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Federal Direct PLUS Loans Review

Federal PLUS loans let graduate students and parent borrowers fill tuition gaps not covered by other types of financial aid.
Aug. 29, 2019
Loans, Student Loans
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5.0 NerdWallet rating

Bottom line: Best for parents who want the safety net federal loans offer, as well as graduate students who need to borrow beyond the federal unsubsidized loan limit.

768px-US-DeptOfEducation-Seal.svg
Type of loanFederal student loan
Loan terms10 to 25 years once repayment begins, depending on the plan
Loan amountsTotal cost of attendance minus other financial aid
Grace period6 months (must be requested for parent PLUS loans)
Related productsUnsubsidized student loans
Apply now for PLUS loans after filling out the FAFSA

Pros & Cons

PROS

  • More flexible repayment options for struggling borrowers compared with private lenders.
  • All borrowers who attend a school authorized to receive federal aid qualify.

CONS

  • May have higher interest rates compared with private lenders.
  • You pay an origination fee.
  • You can’t see if you’ll qualify without a hard credit check.

Full Review

The direct PLUS loan is a federal student loan that can be taken out by parents to help pay for their child’s college education, or by graduate and professional degree students.

PLUS loans are more like private loans than they are like other types of federal loans: They require a credit check; have higher interest rates and fees; and, for parents, come with fewer repayment options.

  • Graduate students should take out PLUS loans only after they’ve borrowed the maximum in unsubsidized federal direct loans.
  • Parents should take out PLUS loans only if they need the consumer protections these loans offer. Some parents may receive a lower interest rate through a private lender; shop around for a private loan before committing to a PLUS loan.

Federal Direct Plus Loans at a Glance

  • Loans are only available for eligible graduate students and parent borrowers.
  • Borrowers with adverse credit history typically can’t qualify on their own.
  • Parents and grad students can borrow up to the cost of attendance, minus other aid received.

How Federal Direct Plus Loans Could Improve

Federal PLUS loans may be the best option for you, but they’re not perfect. They could improve by:

» MORE: Compare parent loans: PLUS and private

Federal direct PLUS loan details

  • Soft credit check to qualify and see what rate you’ll get: No, but all eligible borrowers receive the same rate: 7.08%. Rates are fixed over the life of the loan.
  • Loan terms: 10 to 25 years once repayment begins, depending on the plan.
  • Loan amounts: Up to the school’s cost of attendance, minus other aid received.
  • Application or origination fee: 4.248% origination fee.
  • Prepayment penalty: None.
  • Late fees: Yes.

Financial

Borrowers must not have adverse credit history due to a previous student loan default, bankruptcy or other negative mark on their credit report.

If you have adverse credit, you can still get a PLUS loan if you complete PLUS Credit Counseling and either appeal the decision or apply with a co-signer who doesn’t have adverse credit.

Other

  • Citizenship: U.S. citizens and eligible noncitizens.
  • Location: Available in all 50 U.S. states.
  • Must be enrolled half-time or more: Must be enrolled half-time or full-time.
  • Types of schools served: Any school authorized to receive federal aid.

» MORE: Are you eligible for a parent PLUS loans?

In-school repayment options

Graduate PLUS loan payments are automatically deferred while borrowers are enrolled at least half-time in school and for the six-month grace period after leaving school.

Parent PLUS borrowers can request a similar deferment; otherwise, repayment begins within 60 days of when the loan is fully disbursed.

There is no penalty for making payments on any PLUS loan while in school, so you may opt to make immediate or interest-only payments to reduce your debt if you opt for a deferment.

Post-school repayment options

Borrowers are automatically enrolled in the standard 10-year repayment plan. To change your repayment plan, you must contact your loan servicer. You can use the federal student aid office’s Repayment Estimator to find out which plans you might be eligible for and to get monthly and overall payment estimates. While graduate PLUS borrowers are eligible for all the repayment plans listed below, income-contingent repayment is the only income-driven option available to parent PLUS borrowers.

  • Grace period: 6 months.
  • Standard repayment: Your payments are fixed in order to pay off the full loan in 10 years.
  • Graduated repayment: Your payments are initially lower and will increase, typically every two years, in order to pay off the full loan in 10 years.
  • Extended repayment: Your payments are fixed or graduated in order to pay off the full loan in 25 years.
  • Revised Pay-As-You-Earn (REPAYE): Any borrower with an eligible federal direct loan can qualify for payments set at 10% of your discretionary income. Your loan term increases from the standard 10 years to 20 or 25 years.
  • Pay As You Earn (PAYE): Your qualifications depend on your income and amount of outstanding debt. If you qualify, your payments will be set at 10% of your discretionary income and your loan term increases from the standard 10 years to 20 years.
  • Income-based repayment (IBR): Your qualification is based on your income and amount of outstanding debt. If you qualify, your payments are set at 10% or 15% of your discretionary income and your loan term increases from the standard 10 years to 20 or 25 years.
  • Income-contingent repayment (ICR): Your qualifications depend on your income, tax filing status and the number of people in your household. Your payments are capped at 20% of your discretionary income or the amount of your fixed monthly payments on a 12-year loan term, whichever is less. Your loan term increases from the standard 10 years to 25 years.

Deferment

All PLUS borrowers can request a student loan deferment from their loan servicer in several situations:

  • While enrolled at least half-time at an eligible college or career school, graduate fellowship program, rehabilitation training program for the disabled.
  • While experiencing economic hardship, up to three years.
  • While unemployed or unable to find full-time employment, up to three years.
  • While serving in the Peace Corps, up to three years.
  • While receiving treatment for cancer.
  • While on active military duty or for 13 months after the conclusion of that service or until you return to a college or career school.

