It would be a natural mistake to assume that a graduate PLUS loan is similar to the undergraduate PLUS loan, as they both share the same name. However this is not the case as parents who have already assumed the burden of a PLUS loan will be glad to hear; the graduate PLUS loan is actually one issued to the student not to the parents.
The graduate PLUS loan is available to post graduate students enrolled in either a graduate or professional college course of study, together with other financial aid. The benefit of this loan is that it is federally guaranteed, as the Stafford loans of undergraduate days were. However this loan is not needs based and is dependant on a credit check, and will only be issued to those with no adverse credit history. If there is a credit check problem then the student can still apply if there is someone willing to endorse the loan on their behalf.
The loan is issued at a fixed interest rate and although payments are due to start sixty days after disbursement of the loan the student can apply for a deferment until forty five days after school has finished; this is mostly granted by the department of education. It is also possible to start paying the interest on the loan immediately or to also defer that. The standard repayment terms are over ten years but the graduate PLUS loan can also be consolidated with other federal student loans which were taken pre graduation. The tax department will be able to give advice regarding the tax credits available with this loan.
There is no prepayment penalty attached to the loan at all, although there is a fee of 4% charged by the department of education which is applied when the loan is dispersed. The loan is applied for through the FASFA form, by now a familiar form to a graduate no doubt, together with a federal direct PLUS loan application. A promissory note (PLUS MPN) is also required.
Taking a PLUS graduate loan on top of the student loans one already has is a huge financial responsibility to assume, thus it is wise to have employment lined up in advance. As with the federal Stafford loans, the PLUS graduate loan is also non dischargeable and late payments will be pursued.The PLUS loan is the most sensible way to finance graduate school if additional funds are necessary, as it is federally guaranteed, and the rates are fixed.
It should be amusing to see the looks on the face of parents as the graduating student announces the intent to continue education at graduate school and drops the words PLUS loan into the conversation. This is after all though, a PLUS loan which is the total responsibility of the student.