4 Benefits of PLUS Loans

PLUS loans offer various advantages for parents when financing the education of their undergraduate or graduate dependents. Although this type of government loan was initially made available to parents only, it was expanded in 2006 to graduate or professional students. Borrowers can request these loans from the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan Program (Direct Loan).

Benefits of the Loan

Some of the benefits parents and students  have with PLUS loans are:

  1. Full cost of education is funded. A borrower is allowed to borrower up to 100% of the cost of attendance, incurred during the course of the study. The amount of financial assistance that a parent or a graduate student can borrow is expenses, minus the amount of financial aid the student receives from other sources. For example, if the sum of the cost of attendance is $7,000 and the amount of the financial aid acquired from other loan programs is $3,000, the parent or student can borrow up to $4,000, which is the difference.  Aside from tuition fees and projects, the fund can also be used to pay the rent for room and board, projects, and other eligible school expenses.

  2. Lower interest rate. PLUS loans are low interest loans, making them affordable for parents and graduate students.  Direct PLUS loans have a fixed-interest rate of 7.9%, while PLUS loans underFFEL rate is 8.5%.

  3. Flexible repayment plans. Direct and FFEL PLUS loans offer various and flexible repayment plans that cater to the needs of each borrower based on their financial and repayment capabilities. The following options are:

    • standard repayment plan - A fixed amount is paid and should not be lesser than $50 each month. The borrower is given 10 years to pay the full amount of loans.

    • graduated repayment plan - A borrower starts to pay the loan at a lower amount and will increase every two years. He or she is given up to 10 years to fully pay the loan.

    • extended repayment plan - The loan is repayable up to 25 years and the amount borrowed should be more than $30,000 to become eligible for this plan. The parent or student can either choose the fixed annual (standard) or graduated payment options.

    • income contingent/income-sensitive repayment plan - Monthly payment is calculated based on the borrower's income and his or her spouse's income (if married), family size, and the total debt accrued in the loan.

    • income-based repayment plan - Monthly obligation is based on the borrower's income during a period or periods of financial hardships and can be adjusted each year.

  4. Consolidation of Loans. PLUS loans allow parents of independent undergraduates or graduate students to combine their PLUS loans with several eligible federal student loans. The borrower can pay his or her debts in one payment, instead of paying multiple loans every month. Utilizing this alternative makes the monthly obligations easier and affordable.

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