PLUS loans

Students studying in cafeCollege costs are rising, with some of the most expensive schools now costing upwards of $60,000 a year, according to Forbes. Most students can’t afford to pay these costs without help. As soon as you decide to seek higher education, you should start exploring what types of grants and scholarships, basically free money that doesn’t have to be paid back, you may be eligible for. The next step is to apply for student loans.

Federal student loans are funded by the U.S. Department of Education under the William D. Ford Direct Loan Program and usually have the most competitive terms and conditions. Direct Loans have low and fixed interest rates as well as flexible repayment plans. When federal loans are still not enough to cover the expense of college, you may wish to explore private loans through independent financial institutions, although this should be a last resort.

The Direct Loan program offers financial aid through several different loan types for undergraduate students, graduate students, and parents of undergraduate students to make higher education more accessible for most students. Federal loans include Direct Unsubsidized, Direct Subsidized, Direct PLUS, and Direct Consolidation Loans. The Direct PLUS Loan is a type of federal financial aid given to either graduate or professional degree students or the parents of dependent undergraduate students.

Eligibility Requirements

In order to be eligible for federal financial aid, you must:

In the case of a Direct PLUS Loan, if you are borrowing on behalf of your child, both you and your child need to meet these eligibility requirements. Graduate or professional degree students need to be enrolled in a degree- or certificate-granting program at least half-time at a participating school. Direct PLUS Loans are based on your credit history and borrowers with adverse credit may not qualify. If you do have adverse credit, you may still be able to obtain a Direct PLUS Loan by satisfactorily documenting the extenuating circumstances that led to your adverse credit history or by obtaining an endorser. An endorser cannot have adverse credit and agrees to be financially liable for you should you not be able to repay the loan. A dependent student cannot be the endorser for a parent seeking a Direct PLUS Loan on their behalf.

Loan Disbursement

Direct PLUS Loans are disbursed at least twice a year, usually at the beginning and midpoint of your school year or at the start of each semester or quarter. Loans are generally disbursed directly to the school to pay for education-related expenses, including:

The school will apply the funds toward the balance of your school account first and then usually disburse remaining funds directly to you to pay for additional education-related expenses. The school will notify you, or your parent if your parent took out the loan, of the amount and how the remaining funds will be disbursed to you either by check or some other means determined by the school. You should receive a disclosure statement detailing the amount of your loan, disbursement amount, and dates as well as any fees associated with your loan.

For a federal student loan, the U.S. Department of Education is your lender, but the loan is actually managed through an independent loan servicer chosen by the government. Your loan servicer is chosen for you and will be your point of contact through the life of your loan. You will pay your bills directly to your loan servicer when repayment starts. You should contact the loan servicer for any questions regarding your repayment options.

Repayment Information

GradPLUS Loan Cosigner

Unlike other federal Direct Loans, Direct PLUS Loans do not have a grace period, or period after graduation before repayment starts. Generally, you will need to start repaying your Direct PLUS Loan within 60 days of your final loan disbursement. There are circumstances in which you can apply for a deferment, however. Deferment is when you loan payments are deferred for a period of time, usually up to six months following graduation, dropping below half-time status, or leaving the school. You may be eligible for deferment if you are a parent borrower also attending school or while your student is still enrolled school at least half-time and for six months thereafter.

You have the choice of either the standard, extended, or graduated repayment plans for a Direct PLUS Loan. The standard repayment plan helps you to pay off your loans faster, meaning you will pay less in the long run. Standard repayment plans give you up to 10 years to pay off your loans with a minimum payment amount of $50 a month. If you have incurred more than $30,000 in federal student loan debt, you may choose the extended or   graduated payment plans. The extended payment plan has two options, either through fixed or graduated payments, and gives you up to 25 years to repay your loans. Fixed means you pay the same each month, similar to the standard repayment plan, although with lower monthly payments for a longer amount of time. Graduated repayment plans start with lower monthly payments and every two years your payment amounts increase. This is a good option if you expect your income to rise. Payments will increase gradually, and no single payment will be more than three times the amount of any of your payments.

It is important to remember that while graduated and extended repayment plans will lower your monthly payments, by increasing the repayment period of your loan, you will raise the amount of interest and therefore the total amount you will end up paying over time. If you can afford to pay more per month and pay off your loan faster, you should do so. Most loan servicers have many options to make repayment easy and convenient, including automatic debit, electronic, and phone payments as well as a mail-in option. If you have trouble making payments, contact your loan servicer immediately so you can set something up and salvage your future credit scores.

Loan Forgiveness and Forbearance

Sometimes you just cannot make your loan payments and you don’t qualify for deferment. There may be options available to you that will either forgive your remaining debt, or reduce or stop payments for up to 12 months. Loan forgiveness for a Direct PLUS Loan is offered for the following circumstances:

When a loan is forgiven, it means you no longer have to pay it back. Contact your loan servicer for more information regarding loan forgiveness.

Forbearance can either greatly reduce your monthly payments or stop them altogether for a set period of up to a year. Direct PLUS Loans may be eligible for either a discretionary or mandatory forbearance. A discretionary forbearance may be granted for either a demonstrated financial hardship or illness. You have to request the forbearance through your lender, and they decide whether or not you will qualify. Your lender is required to grant you a mandatory forbearance if you meet certain eligibility requirements, including:

Interest will continue to accrue during forbearance. You will likely have to provide documentation to receive a forbearance, and you should check with your loan servicer on how to apply if you think you may be eligible.

For more detailed information on your financial aid options, continue browsing our site.

 

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