NEW GRAD PLUS Program

Prior to July 1, 2006 only parents of undergraduate students were eligible for the PLUS loan (Parent Loan for Undergraduate Students). With the signing into law by President Bush, the Deficit Reduction Act of 2005 extended PLUS loan eligibility to graduate and professional school students.

The main difference between the Grad PLUS Loan and the Parent PLUS Loan is that graduate and professional students who are denied a PLUS loan because of an adverse credit history will not be eligible for increased Stafford Loan limits.

PLUS loans are limited to cost of attendance minus aid received, as certified by the school. All Grad PLUS applicants must complete and submit the Free Application for Federal Student Aid (FAFSA) before applying for a PLUS Loan. Before applying for a PLUS Loan, a graduate or professional student must also apply for and the school must determine the student's eligibility for the maximum annual subsidized Loan and/or unsubsidized Stafford loan amounts.

The Grad PLUS loan presents a never before available cost effective option for private alternative education loans. Eligibility for private education loans typically depends on a borrower’s debt-to-income ratio and FICO score. Eligibility for the PLUS Loan does not depend on these factors. You can get a PLUS loan even if you have a bad credit score, so long as you don't have an adverse credit history (i.e., no more than 90 days late on any debt and no defaults, bankruptcies or other adverse action on any Title IV debt).

Most private education loans are variable rate loans with an interest rate that depends on the borrower's (and/or co-borrower's) credit score. The PLUS loan has a fixed interest rate of 8.5% and 7.9% from the Direct Program as the result of a legislative oversight (private FFELP lenders provides for significant discounts and rebates). The PLUS loan does not depend on your credit score. There are no cumulative loan limits for the PLUS loan. The loan fees on a PLUS loan total 4%, while the loan fees on private education loans depend on your credit score and can be as high as 11%.

Sources include U.S. Department of Education, FinAid.com, and National Council of Higher Education Loan Programs (NCHELP).

July 2006