Plus Loans Vs Alternative Loans Information

Parent PLUS Loan VS. Alternative Loan  

This Chart compares various aspects of both loans.


Parent Plus Loan Alternative Loan
Loan Interest Rate Fixed at 6.41% Variable, usually no cap. Many programs reset quarterly. Varies from lender to lender. Usually based on a consumer index(prime, commercial paper, LIBOR, etc.) plus a margin. Some lender also offer a fixed rate loan.
Loan Borrower The parent is the borrower and the loan is in the parent's name. The student is the borrower. While the loan is in the student's name, usually a parent is included as a cosigner. Cosigner bears equal responsibility for loan repayments. Generally, a student might receive a better interest rate with a credit worthy co-signer.
Loan Amounts Up to the cost of the student's education minus other financial aid. Minimum and maximum borrowing limits vary from lender to lender. It cannot exceed cost of attendance minus other financial aid.
Loan Cancellation Loan forgiven if student or parent dies. Not usually discharged if student dies. If there is a co-signer, he or she will usually continue to be responsible for repayment of the loan.
Loan Interest Accrual Parents may postpone payments until student is out of school six months (must apply with servicer each year). Interest accrued during the postponed period is capitalized. Parents may also choose to make interest-only payments while student is in school. Interest accrues while student is in school. Some programs require the student to make minimum monthly payments or interest-only payments while in school. If deferred, repayment usually begins 6 months after student graduates or leaves school.
Loan Deferment/Forbearance Parent may defer payment on this loan until the student is out of school six months (must apply with servicer each year). To apply for this deferment, contact the Department of Education after the loan is disbursed. Varies from lender to lender. Check with the lender for availability.
Loan Qualifying Based on credit history; debt-to-income is not considered thus making it easier to qualify. Varies from lender to lender but often debt-to-income ratio is considered in credit decision. Many lenders will require a credit-worthy co-signer.
Loan Ease of Application Very easy. Parent must complete a Direct Parent PLUS Loan Master Promissory Note (Direct Parent PLUS MPN) when applying for their first Direct Parent PLUS Loan. Parent must also complete UW-Stout's Parent PLUS Loan Request Form. On-line applications are available for most loans. Supporting documentation is generally required (proof of income, co-borrower addendum, etc).
Loan Fees 4.204% Origination Fee Fees vary from lender to lender. May include origination and/or repayment fees.
Loan Repayment Terms Repayment begins 45-60 days after loan is fully disbursed although parent can request that the Department of Education delay repayment until after the student is out of school six months. Parent must apply for this deferment each year). 10 year repayment period. Varies among lenders. Typically, 10 - 25 years.