Graduate PLUS – A New Option
for Graduate & Professional Students
Submitted by Scott Orris, American
Education Services
The Higher Education Reconciliation Act of 2005 (HERA) introduced
the Graduate PLUS loan into the Title IV loan programs allowing graduate
and professional students to borrow PLUS loans. The Graduate PLUS
program is effective for loans certified on or after July 1, 2006.
The terms and conditions applicable to the Parent PLUS loans also
apply to Graduate/Professional PLUS loans:
- Determination that the borrower
does not have adverse credit history
- Repayment beginning on the date of the last disbursement
of the loan – Graduate
PLUS allows for in-school deferment
- Fixed interest rate for FFELP of 8.5% (FDLP 7.9%)
- Applicants for these loans are required to complete the Free
Application for
Federal Student Aid (FAFSA)
- Borrower must have also applied for their maximum annual loan
eligibility under
the Federal Subsidized and Unsubsidized Stafford Loan Program before
applying
for a Graduate/Professional PLUS loan
- A revised PLUS MPN form will serve both parent and graduate student
borrowers
- U.S. citizen or eligible non-citizen
- Enrolled at least half-time
- Making satisfactory academic progress
- Not be in default on a federal student loan or owe a refund on
any federal student
aid program
For more information on the program requirements and eligibility
requirements of the Graduate PLUS loan you can access the Dear
Colleague Letter (http://www.ifap.ed.gov/dpcletters/FP0605.html)
With the Graduate PLUS Loan, students have more options
than ever. When comparing PLUS to private loans, here are some key points to
consider:
Qualification – If a graduate student has limited or no credit
history, it may be more difficult to qualify for a private loan.
With the Graduate PLUS Loan, not having credit history (or having
limited positive credit history) is normally acceptable.
Interest Rate – Although the interest rate for many private
loans may currently be lower
than the new PLUS program, those rates are not fixed, nor is there
typically an interest rate cap on private loans. The Prime Rate and
LIBOR can fluctuate dramatically over the life of the loan. Federal
fixed loans make it easier for students to plan for repayment.
Fees – With the Graduate PLUS program, students may pay as
much as 3% of their original loan amount in fees. With private loans,
these fees can be lower or higher depending on the borrower’s
credit history and income.
|
OCTOBER
2006
