Plus And Grad Plus Loan Limits
When federal Stafford Loans are not enough to cover the full cost of attendance, graduate-level students may qualify for a Grad PLUS Loan and parents of an undergraduate student may qualify for a Parent PLUS Loan.
Grad PLUS and Parent PLUS Loans differ from Stafford Loans in that they are only available to graduate-level students and parents of students who do not have an adverse credit history.
The loan limits for Grad PLUS and Parent PLUS Loans also differ from Stafford Loans. There is no annual limit as a set dollar amount, but students or parents may not borrow more than the total cost of attendance, less any other financial aid received.
Stafford Loan Limits For Independent Students
College students who can prove they are independent may qualify for more federal funding to help cover the cost of their educational goals. Independence as a student means there is no other person who can or is claiming the student as a dependent on their tax return.
Independent students are managing the financial aid process for their college years on their own, in theory, and therefore may need additional help through federal Stafford Loans.
While less restrictive than dependent students limitations, there are still federal student loan limitations imposed on independent students who qualify for financial aid. The restrictions are as follows:
- First-year undergraduate students $9,500, with no more than $3,500 in subsidized loans
- Second-year undergraduate students $10,500, with no more than $4,500 in subsidized loans
- Third- and fourth-year students $12,500, with no more than $5,500 in subsidized loans
Similar to dependent students, independent students face aggregate student loan limits. Undergraduates may have no more than $57,500 in total federal student loans, with no more than $23,000 in subsidized loans. It is also important to note that all graduate-level students are considered independent students. They also have federal student loan limits, as follows:
Differences In Subsidized And Unsubsidized Student Loan Terms
The federal government pays the interest on subsidized student loans during the in-school, grace and authorized deferment periods.
The federal government also pays the accrued but unpaid interest on subsidized student loans during the first three years of the income-based repayment , pay-as-you-earn and revised pay-as-you-earn repayment plans, but not for the income-contingent repayment plan.
Loan limits are lower on subsidized Federal Direct Stafford loans. The annual limits are $3,500 for freshmen, $4,500 for sophomores, $5,500 for juniors and $5,500 for seniors, with an aggregate limit of $23,000. The subsidized Federal Direct Stafford loan limits are the same for dependent and independent students. Any amounts that the student does not receive as a subsidized loan can be borrowed as an unsubsidized loan, up to the overall Federal Direct Stafford loan limits.
If a dependent undergraduate students parents are denied a Federal Parent PLUS loan because of an adverse credit history, the student becomes eligible for the same Federal Direct Stafford loan limits as independent students. The increase in loan eligibility is limited to unsubsidized Federal Direct Stafford loans there is no change in subsidized Federal Direct Stafford loan limits.
Other loan terms, such as interest rates and fees, are the same for subsidized and unsubsidized Federal Direct Stafford loans.
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Can I Still Receive A Direct Graduate Plus Loan If I Have An Adverse Credit History
A credit check will be performed during the application process. If you have an adverse credit history, you may still receive a Direct Graduate PLUS Loan through one of these two options:
With either option 1 or option 2, you also must complete credit counseling for PLUS loan borrowers at studentaid.gov.
Federal Direct Parent Plus Loans
To help pay for a childs educational expenses, parents of dependent undergraduate students that are enrolled at least half-time, may choose to apply for a Federal Direct Parent PLUS Loan. A Parent PLUS Loan is the sole responsibility of the parent applying for the loan and must be repaid by the parent. Responsibility of the loan may NOT be transferred to the student.
The U.S. Department of Education defines a parent as a biological or adoptive parent. In some circumstance, step-parents may apply for a Parent PLUS Loan, IF the step-parent applying for the loan is listed on the students FAFSA for purposes of reporting financial information. Legal guardians and grandparents are not eligible to receive a Parent PLUS Loan.
To be eligible to receive a Parent PLUS Loan, both the parent and student must meet all other eligibility requirements for federal student aid, as noted on the FAFSA. A credit check will be performed during the application process. Parents with an adverse credit history may not be eligible to receive a Parent PLUS Loan, unless additional requirements are met. If a parent is denied for a Parent PLUS loan, the student may be eligible to receive additional Federal Direct Unsubsidized Loan eligibility. However, once an approval is obtained for the year , students are no longer eligible to receive the additional unsubsidized loan amount, even if an alternate parent is subsequently denied for the Parent PLUS Loan.
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About Federal Direct Graduate/professional Plus Loans
If you are a graduate or professional student, consider a Federal Direct Graduate/Professional PLUS loan before an alternative loan or maxing out your credit cards. This loan helps qualifying students pay the difference between the financial aid already received from scholarships, grants and student loans and the cost of attendance. Unlike some private loans that come with variable rates that can climb several times a year, this loan has a fixed rate for the life of the loan.
