Federal Direct PLUS Loan for Grad & Law Students
Beginning on July 1st, 2006 graduate and law student may borrow under the Federal Direct PLUS Loan program. Lewis & Clark graduate and law students may choose either a Federal Direct PLUS Loan or a private loan to cover educational costs after they have exhausted their Federal Direct Loan eligibility. Be aware that both the Direct PLUS and private student loans are credit-qualified loans. Not all students will meet the credit qualifications to borrow under these programs.
When considering which loan to apply for there are a few important facts to keep in mind:
- Most private loans come with a variable interest rate and no fees. The Direct PLUS Loan, on the other hand, offers a fixed 6.41% interest rate for the life of the loan and disbursements are reduced by an origination fee.
- While both Direct PLUS Loans and private student loans are credit-qualified loans, credit criteria are usually more stringent on private loans.
- The Direct PLUS Loan does not offer a grace period, while private loans usually do. See “Deferment and Forbearance” section below for more information.
- The Direct PLUS Loan is permitted in Federal Consolidation Loans and private loans are not.
How to Apply
If you have not already done so, you will need to file a Free Application for Federal Student Aid (FAFSA) before your Federal Direct PLUS Loan may be originated. You may do so online at www.fafsa.ed.gov.
Fees and Disbursement
UPDATE: Due to sequestration, all Direct PLUS Loans with a first disbursement date on or after December 1, 2013 and before October 1, 2014 will have an origination fee of 4.288%.
All PLUS Loans with a first disbursement date on or after July 1, 2013 but before December 1, 2013 will have an origination fee of 4.204%.
PLUS Loans with a first disbursement date prior to July 1, 2013 will have an origination fee of 4.0%.
Be aware of this fee when determining the amount that will be received and applied to the student account. Use the net disbursement amount (principal minus fee) when completing the “Estimating College Costs” worksheet.
The loan amount will be evenly divided over your academic year. Disbursements will be made at the beginning of each semester. We will notify you when PLUS funds have been applied to your student account. Any excess funds will be released to you via a refund through Student & Departmental Account Services (loan funds must first clear the student account with the College for that semester).
Returning loan funds to your lender
We will return loan funds if your written request is received within 14 days after the disbursement notification has been sent to you.
After this time, you can return Direct Loan funds by check to your servicer. For information about your servicer, please visit NSLDS.
To ensure that the payment is properly credited, you will need to include a cover letter stating whether the funds are for a loan payment or for canceling (inactivating) a loan. This note should indicate which loan(s) the returned funds should be applied to, and in what amounts (if repayment is split between loans).
A borrower has up to 120 days after the disbursement date to return Direct Loan funds without being responsible for paying fees and any accrued interest on the amount canceled.
Deferment of Payment and Forbearance
Borrowers may need to request an in-school deferment so payments are not required while in school. Borrowers may also need to request a deferment or forbearance for a period of time after graduation if they are not able to immediately begin repayment on their loan. Payment may also be deferred if the borrower is unemployed or in a situation of demonstrable economic hardship. Contact the lender for additional information on deferments. During a deferment, interest continues to accrue on the loan and may be capitalized (added to the principal of the loan).
In situations not covered by deferment, a borrower may ask for a forbearance. By granting forbearance, a lender permits a temporary cessation of payments, allows an extension of time for making payments, or temporarily accepts smaller payments than were previously scheduled.
Interest and Repayment
UPDATE: Federal Direct PLUS Loans with a first disbursement date of July 1, 2013 or later have a fixed interest rate of 6.41%.
PLUS Loans with a first disbursement date prior to July 1, 2013 and after July 1, 2006 have a fixed interest rate of 7.9%.
Federal Direct PLUS Loan borrowers enter repayment at the time the loan is fully disbursed, unless in-school deferment is granted. The lender must notify the borrower of the terms and conditions for repayment of the loan before repayment is scheduled to begin. The minimum monthly payment is $50.00. A borrower is allowed at least 5 years (unless the minimum required payment will retire the debt in less time), and no more than 10 years, to repay a Direct PLUS Loan. A borrower may prepay his or her loan in full or in part at any time, without penalty and without liability for unearned interest.
Alternative repayment schedules and deferment or forbearance options are available on all federal student loans, including the Direct PLUS Loan. Extended repayment plans (up to 25 years) are available for borrowers with federal education debt exceeding $30,000.
The following table is based on a standard 10 year repayment plan. Use this table to estimate the monthly payment amount for your Federal Direct PLUS Loan(s).
Financial Planning Tools
Students considering a Federal Direct PLUS Loan may benefit from the following financial planning tools designed to assist with student loan debt management.