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Federal Direct PLUS Loans

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
Federal Direct PLUS
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Fixed interest rate loan
Loan amount up to the cost of attendance
Deferment options
Tara Mastroeni
Written by:Tara Mastroeni
Real Estate and Personal Finance Expert

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.

Summarized Rating

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.

Federal Direct PLUS Loan Pros and Cons

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.

Pros
Affordable interest rates.
Flexible repayment options.
Eligible for deferment and forbearance
Cons
Charges an origination fee

What is a Federal Direct PLUS Loan?

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.

Federal Direct PLUS Loan Features

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

Federal Direct PLUS Loan Interest Rates and Fees

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

Federal Direct PLUS Loan Qualification Requirements

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

Federal Direct PLUS Loan Application Process

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.

  1. Fill out a FAFSA form: To get started, you or your child will need to fill out the Free Application for Federal Student Aid (FAFSA) form. This form looks at your financial information in order to determine your eligibility for federal aid.
  2. Fill out the direct PLUS loan application: While there are separate applications for parent and graduate student borrowers, most schools allow you to fill out the application form for direct PLUS loans online. However, some schools have different processes. You’ll want to check with the school’s financial aid department to determine the correct way to apply.
  3. Undergo a credit check: In order to receive a direct PLUS loan, you’ll need to submit to a credit check to prove that you do not have an adverse credit history. If an adverse credit history is found, additional documentation may be required for approval.
  4. Sign the master promissory note: Once you’ve been approved for a loan, you’ll need to sign a promissory note, where you agree to the terms of the loan and promise to repay the loan balance. After all the paperwork has been signed, the loan funds will be disbursed.

Federal Direct PLUS Loan Perks and Bonuses

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:

Flexibility:

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:

  • Standard repayment plan: Fixed monthly payments, allowing you to pay off the loan in 10 years.
  • Graduated repayment plan: Payments start off lower and gradually increase every two years, allowing you to pay off the loan in 10 years.
  • Extended repayment plan: Payments can be fixed or graduated, allowing you to pay off the loan in 25 years. However, you must have over $30,000 worth of debt in order to be considered eligible for this plan.

Mentorship:

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.

Technology:

Multi-channel payment optionality and mobile app availability will depend on your loan servicer.

Final Thoughts

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.

Frequently Asked Questions(FAQ)

Who can take out a direct PLUS loan?

Direct PLUS loans are meant for parents of dependent undergraduate students and eligible graduate students.

How long does it take for a direct PLUS student loan to process?

The time it takes to process a direct PLUS loan will depend on how quickly you or your child complete all the necessary application requirements. It also depends on your school’s office of financial aid. Be sure to work closely with them to ensure that you've satisfied all the necessary requirements and are able to move forward.

How much money can a student get with a direct PLUS loan?

There is no set  limit on the amount you can borrow with a direct PLUS loan. Parents and grad students can borrow up to the cost of attendance at the school, minus any financial aid that they receive.

What is the difference between a parent PLUS loan and a direct loan for a student?

The difference is in who is responsible for paying the loan. With parent PLUS loans, the parent is the borrower and is responsible for making the payments. With direct loans for students, the student is the one responsible for repaying the loan.

Tara Mastroeni

Tara Mastroeni

Real Estate and Personal Finance Expert

My specialty? Breaking down technical concepts in a way that's easy to understand.

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