Which Student Loan Type Lets You Borrow Up to the Cost of Attendance Minus Other Aid?

Paying for college is expensive, and sometimes, grants and traditional student loans just don’t cut it. That’s where Direct PLUS Loans come in. These federal loans help parents and graduate students cover the remaining cost of attendance (COA) after other financial aid has been applied. Unlike regular student loans, PLUS Loans offer more flexibility in borrowing but come with different eligibility requirements and repayment terms.

Let’s break down how these loans work and what you need to know before applying.

Types

Direct PLUS Loans come in two forms, depending on who is borrowing:

• Parent PLUS Loans – For parents of dependent undergraduate students.
• Graduate PLUS Loans – For graduate or professional students.

Both types allow borrowers to take out loans up to the full cost of attendance minus other aid received. This makes them a useful option for covering tuition, housing, books, and other education-related expenses.

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Eligibility

To qualify for a PLUS Loan, borrowers must meet basic federal student aid requirements, such as being a U.S. citizen or eligible non-citizen. Unlike standard federal loans, however, PLUS Loans require a credit check. The Department of Education checks for adverse credit history, including:

• Delinquent accounts
• Loan defaults
• Bankruptcies
• Debt write-offs

A poor credit history doesn’t automatically disqualify an applicant. Borrowers can still get approved with an endorser (co-signer) or by proving extenuating financial circumstances.

Loan Amount

How much can you borrow? The amount is based on your school’s cost of attendance (COA). Here’s how it works:

1. The school determines the total COA, including tuition, fees, room, board, books, and supplies.
2. They subtract any financial aid received (grants, scholarships, and other loans).
3. The remaining balance is the maximum amount you can borrow through a PLUS Loan.

This makes PLUS Loans a great option for filling financial gaps, but borrowers should be mindful of borrowing only what they need.

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Interest

Unlike Direct Subsidized Loans, where the government covers interest while the student is in school, PLUS Loans accrue interest immediately after disbursement. This means:

• Interest starts accumulating right away.
• Borrowers are responsible for all interest charges.
• Payments can be deferred while the student is enrolled at least half-time, but interest still builds up.

Interest rates are set by the federal government and can change each academic year. It’s important to check the latest rates before borrowing.

Repayment

Repaying a PLUS Loan works a bit differently than other federal student loans. Here’s what borrowers need to know:

• Repayment starts as soon as the loan is disbursed. However, deferment options are available.
• Parent PLUS borrowers can request a deferment while their child is in school and for six months after graduation.
• Graduate PLUS borrowers get an automatic deferment while they’re enrolled at least half-time.
• Repayment plans include Standard, Graduated, and Income-Contingent options. However, Income-Driven Repayment (IDR) plans are only available for Graduate PLUS Loans—not Parent PLUS Loans.

Since interest continues to accrue, making interest-only payments during deferment can help reduce overall costs.

Pros and Cons

Before taking out a PLUS Loan, consider both the advantages and potential drawbacks.

Is a PLUS Loan Right for You?

A PLUS Loan can be a great solution for those who need extra funds to pay for school. However, it’s important to compare other financial aid options first. Since interest starts building right away and repayment terms can be strict, borrowers should carefully consider how much debt they’re willing to take on.

If you have a strong repayment plan in place and need to bridge the financial gap, a PLUS Loan could be the right choice. Just make sure to borrow responsibly to avoid unnecessary debt.

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