General Forbearance

You can request student loan forbearance if you have financial difficulties, medical expenses, change in employment or other reasons your loan servicer deems acceptable. However, interest will continue to mount during any period of forbearance. If possible, you may consider making interest payments to prevent the total amount you have to repay from growing.

General forbearance is granted for no more than 12 months at a time. If you are experiencing hardship at the end of a 12-month period, you can request another. Your loan servicer may set a limit on the maximum period of time you can receive a general forbearance, but the Education Department has no limit.

Mandatory forbearance

Your loan servicer is required to give you forbearance, up to 12 months at a time, in a few situations:

  • You are serving in a medical or dental internship or residency program and meet requirements.
  • The total amount you owe each month is 20% or more of your total monthly gross income, for up to three years.
  • You are serving in an AmeriCorps position for which you received a national service award.
  • You are performing teaching service that would qualify you for teacher loan forgiveness.
  • You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
  • You are a member of the National Guard and have been activated by a governor, but you are not eligible for military deferment.

Death or disability discharge

Federal PLUS loans are forgiven if the borrower, or the student who benefitted from the loan (for parent PLUS loans), dies or becomes permanently disabled.

Loan servicer: Your loan is assigned to a loan servicer after it is disbursed. You may have one of nine servicers: CornerStone; FedLoan Servicing (PHEAA); Granite State – GSMR; Great Lakes Educational Loan Services Inc; HESC/Edfinancial; MOHELA; Navient; Nelnet; or OSLA Servicing.

Contact your servicer

  • Public Service Loan Forgiveness: Borrowers who make 120 payments on an eligible repayment plan (income-driven repayment) while employed full-time for a qualifying public service employer may qualify for loan forgiveness.
  • Teacher Loan Forgiveness: Teachers who teach full-time for five complete and consecutive academic years in a low-income school or educational service agency may be eligible for loan forgiveness of up to $17,500 in direct loans.
  • Loan forgiveness for income-driven repayment: After the loan term ends on any of the four income-driven repayment plans, the remaining balance is forgiven.
  • Borrower Defense to Repayment loan forgiveness: If a borrower’s school misled or engaged in any other misconduct or illegal activity, borrowers may be eligible for loan forgiveness.
  • Closed School Discharge: You may be eligible for 100% discharge of your direct loans if your school closes while you’re enrolled and you do not complete your program, or if your school closes within 120 days after you withdraw.

Is a federal direct PLUS loan right for you?

NerdWallet recommends federal student loans over private loans in almost all cases. But PLUS loans have some features that may make a private loan a more desirable option. As a general rule, take out student loans in this order:

  1. Choose federal subsidized and unsubsidized loans first. As a parent, that means your child will borrow as much as they need in federal loans in their own name, up to the maximum. As a graduate student, that means taking out the maximum in unsubsidized federal loans.
  2. Look into the interest rates you’d likely receive for private loans. Since these are based on credit history, borrowers with good or excellent credit will get the best rates. In addition to interest rates, look at lenders’ repayment alternatives and the flexibility they offer to borrowers who struggle to make payments. Private loans have limited repayment flexibility. But if you think you’ll be able to pay them off quickly or won’t need the option to postpone or lower payments, they may be cheaper.
  3. Take out PLUS loans if your credit isn’t strong enough to get a low-interest private loan, or if you plan to qualify for Public Service Loan Forgiveness. Use PLUS loans to fill a gap after subsidized and unsubsidized loans, grants, work-study and scholarships have been applied. Borrow as little as you can manage.

» MORE: Compare graduate student loans

How to apply for a federal PLUS loan

PLUS borrowers must go through an additional step beyond submitting the Free Application for Federal Student Aid, known as the FAFSA. Here’s what to do:

  1. Submit the FAFSA first. It’s easiest to file online using your Federal Student Aid ID. Learn how to complete it based on your individual situation with NerdWallet’s FAFSA guide.
  1. Check with your school how to proceed next. Most will ask you to apply for PLUS loans on studentloans.gov, but some may have other requirements.
  1. Apply for either a parent PLUS loan or a graduate PLUS loan online. The application must be completed in one session, so gather the documents in the “What do I need?” section first.
  1. On the application, request a deferment while the student is in school and for the six months after graduation. Otherwise, you’ll be required to make payments within 60 days after you receive the last loan disbursement.
  1. Make sure you’ve lifted any credit freezes you’ve set up at the credit bureaus. You won’t be able to go through the required credit check otherwise. Here’s how to unfreeze your credit.
  1. Sign a Master Promissory Note and attend entrance counseling if you’re a first-time graduate PLUS loan borrower.
Apply now for PLUS loans after filling out the FAFSA

STUDENT LOAN RATINGS METHODOLOGY

NerdWallet believes the best student loan is one you can repay at the lowest interest rate you can get. That’s why NerdWallet’s federal and private student loans ratings reward lenders that offer a variety of loan terms, limit their fees and penalties, and extend borrowers multiple options to avoid default. Points are also awarded for soft credit checks, underwriting transparency and other consumer-friendly features. Use these ratings as a guide, but we encourage you to shop around for the lowest interest rate you can qualify for. NerdWallet does not receive compensation for its reviews. Read our editorial guidelines.

5 stars out of 5 — Among the very best for consumer-friendly features

4.5 stars out of 5 — Excellent; offers most consumer-friendly features

4 stars out of 5 — Very good; offers many consumer-friendly features

3.5 stars out of 5 — Good; may not offer something important to you

3 stars out of 5 — Fair; missing important consumer-friendly features

2.5 stars out of 5 — Poor; proceed with great caution

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