Grad PLUS Loans: Everything You Need to Know | Education

Student advocates say it’s important that students have clear, timely, and actionable information about the cost of a college education and the options available to them to cover those expenses, including loans.

This is especially true for graduate students considering applying for federal Grad PLUS student loans, which “can become particularly burdensome because they have a higher interest rate and because students can borrow up to their tuition,” says Michele Streeter, Principal. college affordability at the Institute for College Access & Success, a national nonprofit based in California and Washington, D.C.

“Students who wish to take out Graduate PLUS loans should carefully consider their offer of assistance and determine how much they need to borrow to cover their costs and whether they will earn enough in their field to meet their loan repayments,” she adds. “Students do not have to accept the full loan amount offered to them by their college.

What is a Grad PLUS loan?

The Grad PLUS loan is a type of direct federal PLUS loan available to eligible graduate and professional students to finance their education, including living expenses. A Grad PLUS loan is intended to supplement any direct unsubsidized loan for which these students are eligible.

The U.S. Department of Education provides Grad PLUS loans to qualified students through schools participating in the federal Direct Loan Program.

Streeter and other student loan experts say it’s worth noting that while some graduate students may qualify for private student loans that have lower interest rates than the Grad PLUS loan, they should be wary: federal student loans come with better consumer protections than even the most generous. private student loans.

How to Apply for a Grad PLUS Loan

Before applying for a grad PLUS loan, you must complete the Free Application for Federal Student Aid, a federal form also known as the FAFSA that determines financial need and eligibility and that schools typically require for aid. institutional like stock exchanges.

Most schools require you to apply for a Direct PLUS loan online, but some schools have different application processes. Federal Student Aid, a website operated by the US Department of Education, has a list of schools who participate in the federal direct lending program. When you select your school from the list, the site will let you know if the school has a different application process. If so, check with the school’s financial aid office to find out how to apply for a Grad PLUS loan.

A credit check will be performed during the application process. If you have a bad credit history, you may still qualify by getting an endorser, a type of co-signer who agrees to repay the loan if you don’t.

An approved borrower with an adverse credit history must follow credit counseling for borrowers PLUS, whether the student has an endorser or has been able to document extenuating circumstances to the satisfaction of the service of the education.

What to Remember About Grad PLUS Loans

For Grad PLUS loans first disbursed on or after July 1, 2022, and before July 1, 2023, the interest rate is 7.54%, down from 6.28% the previous year. This is a fixed interest rate, set by the US Congress, for the term of the loan. The maximum Grad PLUS loan amount you can borrow is the cost of attendance – which is determined by the school – minus any other financial aid you receive.

You do not have to start repayment until six months after graduation, the end of your studies or the end of the half-time enrollment period.

Interest will accrue on the loan during any period that you are not required to make payments, except in special circumstances such as temporary payment and suspension of interest granted by the federal government due to the coronavirus pandemic. COVID-19.

You can make interest-only payments while in school – which can save money in the long run – or allow the interest to be capitalized, meaning it will be added to your loan principal balance when you will start making payments.

The student loan officer assigned to you will let you know when your first and subsequent payments are due and can help you with any questions or concerns you may have during the repayment process.

Tips if you’re having trouble repaying Grad PLUS loans

It’s wise to contact your student loan officer to understand your options for keeping your loans in good standing, experts say. For example, there may be options if you want to change your repayment plan to lower your monthly payment, or request a deferral or forbearance that allows you to temporarily stop making payments.

However, remember that interest will continue to accrue during these periods.

There is a downside to Grad PLUS loans, according to Megan Walter, policy analyst at the National Association of Student Financial Aid Administrators. This is the loan origination fee, which is a percentage of your total loan amount charged to process your loan.

All Federal Direct Student Loans charge this fee, but for Grad PLUS Loans it is 4.228%, approximately four times the origination fee for subsidized and unsubsidized Federal Direct Student Loans. This rate applies to Grad PLUS loans disbursed on or after October 1, 2020 and before October 1, 2023.

Because of the origination fee, Walter explains, a student who borrows a $10,000 Grad PLUS loan will receive $9,577.20 of that amount, since the origination fee is subtracted from the loan up front.

“If you happen to need the full $10,000, that means you’ll have to borrow more than originally planned to cover loan costs, without running out,” says Walter.

Plus, the interest rate on Grad PLUS loans is the same for everyone, regardless of the applicant’s credit excellence.

“If you are a borrower or co-signer with excellent credit, you may be able to obtain a private student loan at a much lower interest rate than offered by the PLUS loan program, which can make you saving thousands in interest paid at the end of the loan term,” says Walter.

Grad PLUS loans, like other federal student loans, are extremely difficult to repay if you declare bankruptcy. They usually stay with you until you pay them off or die.

However, one way to erase some of the debt is to participate in a federal government loan forgiveness program. Your loan balances may be forgiven if you make 10 years of eligible payments while working in eligible employment with an eligible employer, such as certain educational and nonprofit institutions or federal, state, local, or tribal government .

Mary B. Cooper-Stewart, an independent financial aid counselor based in Texas, notes that student loans from private lenders are not eligible for the PSLF program.

“There is also a lot of new information regarding PLUS Loans, and we expect more to come,” she says. “I would suggest checking in periodically with a credit counselor to keep up to date with the latest news.”

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