What is the Graduate PLUS loan program?

The Graduate PLUS loan program allows a graduate/professional school student to borrow on his or her own behalf up to the cost of attendance, including tuition, room and board, books, and even travel.

The Deficit Reduction Act of 2005 (S. 1932) was signed by the President on February 8, 2006 and became Public Law 109-171. One of the measures in the bill expanded the PLUS loan program for parents of dependent undergraduates to include graduate and professional students.

Does the Grad PLUS program replace the Parent PLUS program?

No. The Deficit Reduction Act of 2005 expands the availability of Federal PLUS loans to graduate and professional students. This new expansion allows graduate-level students to borrow on their own behalf.

Sallie Mae will continue to offer the existing federal PLUS loan to the parents of undergraduate, dependent students. A parent borrower can get a Parent PLUS for his dependent child and, at the same time, get a Graduate PLUS for his own graduate and professional school financing needs.

When did the Graduate PLUS program take effect?

On March 10, 2006, the Department of Education issued guidance via DCL GEN-06-02, Enactment of the Higher Education Reconciliation Act of 2005 Loan Issues. This DCL indicates that PLUS loans for graduate and professional students in the FFEL program is in effect for loans certified on or after July 1, 2006 and for the Direct Loan program, loans originated on or after July 1, 2006.

Will the PLUS loan interest rate change after passage of the Deficit Reduction Act?

Yes. Under the Deficit Reduction Act of 2005, the interest rate for all Graduate PLUS and Parent PLUS loans first disbursed on or after July 1, 2006 will be fixed at 8.5%.

What about loan limits? Are they different for the Graduate PLUS than for the Parent PLUS?

As in the Parent PLUS, there are no annual or aggregate loan limits for the Grad PLUS. Graduate and professional students may borrow the cost of attendance minus any financial aid received, as certified by the school. There is no aggregate maximum PLUS loan amount.

Does a "stand alone" graduate school have to sign a new participation agreement with the Department of Education?

No. A school should not need to sign a new Program Participation Agreement (PPA) with the Department of Education. But the school should go to the Department's online application and update Question 37 by checking the box that says they want to be involved in PLUS loans. Then the Department will update the school's ECAR, indicating the school has permission to be involved with the PLUS loan program.

Is credit score a factor in qualifying for a Graduate PLUS loan?

Yes. A credit check is required to be eligible for a Graduate PLUS loan. Borrowers with adverse credit can either clean up their credit or secure an endorser. The same credit criteria that are applicable to Parent PLUS loans will be applicable to Grad PLUS loans.

Is there a grace period after graduation that delays the start of repayment?

There is no grace period. But Graduate PLUS borrowers may defer payment on their loans while in in-school status.

In addition, we understand that it has been suggested to the Department that the Addendum include language to allow the Graduate PLUS borrower to align repayment of a PLUS loan with the grace period on any Stafford loan. We expect the Department of Education to issue clarification on this in the coming weeks.

Is there another way to defer payment on the Grad PLUS?

Graduate PLUS borrowers qualify for the same deferment options as Stafford borrowers. This means that within 60 days after full disbursement when the first payment is typically due on a PLUS loan, these loans go into in-school deferment status, which can last as long as the borrower is enrolled at least half time.

Does the federal government subsidize the interest on Graduate PLUS loans?

No. Like the unsubsidized Stafford, 100% of the Grad PLUS loan is unsubsidized. The borrower is responsible for all interest that accrues on the loan.

What repayment options are offered on Graduate PLUS loans?

The same repayment options are available on Stafford and Parent PLUS loans:

• regular payments of principal and interest
• reduced payments that may be as low as interest-only
• payments based on income
• extended repayment of up to 25 years for qualified borrowers.

What are the rules pertaining to loan discharge for Grad PLUS loans?

Like Parent PLUS loans, Graduate PLUS loans may be discharged due to death or total and permanent disability. In addition, the Deficit Reduction Act introduces loan discharge due to false certification in the case of identity theft. It is our understanding that the Department of Education will issue guidance on this.

What type of fees will be assessed on Graduate PLUS loans?

There is no change in the origination fee for Graduate PLUS loans. A 3% federal origination fee will be charged for loans first disbursed on or after July 1, 2006. All PLUS borrowers are required to pay this fee, and lenders are required to charge it of the borrowers.

In addition, a 1% "default fee" will be charged for PLUS loans guaranteed on or after July 1, 2006.

Can we use the existing Master Promissory Note when making Graduate PLUS loans?

The Department of Education will issue guidance on the MPN that will be used by Graduate PLUS applicants. We expect the Department to announce an extension of the current PLUS MPN and allow it to be used with an Addendum during an interim period (12–18 months) until the PLUS MPN can be revised to accommodate the changes in the law.

Do students applying for a Graduate PLUS loan need to submit a FAFSA?

Yes. DCL GEN 06-02 indicates that Graduate PLUS loan applicants are required to submit the Free Application for Federal Student Aid (FAFSA) and, before receiving a Graduate PLUS loan, students must have applied for the annual loan maximum eligibility under the Stafford loan program (subsidized and unsubsidized).

Can institutions that participate in School as Lenders make Graduate PLUS loans?

DCL GEN 06-02 indicates that school as lenders may not make Federal PLUS loans to parents or to graduate and professional students.

I thought that "PLUS" stood for Parent Loan for Undergraduate Students. How can such a loan now be made to graduate and professional students?

PLUS no longer stands for "Parent Loan for Undergraduate Students." It is no longer an acronym and now the official program name is just "Federal PLUS."