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    Everything You Need to Know about Direct Plus Loans

    Judy Miller
    Judy Miller

    Direct PLUS loans consist of federal loans which are used for tuition payments by graduate or professional students and by parents of dependent undergraduate students.

    PLUS loans can help pay for costs that are not covered by other financial assistance. These loans are also referred to as Federal Stafford Loans.

    There are two types of Plus Loans:

    • Parent PLUS Loans - When the loan is applied by a parent of the dependent student.
    • Grad PLUS Loans - When the loan is applied by a professional or a graduate student.

    Rates And Fees On Plus Loans

    The rate of interest on all PLUS loans are fixed, meaning you’ll be paying the same interest over the term of your loan. 

    However, you’ll be liable to pay a loan disbursal and default fee. For a shorter repayment duration, the relative effect of the interest charged is greater as the total fee is amortized in a less time. 

    Parent Plus Loans Interest & Fees

    Academic SessionInterestFees
    2019 -20207.08%4.236%
    2018 -20197.60%4.248%

    Graduate Plus Loans Interest & Fees

    Academic SessionInterestFees
    2019 - 20207.08%4.236%
    2018 - 20197.60%4.248%

    Compare Rates & Fees

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    What are the Loan Limits?

    Parent Plus and Grad Plus loans are a great alternative to the standard private student loans as you’ll get extremely flexible repayment options. However, it can be costlier than most. If you default on this loan, it can lead to dire consequences like Social Security and wage garnishment.

    Both these loans have a combined limit depending on the type - subsidized or unsubsidized. These limits are based on your college’s total cost, and whether it is being applied by the parent or the student and is determined by the school. 

    The annual loan cap for self-employed students surpass the annual loan limit for undergraduate students.

    In simplest terms, the maximum amount a parent or a student can borrow equals the cost of attending an approved program after deducting any additional financial assistance that the applicant receives.

    Eligibility For Federal Plus Loans

    Before you apply for a Grad Plus loan, make sure to fill out the FAFSA form. While most colleges will ask you to submit your application online, some colleges may also have different processes. 

    The requirements include:

    1. You need to be a professional or a graduate student.
    2. You must be enrolled in an eligible program for at least half-time.
    3. You must have a sound credit history. If not, check the additional eligibility criteria.
    4. You must meet all other criteria for federal aid. 

    For Parent Plus loans, there are additional requirements. Moreover, both the parent and the dependent must meet the general criteria laid down for federal aid. Note that grandparents or guardians of the dependent aren’t eligible for Parent Plus loans unless you’ve legally adopted the dependent student.

    Other mandatory requirements include:

    1. You must be the biological guardian/parent or legally-approved adoptive parent.
    2. Your child must be enrolled at least half-time in an eligible program or college.
    3. You must have a strong credit history. If not, check the additional eligibility criteria.

    How To Apply?

    Grad PLUS

    Speak to the college's financial assistance office for a Grad PLUS loan. This loan is paid by the college’s financial assistance office.

    Hence, the college authorities administer the application process and assess the maximum amount that can be disbursed. 

    While most schools will ask you to apply online, some might have different processes. The Student Aid official site lists all of the schools that are approved for this program.

    When you select a preferred school from the list, the website will notify you if the school has an independent application process. 

    You’ll need the following details to apply online:

    • A verified FSA ID
    • The name of your preferred school
    • Employer details (address, email, phone number)
    • Personal details (address, email, phone number)

    You will get the money required to help your child pay for the college, once you know how to apply for a Parent PLUS loan. 

    Parents Plus

    These federal loans are available for parents who are interested in helping their dependent student cover the cost of college.

    To begin with, you need to fill in a FAFSA form with your child.

    1. Visit the official website to start filling up your application.
    2. Verified FSA IDs (applicant and dependent).
    3. The name of the preferred school.
    4. Details of the student (name, SSN, date of birth, permanent address)
    5. Personal details of the applicant (address, email, phone number)
    6. Employer details (address, email, phone number)

    Repayment Options

    Repayment of all Direct PLUS Loans begins within 60 days of full disbursement. However, parents may choose to delay the start of repayment until the end of the six-month grace period, normally after the dependent graduates or aren't participating half-time in the program. 

    You can also request deferment while the dependent attends the program, but remember that interest will accrue during this period. Some other repayment options include:

    - In-School Repayment - All borrowers are eligible for this. There are two options to start paying back the loan when you’re in school. You can either opt for a fixed repayment wherein you’ll be paying a fixed amount every month throughout the academic session, even during the grace period or separation. Another option is the interest repayment where you’ll only pay the accrued interest throughout the academic session.

    - Post-School Repayment - You will make principal and interest payments on the balance of the loan term after you have left school following the separation or grace period. This is pretty much straightforward and you’ll be paying less initially. The monthly payments will increase, ideally every 2 years, with the standard term as mentioned in your loan contract.

    - Deferment - The length of eligible deferment varies on the type you’re applying for. If you apply for a deferment because of financial hardship or a consistent unemployment, the lender might defer the loan by 3 years. But keep in mind that you’ll be liable to pay the interest accrued during this period.

    - Forbearance - This is another temporary way of stopping the monthly payments on your student loan. You’ll need to contact the lender to check if this is an eligible option. If eligible, your lender may grant you up to 12 months of forbearance, following which you’ll have to start making regular payments. However, interest and charges will accrue during this period.

    - Disability or Death Discharge - Disabled borrowers can apply for a total discharge of the loan; however this is a complicated process. This discharge requires a doctor's certification that you can’t work for a living owing to an illness or disability which is likely to cause death, or which lasts or is expected to last for no less than 60 months. 

    Parents with PLUS-loans can request discharge on the basis of their own disabilities. If both parents obtain a PLUS loan and only one is disabled, the other is always obligated to repay the loan. 

    To apply, you must file and submit an application for TPD discharge, along with documents demonstrating that you comply with the provisions of the US Department of Education.

    Loan Cancellation

    If you wish to request cancellation/forgiveness of a Grad Plus Loan, you can be eligible for it under the following circumstances:

    If you have a Parent Plus loan, and are looking to cancel it (forgiveness), there are certain conditions. Check if you’re eligible for one of the options mentioned below:

    • The student you borrowed for did not complete his program because the school was closed.
    • The school wrongly certified your eligibility to obtain the loan.
    • The loan was wrongly approved because of identity theft.
    • The student has left the program, but the school has not paid a loan refund in compliance with the laws and regulations applicable.

    Bottom Line

    Although there are charges and fees, Direct Plus Loans are still better than private loans because most of them offer deferment options and grace periods without additional charges. 

    These loans have fixed rates of interest and offer extended repayment terms as well as multiple repayment options. 

    If you’re interested in getting a PLUS loan, discuss the possibilities with the financial aid department of your preferred school.