Direct Plus Loans
Direct Federal Undergraduate PLUS Loan
The Direct Federal PLUS (Parent Loan for Undergraduate Students) is a loan for the parents of dependent undergraduate students. The loan is not based on financial need and can be awarded up to the cost of attendance minus other aid the student is receiving. Your parents determine the amount they wish to borrow. This loan is subject to credit approval policies set by the Federal Government/Department of Education. This is a loan and must be repaid. Interest begins to accrue from the date of the loan disbursement. The interest rate on the loan is fixed at 7.9%. The Federal Direct PLUS Loan Program requires a 3% origination fee and a 1% default fee. There's an up-front rebate of 1.5%, so the net disbursement is 97.5% of the gross loan amount (3% origination fee + 1% default fee - 1.5% rebate = 2.5% fee). The borrower must make the first consecutive 12 monthly payments on time to keep the rebate.
You may want to factor in an allowance for this 2.5% fee when determining the amount to request. Usually, PLUS borrowers must start making payments within 60 days of receiving loan funds. All payments are made to the Department of Education and assigned servicer of the loan.
To receive this loan, your parent must complete the PLUS Loan Acceptance Form (included with the Award Notification Letter that is mailed to the student) and return it to the Student Finance Office. A PLUS Master Promissory Note (MPN) is also required. The parent applying for the loan must complete a Direct PLUS Master Promissory Note (MPN). You can complete the Direct PLUS Master Promissory Note (MPN) at complete the MPN online here.
Federal Direct PLUS Loan for Graduate Students (Grad PLUS)
Graduate and professional students can apply for a Federal Direct Graduate PLUS Loan. Students who have exhausted their Federal Stafford Loans or who seek additional funding may apply for this loan. This loan may be better than alternative/private loans which have variable interest rates. Eligible credit-worthy students can borrow up to the full cost of attendance, minus any other financial aid they are receiving. This program may be of interest to students who need additional assistance to cover educational costs after other forms of aid have been awarded/received. For a Grad PLUS Loan, the student is the borrower, as opposed to the undergraduate PLUS Loan where the borrower is the parent of the student. The interest rate on the loan is fixed at 7.9%. The Federal Direct PLUS Loan Program requires a 3% origination fee and a 1% default fee. There's an up-front rebate of 1.5%, so the net disbursement is 97.5% of the gross loan amount (3% origination fee + 1% default fee - 1.5% rebate = 2.5% fee). The borrower must make the first consecutive 12 monthly payments on time to keep the rebate.
You may want to factor in an allowance for this 2.5% fee when determining the amount to request. If you are denied based on adverse credit, you may obtain a credit-worthy endorser who is secondarily responsible for the loan. Usually, no payments are required while in school due to in-school deferment. Repayment begins when you cease to be enrolled at least half-time. You can consolidate the Grad PLUS Loan; interest rates are based on the weighted average of these loans.
To receive this loan, you must complete the Direct Grad PLUS Master Promissory Note (MPN). You can complete the Direct Grad PLUS MPN at complete the MPN online here.
Click here for additional information: Department of Education's Direct Grad PLUS Loan Questions & Answers