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Student Loans

Federal Direct PLUS Loans Guide

The majority of student loans in the U.S. come from the federal government, which offers a wide variety of loans to meet students’ financing needs. One of those products is called the Direct PLUS Loan, which helps thousands of students fund their education each year.

Types of Direct PLUS loans

The two kinds of Direct PLUS loans are:

Parent PLUSGrad PLUS
Who’s eligible?Biological, adoptive, or stepparents of dependent undergradIndependent grad students
Credit check required?☑️☑️
Interest rate 8.05%8.05%
Orig. fee4.228%4.228%

Parent PLUS Loans

The Parent PLUS loan is for parents of undergraduate students to take out a loan for their child’s school expenses. They must meet the following qualifications:

  • Be the parent (biological, adoptive, or in some cases, a stepparent) of a dependent undergraduate student enrolled at least half-time at an eligible school
  • Have a healthy credit history
  • Meet the general eligibility requirements for federal student aid. For Parent PLUS loans, the student must also meet the requirements.

The two situations where you can still borrow on behalf of your child if you have poor credit are:

  1. You can get an endorser, which is similar to a cosigner. The endorser can’t be the student you’re borrowing for.
  2. If you can document extenuating circumstances for your poor credit history, such as an account showing unpaid when you can prove you’ve already paid it or made payment arrangements with the creditor and have made at least six months’ worth of on-time payments.

The current interest rate on Direct Parents PLUS loans is 7.6%, and that rate is fixed for the life of the loan. An origination fee of 4.248% applies to all new Parent PLUS loans, taken out in addition to the original loan amount and added to the balance, where it accrues interest.

Graduate PLUS Loans

If you’re an independent graduate student, you can apply for a Grad PLUS loan yourself without your parents. Many of the conditions and stipulations are the same. You’ll need a good credit history or extensive documentation and must be enrolled in an eligible graduate program at least half-time.

The graduate version has a fixed 7.6% interest rate. You can borrow up to the total cost of attendance minus any previous financial aid, and it also carries a 4.248% origination fee.

How to apply for a federal Direct PLUS loan

Regardless of whether you’re a graduate student or a parent of an undergrad student program, you can follow these steps to apply for a Direct PLUS loan:

  1. Complete the Free Application for Federal Student Aid (FAFSA). This gives the federal government and your chosen school a view into your finances and how much of your education you can afford to fund. It helps determine your eligibility for federal grants, work-study programs, and loans. You will need to gather necessary documents such as your federal income tax return, W-2 forms, bank statements, and information on any other income or financial obligations.
  2. Review your Student Aid Report (SAR). After submitting the FAFSA, you will get a SAR summarizing the information provided. Review this report to ensure all details are accurate. The SAR will also include your Expected Family Contribution (EFC), which schools use to determine your financial aid package.
  3. Compare financial aid offers: Once your FAFSA is processed, compare financial aid offers from the schools where you applied to understand what grants, scholarships, work-study, and federal loans are available. Pay attention to the types and amounts of aid offered, as well as any conditions attached.
  4. Request a Direct PLUS loan. If you need additional funds beyond what’s offered in the initial aid package, consider applying for a Direct PLUS Loan from the StudentAid website, which has an application for each type of PLUS loan. Be prepared to provide information similar to what was required for the FAFSA, including your recent federal income tax return, bank statements, and details on any debts and financial obligations.
  5. Complete entrance counseling and Master Promissory Note (MPN). First-time borrowers of federal student loans must complete entrance counseling on the StudentAid website to ensure they understand the responsibilities and obligations associated with taking out a loan. You must also sign an MPN, a legal document in which you promise to repay your loans and any accrued interest and fees to the U.S. Department of Education. This can also be completed online.

Repayment options

Several repayment options are available for both loan types.

Repayment planAvail. for Parent PLUS?Avail. for GRAD Plus?

Standard repayment

This is the default repayment plan.

Available for

This plan is an option for all federal loans, including Parent PLUS and Grad PLUS.

How it works

With the standard repayment plan, your payment amount is fixed, and your loans are paid off within 10 years. This is your assigned payment schedule if you don’t request another payment plan.

Graduated repayment

This plan is geared to help those who need time after graduation to find a job, start earning money, and increase their total earning power.

Available for

This plan is an option for Parent PLUS and Grad PLUS loans.

How it works

Payments are lower at the beginning of the repayment term and increase about every two years as your earnings increase.

You’ll still end up paying the loan off within 10 years, but you’ll pay more in accrued interest than under the standard plan.

Extended repayment

This plan is meant to keep monthly payments as low as possible.

Available for

This plan is an option for Parent PLUS and Grad PLUS loans.

How it works

You can stretch out the loan term to 25 years. You must have more than $30,000 in outstanding loans, and you’ll pay far more on this plan than on others.

Saving on a Valuable Education (SAVE)

The SAVE plan (formerly the REPAYE program) is an income-driven plan.

Available for

This plan is an option for Grad PLUS loans.

How it works

SAVE holds your payment amount to 10% of your monthly discretionary income—money left over after you pay for housing, food, clothing, and medical care.

Your payment amount is recalculated each year based on your income and family size. Under this plan, you can also count your spouse’s loan debt.

Pay as You Earn Repayment (PAYE)

The PAYE program is similar to the SAVE plan.

Available for

This plan is an option for Grad PLUS loans.

How it works

REPAYE holds your monthly payment amount to 10% of your discretionary income. The maximum amount is capped at whatever your payment amount would be under the standard plan.

Income-Based Repayment (IBR)

The IBR program also bases payment on your income.

Available for

This plan is an option for Grad PLUS loans.

How it works

Your payment amount is 10% to 15% of your discretionary income but never more than the standard payment amount. Your loans are forgiven if you haven’t paid them off after 20 years.

The federal government views the forgiven amount as income. You may need to pay taxes on that amount at the end of the tax year.

You can use our IBR calculator to see what your payments and total loan cost would be under this plan.

Direct PLUS loans vs. private student loans

Most federal loans don’t require a credit inquiry, and some are based on financial need. PLUS loans more closely resemble student loans from private lenders because they’re based more on a borrower’s creditworthiness as a borrower than their level of need.

Federal Direct PLUSPrivate student loans
Interest rate7.6%4.00% – 17.00% (average)
Term lengths10 – 25 yearsDepends on the lender
Max loan amountThe full cost of attendance minus any financial aid receivedUp to the full cost of attendance, depending on the lender
Repayment optionsMany, including income-driven plans (Parents PLUS loans have fewer options)Might require immediate interest-only payments; some lenders have more flexible options.