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.
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.
Direct PLUS loans are federal loans that graduate or professional degree students or parents of dependent undergraduate students can use to help pay for education expenses. Direct PLUS loans have a fixed interest rate and are not subsidized, which means that interest accrues while the student is enrolled in school.
If you got your Direct PLUS Loan on or after July 1, 2024, and before July 1, 2025, it will have a fixed interest rate of 9.08% after the payment pause ends. If your loan was disbursed before July 1, 2024, it likely has a different interest rate. View interest rates for loans disbursed earlier than July 1, 2024.
Parent PLUS loans can potentially be forgiven after 10 years under specific conditions, such as through the Public Service Loan Forgiveness (PSLF) program after consolidation into a direct consolidation loan. Parent borrowers must enroll in the Income-Contingent Repayment (ICR) plan to qualify for PSLF.
How much can I borrow in Direct PLUS Loans? There are no set annual or aggregate limits. You may borrow up to your full cost of attendance, minus any other financial aid you receive (including Direct Subsidized Loans, Direct Unsubsidized Loans, scholarships, and certain fellowships).
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.
Don't defer payments if you can avoid it – Delaying loan payments can be helpful if you're on a tight budget, but it can also increase your interest costs. That's because your PLUS loans' interest will accrue throughout the deferment period and inflate your outstanding balance.
There's no penalty if you make payments before they are due or pay more than the amount due each month.
If you're a parent or graduate student seeking a Direct PLUS Loan, one of the requirements to qualify is that you must not have an adverse credit history. If your application is denied because of an adverse credit history, don't give up. You still have options.
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.
In addition, the graduate/professional student, the parent or the dependent student must not be in default on any federal education loans or owe an overpayment on a federal education grant, and must meet other general eligibility requirements for the Federal Student Aid programs.
You can take a tax deduction for the interest paid on student loans that you took out for yourself, your spouse, or your dependent. This benefit applies to all loans (not just federal student loans) used to pay for higher education expenses. The maximum deduction is $2,500 a year.
Parent PLUS loans can be a good alternative to private student loans because they offer more flexible repayment options. But Parent PLUS loans can be costlier than other options, and consequences are harsh for default, including the potential for wage and Social Security garnishment.
*The Federal Direct PLUS Loan program charges an origination fee of 4.228% for loans disbursed after October 1, 2020, and before October 1, 2025.
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.
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.
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.
You must complete a Direct PLUS Application for each year you wish to receive a graduate (grad) PLUS loan.
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.
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.
If you can't pay off the loan immediately, you have two options: rehabilitation and consolidation . Rehabilitation: After 9 months of reasonable payments (based on your income), your loan will be in good standing. Rehabilitation removes the default note from your credit report.
The government doesn't forgive Parent PLUS Loans when you retire or draw Social Security benefits, but it has programs that will wipe out your remaining balance after you've made a number of student loan payments under an income-driven repayment plan.