Minimum Credit Score | A credit check will be performed and you must not be found to have an “adverse credit history,” which looks at delinquencies, charge-offs, bankruptcies, foreclosures, etc. |
| Minimum Income | N/A - Must demonstrate financial need |
| Maximum Debt-to-Income | N/A |
| Co-signer/Joint Application Requirements | Co-signers are allowed in the event of an adverse credit history |
Applying for a federal direct PLUS loan is slightly more complicated than applying for private student loans, but the added flexibility that these loans offer often makes it worth jumping through the extra hoops. In general, you have to complete the following steps in order to receive this type of federal aid.
Since federal direct PLUS loans are eligible for the same
federal protections as all other federal student loans, they are typically more
flexible than similar private loans. Here’s a closer look at the specific perks
and bonuses that they have to offer:
Added flexibility is what sets federal student loans apart
from private student loans. In addition to offering a deferment option that
allows you to delay payment until six months after graduation, enhanced
forbearance protections, and an affordable consolidation loan, the Department
of Education offers three repayment options for federal direct PLUS loans,
including:
Since federal direct PLUS loans are meant for more mature borrowers, specifically parents
and grad students, they do not have the same loan education requirements as
other federal direct loans.
Multi-channel payment optionality and mobile app
availability will depend on your loan servicer.
If you’re a parent who wants to help your child pay for
school or a grad student who needs extra assistance paying for your education,
federal direct PLUS loans may be your best option. These loans are afforded all
the protections of federal student loans and offer more flexibility than
similar private student loan programs.
Use the information
above to help determine if you might be a match for direct plus loans. Armed
with this knowledge, you’ll have a much better idea of whether or not they are
the right fit for you.
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