How does the Federal Plus Loan compare to Private Loans?

Federal PLUS Loan

• Fixed interest rate
• Interest rate will never exceed 9%
• Accrued interest capitalizes once at final payment
• May borrow up to the cost of education less other aid
• Credit check based upon federal standards (easier to qualify); no debt-to income ratios or credit scoring
• Parent is responsible for payment
• Wide selection of deferment privileges available federally insured against death and disability for both the parent and student
• Three options for loan repayment: 1. Immediate repayment, 2. Interest payments only or 3. Full loan repayment in deferment while the student is in school for up to 4 years.

Private Alternative Loans

• Variable interest rate (monthly or quarterly)
• Interest rate usually will not exceed 18% to 21%
• Accrued interest may be capitalized monthly, quarterly, or once at repayment
• Borrowers must pass comprehensive credit check and/or may be required to have a co-signer
• Student is responsible for repayment (however, a co-signer is equally liable and the loan – and payment history – are listed on the co-signer’s report)
• Not federally insured against death and disability
• Limited forbearance and consolidation options available at least half time.

Based Upon These Standard Comparisons
A Federal PLUS Loan is clearly the most cost-effective choice, offering federal protection and more repayment options. The average interest rate over time is far greater for Private Alternative Loans over that Federal PLUS Loans.  However, the final choice is untimely yours.  We hope the information will help make your decision an informed one.  For more information (and on-line applications) for alternative loans, visit our website at www.paulsmiths.edu.