Student PLUS Loan
There are two different kinds of PLUS loans – those borrowed by the parents of students to help cover the cost of tuition and other school related expenses, and those borrowed by graduate students to help pay for graduate school.
In each case the loans act as a supplement to other financial aid, minimizing or eliminating the amount of cash the student and their family have to come up with out-of-pocket. If desired, the loan can be for the entire cost of the education, which includes tuition, room and board, and any other eligible college expenses, minus other financial aid the student is receiving.
The Parents PLUS Loan
The purpose of the Parents PLUS loan is to give parents of college students the option to help cover educational expenses with the security of federally guaranteed low interest rates. Rather than take out private loans with varying rates, PLUS loans lock parents in to fixed, low rates.
Not only are the rates low, but most lenders are willing to work with parents to make sure the repayment plans are structured in a way that works best for them. If financial hardships occur, deferrment or delayed payment plans can be worked out.
Anyone can apply for PLUS loans and they are not need based. This means neither the amount of financial aid you are already receiving, nor your level of financial need plays a role in whether you are eligible for a PLUS loan. All it takes is a quick credit check to be sure the borrower’s (parent’s) credit is ok. If the credit check comes back clean, meaning they’re not later than 90 days on any debt, they will most likely be approved for the loan.
Another benefit for parents who take out a PLUS loan for their child’s education is the tax deductions that come with it. In a majority of situations the interest paid on the loan can be deducted from their income taxes.
The Graduate PLUS Loan
The Graduate PLUS loan is similar to the Parents PLUS Loan except it is for students who are enrolled in a graduate program. They, rather than their parents, are responsible for repaying the loan and it’s their credit that must be approved in order for them to be eligible.
If the student’s credit is acceptible, no cosigner is necessary. However, in cases where the student has unestablished or poor credit, the student include a cosigner when applying.
Payments can be made at anytime, with the option to defer them until six months after you are finished with graduate school, though the interest begins accruing as soon as you graduate. Most of the time interest on the Graduate PLUS loan is tax deductible as well.
