Students Should Consider Grad PLUS and PLUS Loans During Student Loan Application Process

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With FAFSA and other applications due in a couple months, both incoming freshman and graduate students can draw on PLUS loans for additional funding.

As winter semester winds down and college students plan for summer jobs and continued classes, another group of students is just completing the FAFSA and other financial aid applications for Fall 2007 student loans. Two types of loans students should consider during the application process are the PLUS and Graduate PLUS loans. These are federal student loans offered to undergraduate and graduate students that can bridge the gap to funding postsecondary education.

Student Assistance Foundation, a nonprofit nationwide lender, offers PLUS and Grad PLUS loans at the standard 8.50 percent. However, once the borrower qualifies for the company's wide range of benefits, he or she can ultimately pay less.

PLUS, which stands for Parent Loans for Undergraduate Students, are to be handled and paid for by the parents of dependent undergraduate students. PLUS loans -- which require no adverse credit history -- can finance up to 100 percent of undergraduate education costs, including tuition, books, school supplies and living expenses, but are often accessed after scholarships and other federal loans or grants are exhausted.

Borrowers can be rewarded with a 0.25 percent interest rate reduction for consistent, automatic payments, lowering it to 8.25 percent for the life of the loan. Through Student Assistance Foundation there are no restrictions, no collateral requirements and no prepayment penalties. Parents have flexible repayment options and can manage everything online through their own account.

PLUS loan repayment begins within 60 days of the loan being fully disbursed for the academic year. While these loans are eligible for deferments and forbearances, they are unsubsidized. This means that the borrower is responsible for the interest that accrues during the deferment period.

In addition, while PLUS loans are eligible for consolidation, it is important to note that a parent cannot consolidate his or her PLUS loan with the student's loans.

Students planning for graduate or professional school can apply for Graduate PLUS loans, only available since July 2006. The terms and conditions associated with regular PLUS loans apply to Graduate PLUS loans, with a few additional benefits. Three percent of the loan can be returned to a student after 12 consecutive, on-time payments. Upon full disbursement of loan, a 0.75 percent interest rate reduction can be applied. An additional 0.50 percent interest rate reduction is applied for using automated payment processing. In-school deferments are available to postpone repayment until after graduation.

These are unsubsidized loans, which means interest is the borrower's responsibility and begins to accrue as soon as the first disbursement is made. For that reason, borrowers are encouraged to make interest payments while in school. In addition, grace periods don't apply, and borrowers begin repayment after dropping below half-time status, leaving school or graduating.

For more information on PLUS and Grad PLUS loans for the Fall 2007 semester, visit http://www.safservices.org or call 800-852-2761 x 9750.

About Student Assistant Foundation

Student Assistance Foundation is a Montana-based, nonprofit organization that provides students and families nationwide with the knowledge and tools to finance and pursue post-secondary education. Student Assistance Foundation offers a wide range of programs including grants, community outreach, student loan consolidation, counseling and training on education finance planning.

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Janet K. Drexel
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