Education loans may be one of the options that your family considers for managing unmet costs. As with any other type of financial aid, borrowers need to do their homework in order to make an informed decision. It’s important to always remember that taking on debt for any reason should be done deliberately and only for the amounts needed. Please know that our office is committed to helping families understand their options in this area.
At DU, there are two loan options available when eligibility for Direct Stafford Loans is exhausted. The PLUS loan program is a federal student loan available to graduate students or the parent of a dependent undergraduate student. Private education loans are offered by private financial institutions and are available to both students and parents. PLUS loans and private educations loans are both credit-based loans, so there may be instances where a co-signer is required to borrow the funds. Below, we have tried to provide resources to help you evaluate which loan option may be right for you.
Federal student loans have fixed interest rates and origination fees that are regulated each year by Congress. They also carry other federal benefits, such as an Income-Based Repayment option and Public Service Loan Forgiveness.
Alternative student loans often offer a variable interest rate, based off of indexes such as LIBOR or Prime that fluctuate with the market. Because these indices are at historic lows, students and families with very strong credit histories may find that an alternative loan offer appears to be more attractive than their federal loan offer. Borrowers need to keep in mind, however, that there is a lot more to consider than just the interest rate.
If you would like to compare the Federal PLUS loan against a private loan offer, filling in the following questions may help you make an accurate comparison of each loan program. Remember that you will want to apply for these loans at least 6-8 weeks prior to the start of the academic term and no earlier than May 1st for the upcoming Fall Semester/Quarter.
|
|
Federal PLUS Loan |
Your Private Lender |
|
Who can be the borrower? |
A graduate student or the parent of a dependent undergraduate |
|
|
Co-signer Required? |
Only in the event of adverse credit history for the primary borrower |
|
|
Credit Requirements |
No adverse credit history |
|
|
Interest Rate |
7.9% |
|
|
Can the rate change and if so, how often? |
No, fixed interest rate |
|
|
Origination Fee |
4% deducted at time of disbursement |
|
|
When do payments begin? |
Immediately, upon graduation, or 6 months after graduation ( borrower has the option) |
|
|
Repayment Options |
Standard 10 Year Extended 20-30 Year Graduated Income-Based |
|
|
Yearly or Aggregate Borrowing Limit |
None |
|
|
Loan Deferment Options |
In-School Deferment
|
|
|
Forbearance Options |
Economic Hardship Forbearance
|
|
|
Loan Forgiveness Options |
Public Service Loan Forgiveness Total and Permanent Disability Discharge Death Discharge |
|
|
Borrower benefits offered: - Interest rate reduction for on-time payments, electronic funds transfer, or graduation - Release of cosigner after making a certain number of on-time payments - Other benefits |
Borrowers who enroll in direct debit can receive .25% interest rate reduction.
Graduate PLUS loans can be consolidated with a student’s other federal loans. |
|