Plus Student Loans

As the cost of education has risen over the last few years,the nation's lean towards Stafford loans has not been able to cover all of the expenses. Thus the PLUS program was designed to take up the slack. PLUS stands for Parent Loans for Undergraduate Students. And although the rate of interest is a bit higher than some of the loans out there, the cap on borrowing much more pliable and the loans are not based on needs.

There are different interest rates that apply here. For the Federal Family Education Loan program,where the loans are funded by private lenders,the interest rate is 8.5%. Through the Direct Loan Program where the Dept of Education directl funds the loan at 7.9%. This little bit of difference can mean a substancial difference over the lifetime of the loan.Let us say with a 10 year loan of $25,000 it comes to around $2050 - $1920 - $130 in interest.A significant savings.

You will need a calculator to check out sample scenarios like the one at Bankrate.com.

Parents can borrow up to the entire cost of education with the PLUS program.Itis not a cheap loan but it could play a big part in the choice ot the institution you attend.

One negative in all this is that since PLUS loans are not need based a credit check will be required.However the students credit is absolutely not in question.Since the parents name will be required on the note, the credit check will be on them.

A recent change to the program, aside from changes in the interest rates,is to allow graduate students to qualify for the PLUS loans.But they must be enrolled in an eligible institution and program at least half time like all students.

One thing about repayment of a PLUS loan. The repayment process begins within 60 days after the funds of the loan are disbursed and the interest begins from the first disbursement.Payments are made to the private lender in the case of thr FFEL and to a servicing center of the Dept. of Education in the case of Direct Loans.

Always calculate all the costs dealing with a PLUS loan and treat it like it is your last resort. Even a home equity loan would be a liitle less expensive because the interest is tax deductible. Just a thought.