PLUS Loans vs Stafford Loans

PLUS loans and Stafford loans are federal loan program offered through the U.S. Department of Education. The programs provide funding for a student's education. The amounts available and eligibility differ depending on the loan program. PLUS loans, which stands for Parent Loans for Undergraduate Students, are available to parents and student borrowers based on the amount of unmet need. Stafford loans are available to student borrowers with a capped interest rate and limit on the amount that can be borrowed.

Eligibility Requirements

To be eligible for a PLUS loan, a student or parent must meet the credit and other borrowing requirements of the private lender making the loan available. The loan does not have a limit as to the amount that can be borrowed and the proceeds of the loan can be used for those purposes related to education, including tuition, books, fees and housing.

A student attending an accredited college or university can take out a Stafford loan. The amount that a student can take out is based on the year they are in at school. 

Interest Rates

The interest rate on a Stafford loan is set by the U.S. Department of Education and is adjusted on an annual basis in accordance to other loan interest rates. Rates for PLUS loans are also capped and are set by private lenders. The rate charged for PLUS loans tend to be higher than the rates charged on Stafford loans because there is no limit to the amount that can be borrowed under a PLUS loan for students.

Repayment Provisions

The Stafford loan is typically paid back within 6 months after the student graduates or leaves school on a full-time basis. With a PLUS loan, interest and principal payments must be paid within 60 days after the loan proceeds have been paid out. It is possible to have a PLUS loan deferred until after the student leaves school, but interest will still accrue during the deferral period.

A PLUS loan or a Stafford loan can be adequate to meet any unmet need that a student or parent may have in funding education costs. Choosing between the loan types is determined by the student's needs and should be discussed with a qualified financial aid counselor.

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