Student Loans-All about PLUS Student Loans

March 17, 2009 by  
Filed under Student Loans

Within the past few decades, the cost of education has risen dramatically and students who have started to rely on Stafford student loans have failed in trying to cover for most of their expenses. That’s what the Parent Loans for Undergraduate Students (PLUS) student loan program is here for.

Although the interest rate may be higher than those of other student loan programs, PLUS student loans are far more flexible and the student loans are not based on needs.

With the Federal Family Education Loan (FFEL) student loan program, private lenders pay for the student loan and the interest rate is 8.5%. Direct loan students are funded by the United States Department of Education with a direct student loan at 7.9%. This slight 0.6% difference can amount to a lot, though, even in average student loans. In just one year, a decade-long student loan of $25,000 can amount to $2050; that’s $130 in interest.

For exact calculations, play around with your own sample scenarios by using the student loan calculator at: http://www.bankrate.com/brm/mortgage-calculator.asp

With PLUS student loans, the total education cost can be borrowed, minus the amount that the student has already been awarded. PLUS money may not come cheap, but it can make a difference, depending on which school the student wishes to attend.

However, since PLUS student loans are not based on needs, they make a credit check. This does not mean that the student’s credit is taken under consideration, but the parents’ credit since they will be co-signing the promissory note. The parents hold the sole responsibility of paying back the student loan.

There are rare cases, however, where the parents’ credit history makes them ineligible; in these cases, another co-signer (a relative, perhaps) can help with the student loan. The co-signer must, however, take full legal responsibility as a co-borrower.

Interest rates aside, another change that student loan programs have gone through is the eligibility of graduate and professional students to apply for PLUS student loans. The same eligibility criteria and interest rates now apply for these students, as well; they, too, must be in an eligible institution and student loan program at least part-time.

Unlike a lot of Stafford student loan programs, PLUS student loans are repaid straight away, usually within two months after the student loan has been given. Interest starts to pile up right away, as well. Student loans are paid to the private lender, in case of FFEL student loans and to a United States Department of Education servicing center, in case of direct student loans.

Be sure to carefully and thoroughly calculate every cost involved with a PLUS student loan, and choose this student loan only as a last resort since any other student loan is sure to be less expensive.

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