For Direct PLUS Loans first disbursed on or after July 1, 2024, and before July 1, 2025, the interest rate is 9.08%. This is a fixed interest rate for the life of the loan.
What Are Some Reasons to Avoid PLUS Loans? First, PLUS loans have no automatic grace period. Then there's the fact they aren't eligible for most IDR plans. Then, borrowing too much is easy to do, and finally, they're nearly impossible to get out of, even in bankruptcy.
Under the Higher Education Act of 1965, as amended, interest rates are determined each spring for new Direct Loans being made for the upcoming award year, which runs from July 1 to the following June 30. Each loan has a fixed interest rate for the life of the loan.
Interest begins accruing immediately after disbursement. The federal government does not pay the interest on the Federal PLUS Loan. If the borrower does not pay the interest as it accrues, it will be added to the loan balance (capitalized) when the loan enters repayment, which increases the debt.
Key takeaways. To qualify for a parent Direct PLUS loan, your child must be an undergraduate student enrolled in an eligible college at least half time. You also have to pass a credit check or you may have to apply with a cosigner.
GLOSSARY. Direct PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students use to help pay for education expenses. Like Direct Subsidized and Unsubsidized Loans, these loans have a fixed interest rate.
Fixed-rate mortgages
With a fixed-rate loan, your interest rate and monthly principal and interest payment stay the same. Your total monthly payment can still change—for example, if your property taxes, homeowner's insurance, or mortgage insurance goes up or down.
The maximum Direct PLUS Loan amount that can be borrowed is the cost of attendance at your school minus any other financial assistance received.
If you have a good credit history and can qualify for a lower interest rate on a private student loan, it may be a better option for you. However, there are protections and benefits of federal loans that could be beneficial in some circumstances, so in that regard a Parent PLUS loan may be the better choice.
Are Direct PLUS Loans eligible for Public Service Loan Forgiveness (PSLF)? Your loan's eligibility for Public Service Loan Forgiveness (PSLF) depends on whether you have a Direct PLUS Loan for graduate or professional students or a Direct PLUS Loan for parents.
Look at your Truth in Lending Disclosure statement. Look for language along these lines: “Your loan contains a variable-rate feature. Disclosures about the variable-rate feature have been provided to you earlier.” If similar language is on the disclosure, you have an adjustable rate mortgage.
Yes, Federal Direct Loans, including the parent PLUS loan or a private student loan are available to meet these expenses. Off-campus living expenses are included in your total budget, so loans can be borrowed to cover them.
Can the loan be transferred to the student? No, a Direct PLUS Loan made to a parent cannot be transferred to the child. You, the parent borrower, are legally responsible for repaying the loan.
With federal PLUS loans, the government will check for an adverse credit history, although there is still no minimum credit score requirement. Those who have a less-than-perfect credit history, however, may need to meet additional requirements to get approved.
Direct Subsidized/Unsubsidized Loans have a lower fixed interest rate (6.8%) than Direct PLUS Loans (7.9%), and no interest is charged on Direct Subsidized Loans while you are in school at least half-time or during grace and deferment periods. Interest is charged on Direct PLUS Loans during all periods.
Pay Off High-Interest Loans First
With this approach, you pay off your loans from the highest interest rate to the lowest. You make the minimum payments on each balance except the highest-rate loan. You also make an extra monthly payment based on how much you can put toward the debt.
A parent PLUS loan can help fill any gaps not covered by your child's financial aid package. The government offers parent PLUS loans with fixed interest rates, flexible repayment options and even opportunities for student loan forgiveness.
The school will first apply the loan funds to the school account to pay for tuition, fees, room and board, and any other school charges. Any additional loan funds will be paid to the student as a credit balance (with your authorization) or sent to you.
How to Use the Double Consolidation Loophole: The key to using the double consolidation loophole is to consolidate each of your Parent PLUS Loans twice. In this scenario, a borrower can have as few as two Parent PLUS Loans.
The interest rate for federal direct PLUS loans is 9.08% for loans taken from July 1, 2024, to June 30, 2025. There is also an origination fee of 4.228%, which is deducted from each loan disbursement.