By Ryan Laspina
Analyst, Red Flags and External Reviews at APUS
The Direct PLUS Loan is a frequently used type of Federal Student Aid (FSA). This loan is intended for specific segments of the U.S. population, unlike other types of loans that are available to a wide range of students. Direct PLUS Loans also have unique eligibility criteria, application process, loan rates and responsibilities.
Direct PLUS Loan Eligibility
To qualify for a Direct PLUS Loan, you must fall into one of two categories:
- Graduate or professional student who is enrolled at least half time
- Parent of a dependent undergraduate student who is enrolled at least half time
The school you attend must be eligible for the Direct PLUS Loan program, and you must pass a credit history check. If you have an adverse credit history, you become ineligible to receive a Direct PLUS Loan. In addition, you (or your dependent) must meet all the eligibility requirements to receive any type of FSA.
Applying For Direct PLUS Loans
To apply for the Direct PLUS Loan, contact the university’s financial aid department for instructions on how to request a Direct PLUS Loan. Then, fill out the Free Application for Federal Student Aid (FAFSA) and submit it.
After completing the instructions, you’ll need to sign a Direct PLUS Loan Master Promissory Note (MPN) agreeing to the terms of your loan. If the Direct PLUS Loan is the first loan you have ever received, you must complete entrance counseling before receiving your funds.
Direct PLUS Loan Rates
Direct PLUS Loans are usually the last form of FSA factored into your Cost of Attendance (COA). For Direct PLUS Loans, you can borrow an amount equal to your COA minus any other FSA you have already received.
The interest rate for Direct PLUS Loans between July 1, 2016 and July 1, 2017 is a fixed rate of 6.31%. This is a high interest rate, so you should carefully study your financial situation before applying for a Direct PLUS Loan. In addition, be aware that Direct PLUS Loans carry a loan fee of about 4.27%.
Your Responsibilities Regarding the Direct PLUS Loan
Because Direct PLUS Loans have high interest rates, it is important you fully understand all of the details associated with these loans. If you are a graduate student, you’re expected to pay back your Direct PLUS Loan back after being removed from half time status for at least six months (a grace period).
Parents of dependents will be expected to start repaying a Direct PLUS Loan as soon as the loan has been fully disbursed. If you are financially unable to pay back the loan right away, talk with your loan servicer about deferment options.
There are various loan repayment plans that are available for Direct PLUS Loans. All of the traditional repayment options are not available for Direct PLUS Loans, so it’s important to speak with your loan servicer so you fully understand different repayment options.
If you take out a Direct PLUS Loan as a parent of a dependent undergraduate student, you cannot transfer the loan responsibility to your child at any time. You, as the parent, are solely responsible for the repayment of that loan.
Think Carefully before You Apply for This Loan
Taking out a Direct PLUS Loan requires careful consideration. This type of loan should only be used if other, more borrower-friendly loans are not available or they do not cover your COA.
Since graduate students cannot receive the Pell Grant, a Direct PLUS Loan may be useful if you need additional funding beyond what Direct Loans can offer. Remember though, interest rates and loan fees are fairly high for this loan, so it may not be wise to take out large Direct PLUS Loans. If you think a Direct PLUS Loan is a viable option for you, make sure you discuss your eligibility with your school.