Private alternative loans generally have variable interest rates, tied to either LIBOR or Prime, and can either rise or fall depending on interest rates. The actual interest rate offered to a student is most often based on your credit history. If you have superior credit, some lenders may discount the rate they offer you. The Federal Direct Grad PLUS interest rate is fixed at 7% (through 6/30/2018) and does not vary based on market conditions or credit scores. As with private alternative loans, there may be borrower benefits on the Federal Direct Grad PLUS to further discount the rate.
The Federal Direct Grad PLUS Loan program requires the student to pay a mandatory 4.264% (through 9/30/2018) origination fee. Alternative loan fees will depend on the lender and your credit score and can vary in amount.
Both alternative loan programs and the Federal Direct Grad PLUS offer deferment and forbearance options (in-school, economic hardship, etc.). Length of deferment/forbearance for alternative loan programs may vary by lender.
Interest accrues during in-school, grace, and deferment periods for both private alternative loans and the Federal Direct Grad PLUS Loan.
Alternative loans may offer a grace period between the time a student leaves the University and when the first payment is due. Federal Direct Grad PLUS loans disbursed on or after July 1, 2008, entitle the borrower to a 6 month grace period after they cease half-time enrollment.
Credit requirements are generally less stringent for Federal Direct Grad PLUS. Neither lack of credit history nor income to debt ratios will negatively impact eligibility. All loans have some form of credit check.
Federal Direct Grad PLUS Loans may be consolidated with other federal loans through the Direct Lending Program.
Federal Direct Grad PLUS Loans provide the same death and disability discharge benefits as Stafford/Direct Loans. Private loans may not carry these benefits.
Income Based Repayment provisions with Federal Direct Grad PLUS Loans may allow more manageable repayments for those students with higher loan debt and lower paying professions.
Certain public servants may qualify for loan cancellation provisions in the Federal Direct Federal Grad PLUS Loan program.