Interest Rates On Federal Plus Loans
The interest rates on Federal PLUS Loans are fixed rates that change only for new loans each July 1. The new interest rate is based on the last 10-year Treasury Note Auction in May.
The interest rate on the Federal PLUS Loan is the same for both Federal Parent PLUS Loans and Federal Grad PLUS Loans.
Keep in mind, however, that you are not required to pay interest or make payments on any Federal Direct Loan during the current COVID-19 relief period. The relief period is in effect through at least September 30, 2021.
The interest rates are set according to this formula:
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Strategy For Subsidized Vs Unsubsidized Student Loans
Subsidized student loans are less expensive than unsubsidized student loans, so borrowers should prefer subsidized student loans to save money.
However, borrowers might not be able to cover all college costs with just subsidized loans, especially at higher-cost colleges. Also, graduate students are no longer eligible for subsidized loans.
If a borrower has both subsidized and unsubsidized student loans, it is best to make extra payments on the unsubsidized loans, since this will save the money if the borrower ever needs a deferment.
Grad Plus Loans: The Quick Version
The Grad PLUS Loan is the type of Direct PLUS Loan that’s available to students enrolled in graduate or professional programs at eligible colleges and universities.
In order to be eligible for a Grad PLUS Loan, a student needs to be enrolled in an eligible graduate degree or certificate program on at least a half-time basis, and they cannot have an adverse credit history. While this isn’t as comprehensive or restrictive as the credit checks used by private lenders, it does mean that things like active collection accounts or recent foreclosures can prevent you from getting a Grad PLUS Loan or could create the need to find a creditworthy cosigner. And while they don’t need to have a demonstrated financial need, borrowers do need to file the FAFSA.
Grad PLUS Loans have two costs to consider — the interest rate and the loan fee. Both costs are determined for each school year, so they do fluctuate over time. For the 201819 school year, the Grad PLUS Loan has a fixed interest rate of 7.6%. And the loan fee is 4.248% of the loan amount, which is deducted before the funds are distributed to the school.
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Can You Get Subsidized Loans For Graduate School
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You Can Borrow Up To The Full Amount Of Cost Of Attendance
The maximum amount that you can borrow under the federal Direct Unsubsidized Loan program for graduate school is $20,500 a year, with a maximum lifetime limit of $138,500. But a graduate PLUS loan allows you to borrow up to the cost of attendance, minus any other financial aid received.
Its possible to pay for graduate school in its entirety by exclusively taking out federal loans assuming you qualify . If youre leery of the private student loan market, this is a definite advantage.
However, remember that anything you borrow via grad PLUS loans has to be paid back. You can always decline all or part of the loan prior to disbursement if you determine that its unnecessary.
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Private Student Loan Repayment Plans
When it comes to repayment after graduation, many private student loan lenders will offer payment assistance if its needed, but the available options are more limited than federal loans. For example, private lenders typically cannot offer income-contingent repayment plans or loan forgiveness. That said, the terms of a private loan can typically be altered after signing if assistance is needed.
The sooner you begin paying down the principal and interest on a private loan the better, but circumstances do not always allow for that. Repayment options vary by lender but common plans include:
- Interest Only You make interest-only payments for the first two years of the repayment term of your loan.
- Interest Plus You make interst payments, along with a monthly amount you determine for the first two years of the repayment term.
- Full Principal and Interest You start repaying your principal plus interest right away.
Some lenders offer more repayment flexibility than others. At College Ave., in addition to offering a forgiveness policy, we work with you on repayment options, should you encounter financial hardships.
Learn more about .
Federal Student Loan Interest Rates
Federal student loan interest rates and fees are set at the start of each academic year and remain fixed for the life of the loan. Federal loans come with a standard repayment schedule and offer a wide range of repayment assistance options, including forgiveness for qualified borrowers, forbearance, deferments, and Income-Based Repayment or Pay As You Earn plans that tailor the monthly payments to your income level. For more details on eligibility criteria, repayment assistance, and current rates, visit the Federal Student Aid website.
To apply for federal student loans, you need to complete the .
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When It Could Be A Better Idea To Use Plus Loans
Grad PLUS Loans are superior to private student loans in a few key ways. If you anticipate that you’ll eventually qualify for Public Service Loan Forgiveness or expect to have a lower-paying job that would be able to qualify for the advantages of income-driven repayment plans, it’s tough to make the case in favor of private student loans.
