PLUS student loans are federal student loans that are offered to parents and grandparents of students, and to graduate or professional students.
Most PLUS loans are made to parents and grandparents, although some graduate or professional students, such as law students take them also.
WHO OWES THE LOAN?
PLUS loans, unlike private student loans, do not have cosigners.
I have met many people in their 60s who are looking to retire, but suddenly discover that they owe tens of thousands of dollars in PLUS loans, which they thought their grandchildren were going to repay.
This is because:
- Many people mistake PLUS loans for private loans because they think that the parent or grandparent is only a cosigner
- The parent or grandparent is the only person who is responsible for the loan
- The fact that the parent or the grandparent is the one who owes the loan is not always explained by the schools or the loan servicer
This has come as a surprise to many of my clients over the years.
What about Graduate students and professional students?
Graduate students and professional students can take PLUS loans for their own education.
They do not need cosigners, and are the only people responsible for paying off these loans.
CAN I GET THE BALANCE FORGIVEN THROUGH INCOME-BASED REPAYMENT OR PAY AS YOU EARN?
- No, one of the biggest drawbacks of PLUS loans is that they are not eligible for these programs
Income-Based Repayment and Pay As You Earn are repayment programs that forgive the unpaid principal balance after 20 or 25 years, and are very valuable for people who owe substantial student loan balances.
A borrower can use the income-contingent repayment plan to repay a PLUS student loan, but this program is less favorable than the other two income-based programs.
WHEN DO INTEREST AND PAYMENTS START?
- Interest starts accruing on a PLUS student loan immediately
- This is because the loans have been accruing interest during their studies
- A PLUS student loan for a graduate or professional student is in deferment until 6 months after graduation
Student borrowers with PLUS loans are often surprised to find that the loan amounts are higher than they expected at the moment of graduation, and are like unsubsidized Stafford loans in this respect.
Parent and grandparent PLUS student loans start to accrue interest immediately, and they enter repayment immediately.
The parent or grandparent can, however, request a deferment on the payments until the student graduates or stops being enrolled full time.
Remember, if you do not request the deferment, then payments will start immediately.
If you’re thinking about a PLUS student loan, or struggling becasue of a PLUS student loan, then why not Contact us at 612.724.4357 now and see if we can help?
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