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Student and Parent Loans
Alternative Loans and the Federal Direct Grad PLUS Loan Program
 

Many graduate/professional students rely on alternative loans to cover their costs of attendance. These loans are often standard components in financial aid awards, and you may borrow through them to cover all or part of the expected family contribution (although doing so increases your debt at graduation).

Alternative loans are available either through the Federal Direct Graduate PLUS Loan program (Grad PLUS) or private educational lenders. Lenders may offer borrower benefits to potentially reduce the overall cost of the loan to you. Doing research in advance could save you money both during school and through repayment.

You should consider the following when choosing to borrow either from the Direct Grad PLUS or a private alternative loan program.

  • 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. 

  • If you have an excellent credit rating and can thus get a good interest rate on your loan.

  • If you plan to pay off the loan quickly, thereby lessening the impact of a higher long-term interest rate while taking advantage of the no-origination fee loan.

  • If you believe you can get a variable alternative loan at a significantly better interest rate than the fixed Direct Grad PLUS.

  • If you prefer a fixed rate loan to the uncertainty of a variable rate loan.

  • If you don’t have great credit.

  • If you like the option of consolidating your Federal Direct Grad PLUS Loans with other federal loans.

  • If you like the further financial security of death/disability discharge benefits for you and/or your estate.

  • If you believe you can take advantage of either the Income Based Repayment, Pay as You Earn, or Public Service Cancellation provisions associated with the Federal Direct Grad PLUS Loan program.

 

  Federal Direct Grad PLUS Loan Program Alternative Loan Programs
Eligibility Enrolled at least half-time in a graduate degree program; FAFSA required before loan can be processed; qualified U.S. citizen or permanent resident; not in default on a prior educational loan; no negative credit.  Enrolled at least half-time in a graduate degree program; qualified U.S. citizen or permanent resident; no negative credit. International students must have a U.S. co-signer.
Annual Limit Borrow up to the cost of attendance less other aid (including maximum Direct Loan) Borrow up to the cost of attendance less other aid (including maximum Direct Loan).
Aggregate Limits No aggregate limit. Total educational loan aggregate debt limit established by the lender and may be based on program of study.
Interest Rate
7% (through 6/30/2018) fixed rate not based on credit review.
Lender benefits may further reduce rate.
Variable rate tied to LIBOR or Prime.
May be discounted based on credit review.
May be discounted based on credit review.
Fees 4.264% origination fee Check with your lender
Repayment 6 month grace period
Note: Repayment can be cancelled in the event of student death or disability
Most lenders offer 6-month grace period following graduation/leaving school.
Special Repayment Provisions
Income Based Repayment
Public Service Cancellation
N/A
Length of Repayment Standard 10-year repayment for loan borrowing under $30,000.  Extends to 25 years over $30,000. Repayment period varies by lender, and range between 10-30 years, based on amount borrowed.
Disbursement One disbursement per term of loan period. One disbursement per term of loan period
Recommended Deadline*  By June 15, 2018 to receive credit on your initial Fall Term bill.
Applications are still accepted after this date
By June 15, 2018 to receive credit on your initial Fall Term bill.
Applications are still accepted after this date
How To Apply File a FAFSA. Request a Direct Grad PLUS at www.studentloans.gov Contact your lender
 

 

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