Graduate school students seeking financing to continue their education can now take advantage of a student loan program previously only available to parents of college students.

The Federal PLUS Loan program provides loans to parents of college students to help their children pay for tuition and other education-related expenses at eligible colleges or universities. The loan requires students to be enrolled at least half-time, and parents must also meet certain credit requirements.

College tuition have been rising dramatically in recent years, and graduate school tuition has also been increasing, albeit at a slower pace. While scholarships and fellowships are available, very few students earn enough to cover the full costs of graduate school, which can range from $30,000 to $100,000, depending on the institution attended and degree sought. On top of loans students may have already acquired for their first four years of school, debt acquired to go to graduate school can leave students mired deeply in debt once they finish their education. Obtaining the best possible interest rate and repayment terms is imperative to students who must borrow to finance their education in order to prevent debt repayment from being a long-term burden upon them.

The PLUS Loan program provides low-interest student loans with very flexible repayment options. Beginning in 2006, graduate students have also been able to take advantage of this program, which was previously only available to parents of students.

Who’s eligible?

Graduate PLUS loans are available to students who are U.S. citizens or eligible non-citizens. Citizens will need to present a Social Security number. Applicants must be able to pass a credit check and have good credit (in general, applicants can’t be more than 90 days late on any debt, have had any bankruptcies in the past five years or have any evidence of a default, lien, foreclosure or wage garnishment in the past five years). Also, applicants must not have any defaulted federal education loans or owe money back to a federal education grant whose terms they failed to live up to.

Graduate PLUS loans are graduate school loans backed by the federal government and borrowed from banks or other lenders. The bank or lender will verify that borrowers are attending an eligible school or institution at least half-time before issuing the loan.

What are the benefits of a Graduate PLUS loan?

Graduate PLUS loans have a number of benefits that make them an attractive option for students looking for a way to finance their graduate school education.

The loans have a low, fixed-rate interest of just 7.9 percent. The program is able to offer low interest rates because it is backed by the U.S. government.

The loan is not need-based, so if you fall into the “sandwich group,” which is too affluent to qualify for need-based programs, but not wealthy enough to finance all the costs of education on its own, this loan can provide needed funds for graduate school.

While you’re in school, payments on the loan can be deferred, meaning that you won’t have to start making payments on the loan until after you graduate, although payments begin immediately once you leave, unless there is time left on your deferment.

Graduate PLUS loans can be used to pay for a variety of school-related expenses, such as tuition, books, lab fees and room and board. They can also be used to pay tuition for approved online degree programs.

Once the loan enters into repayment, you’ll be able to claim the interest expense on your federal income tax return.

Disadvantages

Graduate PLUS loan borrowers will have to pass a credit check. If you’ve had credit problems, including bankruptcy, foreclosure or late payments on debt, you may not qualify for this loan. Also, this form of graduate school loan goes into repayment as soon as it’s disbursed, meaning you’re responsible for repayment immediately. You can use deferment or forbearance options to put off repayment until after you graduate, but this will use up these options early.

How much can I borrow?

Graduate PLUS loan amounts are capped at the student’s cost of attendance less the amount of any other financial aid the student gets. For example, if the student’s cost of attendance is estimated at $40,000 per year and the student receives $10,000 in other student aid, such as scholarships or other loans, the student may only receive $30,000 per year in PLUS loans.

For students seeking a way to make up the gap between their financial aid and the cost of attending their school, PLUS loans can be a great help.