PLUS Loans vs Perkins Loans

PLUS loans and Perkins loans are federal student loan programs that enable students and parents to access the necessary funding to meet higher education costs. Both loan programs are administered through the U.S. Department of Education (DOE) and are made through private lenders (with the exception of the Direct PLUS loans made through DOE). 

The PLUS Loan

PLUS loans, whether Direct PLUS or the Federal Family Education Loans (FFEL) made through private lenders, allow a parent to borrow an amount equal to the amount of need necessary to fund education costs. For example, a student attending an institution that costs $30,000 and has qualified for $15,000 in aid may receive a PLUS loan up to $15,000, which represents the amount of unmet need. The amount also removes any expected family contribution, as determined on the Free Application for Federal Student Aid (FAFSA).

Perkins Loan

Perkins loans are need based and do not require a parent or student to meet credit qualifications. With these loans, there is no need for a cosigner. A student, or parent, is eligible to borrow the necessary amount to meet their unmet need, provided that they are not in default on any other federal debt.

Loan Qualification

A parent or student seeking to apply for a Direct PLUS or FFEL PLUS student loan must meet the credit requirement for the loan. A parent or student with bad or poor credit will be required to have an eligible cosigner in order to receive the loan otherwise the loan application will be denied. 

In the case of a Perkins loan, the only qualification that has to be met is the need for the funds to pay for higher education costs. This need is determined on the FAFSA that every student seeking federal student financial aid must complete.

Repayment Terms

A Direct or FFEL PLUS loan is paid back within 60 days after the disbursement of funds is made to the qualifying institution. The loan is not subsidized and therefore the parent or student responsible for the loan must make both interest and principal payments. A deferral may be requested that delays repayment of the loan until 6 months after graduation, or when the student ceases to be at least a half-time student. Interest will, however, accrue during the deferral period.

Perkins loans on the other hand, are subsidized and do not have to be paid back until 6 months after the student graduates or leaves school. As long as the student is a half-time student attending an accredited college or university, the loan is deferred.

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