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PLUS loans are only available to graduate students and parents of undergraduate dependent students. They have an interest rate of 7% and an origination fee of 4.264%. PLUS loan calculations do not take into account expected family contribution (EFC). If a parent is taking out a Parent PLUS loan to pay for the education of a child, then it is the responsibility of the parent to repay this loan. These loans can be competitive with private loan offers depending on your credit score and certain risk factors.
Parents of undergraduate dependent college students are offered Direct PLUS loans (Parent PLUS) equal to the price of college less all other aid in the financial aid package. Parent PLUS loans are taken out by the parent, and have higher interest rates and origination fees than Stafford and Perkins loans. These loans are the responsibility of the parent to repay.
Parents must apply for eligibility for Parent PLUS loans. If they are not eligible, then the student will be able to receive higher amounts of Stafford aid equal to what an independent student receives.
Example – First Year Dependent Undergraduate
|Interest Accrues During Studies?||Yes|
|Max Annually||Total Cost Less Aid Received|
Direct PLUS loans are offered to graduate students. Total amount available is calculated as the price of college less all other aid in the financial aid package. Sometimes, private loans may have lower interest rates for graduate students than PLUS loans depending on the credit score and career path of the graduate student. It is important for graduate students to explore private loan interest rates and fees to compare to Direct PLUS loan rates and fees. This will help ensure that the graduate student is taking out the loan with the best terms.
The origination fee on these loans is a real drawback if you are using them to pay for an expensive graduate program. This origination fee can amount to thousands of dollars if you are using them to fund the majority of a graduate school education. You could be underfunded if you do not have savings to cover the difference between what you take out and how much will be given to you after subtracting the origination fee. More information on origination fees can be found here.