The Federal Direct Graduate PLUS Loan was designed by the federal government to fill the gap between graduate and professional students' cost of attendance and the amount available through Stafford Loan sources. As undergraduate students, through their parents, had access to loans to meet up to the full cost of attendance but graduate students did not, the federal government extended the same type of loan program to graduate and professional students as it had to the parents of undergraduate students.
The Graduate PLUS program is set up with the same basic terms as the PLUS (Parent Loan for Undergraduate Students). These include:
- credit check required
- 7.9% interest rate
- 4% loan fees, 1.5% of which is rebated by the government on loans disbursed before July 1, 2012. The rebate is temporary until the student makes the first 12 monthly payments on tim
- no cumulative borrowing limit
- annual borrowing limit is cost of attendance minus other aid
- no grace period, but loan is deferred while enrolled at least half time
- eligible for deferments, forbearances, and all federal repayment programs
Unlike bank loans, the credit check on the Graduate PLUS loan does not use the student's credit score or a specified debt/income ratio. The credit check focuses on two particular categories: 1) the student's current credit situation and 2) any major past credit problems. With regard to the first item, the federal requirements state that a student may not be 90 days or more past due on any credit item. The second covers serious debt problems in the past five years, including bankruptcies, repossessions/foreclosures, judgments against the student, etc. And no student may receive federal aid of any kind if s/he has a defaulted student loan or if s/he owes a repayment on a federal grant and has not made satisfactory payment arrangement on these.
Students who are denied the loan for credit may appeal after reviewing their credit and paying off past due balances, or may obtain the loan using a co-signer who meets federal credit standards.
As there is no grace period on a Graduate PLUS loan, repayment will begin shortly after a student graduates or drops to less than half time. However, like the Stafford Loans, Graduate PLUS loans are eligible for deferments for unemployment, returning to school at least half time, economic hardship, and other conditions. Graduate PLUS loans are also eligible for income-based repayment and certain loan forgiveness programs.
More information on the Federal Stafford and Federal Graduate PLUS loans is available from the U.S. Department of Education. Students should download the Entrance Counseling Guide for Direct Loan Borrower at http://www.edpubs.gov/document/END0124B.pdf for more details about applying for and receiving federal direct loans, as well as repayment, consolidation, and loan forgiveness programs. Please note that the information about loan fee rebates is effective only until June 30, 2012.