Grad PLUS Loans are also likely to be the better choice for borrowers with so-so credit. Since all Grad PLUS Loan borrowers get the same interest rate, regardless of credit score, it can be a smart idea to consider a Grad PLUS Loan if you don’t have excellent credit.
What Fees Are Associated With Grad Plus Loans
There are two important fees to understand related to Grad PLUS loans. The first fee is interest. Interest is the money you pay for the privilege of borrowing money.
PLUS loans charge the highest rates of all federal student loans. Over the past 10 years, Grad PLUS loans have charged rates between 6.3% and 7.9%. However, due to the massive decline of the 10-Year Treasury note yield in the wake of the COVID-19 crisis, the recently announced new federal student loan rates were also all-time lows.
For the 2020-2021 academic year, the interest rate on Grad PLUS loans is 5.3%. Interest begins accruing the minute you take a disbursement. So if you take a $10,000 loan today, you will owe $10,530 next July.
You can find the best student loan rates here > > There is also a disbursement fee associated with Grad PLUS loans. The disbursement fee is taken out of your loan issuance. Right now the disbursement fee is 4.236%. With the disbursement fee, you receive less money than you borrow. When you borrow $10,000, you will only receive $9,576.40. The disbursement fee is applied every time you receive money from the loan.
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Danger : Plus Loans Aren’t Eligible For Most Income
The federal government offers four different income-driven repayment plans for student loans. They limit monthly payments to a percentage of the student’s discretionary income . If the student makes those payments for a certain number of years , any remaining loan balance will be forgiven.
Parent PLUS loans, however, are eligible for only one of these plans, Income-Contingent Repayment , and only after the parent has consolidated their parent loans into a federal direct consolidation loan. An ICR plan limits payments to no more than 20% of discretionary income, to be paid over a term of 25 yearswhich is a long time horizon for the average parent.
Getting Your Name Off A Cosigned Loan
Who Is Eligible For A Subsidized Loan
Only undergraduate students are eligible for subsidized Federal Direct Stafford Loans. Graduate students have not been eligible since 2012.
Eligibility is also based on financial need. The student must file a FAFSA annually to determine whether they demonstrate financial need each year. The college financial aid administrator will determine the students eligibility for subsidized Stafford loans and the amount of loans available to them based on their financial need.
Since July 1, 2013, eligibility for subsidized Stafford loans has also been subject to the Subsidized Usage Limit Applies , an arcane set of complicated rules. SULA sets a maximum eligibility period equal to 150% of the normal length of the program, but counts only years during which the student received a subsidized loan. Once the student reached the SULA limit, they cant get any more subsidized loans unless they switch to a longer program, and the subsidized loans become unsubsidized.
SULA has been repealed, effective July 1, 2023, but the U.S. Department of Education can choose to make the repeal effective sooner.
Even with the repeal of SULA, federal student aid is subject to an overall 150% timeframe limitation. This causes a student in a 4-year Bachelors degree program to lose eligibility for more federal student aid if they do not graduate in six years.
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What If I Have Trouble Repaying My Loan
If you are unable to make your scheduled loan payments, contact your loan servicer immediately. Your servicer can help you understand your options for keeping your loan in good standing. For example, you may wish to change your repayment plan to lower your monthly payment or request a deferment or forbearance that allows you to temporarily stop or lower the payments on your loan. Learn more about deferment or forbearance options.
Can I Cancel A Loan If I Decide That I Dont Need It Or If I Need Less Than The Amount Offered
Yes. Before your loan money is disbursed, you may cancel all or part of your loan at any time by notifying the financial aid office. After your loan is disbursed, you may cancel all or part of the loan within certain time frames. Your promissory note and additional information you receive from the financial aid office will explain the procedures and time frames for canceling your loan.
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Can Graduate Students Get Subsidized Loans
With subsidized federal student loans, the Department of Education pays your interest charges while youre enrolled or in deferment. That means you pay less for the student debt you take on.
But the federal student loan interest subsidy is available only to undergraduate students who have demonstrated financial need.
Unfortunately, the office of Federal Student Aid no longer offers subsidized loans for graduate school.
|In the past, FSA offered subsidized loans for graduate school
|Subsidized Stafford Loans for graduate students
|Also called Direct Loans, these Subsidized Stafford Loans were offered to graduate students with a demonstrated financial need until July 2012. Then they were cut to free up funding for other forms of federal student aid.
|Federal Perkins Loans
|The Federal Perkins Loan Program created funds that allowed colleges to offer additional loans to low-income students. Federal Perkins Loans came with a federal interest subsidy and were available to both undergraduate and graduate students. Unfortunately, the Federal Perkins Loan Program expired in 2017 and wasnt renewed by Congress, so this subsidized student loan option is no longer available.