The PLUS Loan: Analysis

The PLUS Loan has both advantages and disadvantages that you should consider; in some ways the loan will help make paying for college easier, but it will also have drawbacks that other loans and financial aid programs don’t have.

Benefits:

-Everyone can get this loan! As long as you meet the basic requirements and have good credit.

-PLUS Loan can cover up to entire cost of education. If money is a severe issue for your family at the time, this loan will ensure that you have the money you need to pay for college. Taking out a full loan that you can pay back later will ensure that you can afford college, and will serve as a great alternative to borrowing against your home or dipping into family savings.

-Funds are usually dispersed fast (within the first weeks of the semester) – you will get the money you need to pay for college on time. Another benefit is that this loan is available throughout the year; so even if you have paid you college expenses already, you can still take out this loan to reimburse yourself and pay it back later on.

-Fixed interest rate; although the interest rate is high, you will never have to worry about increasing a rates, or paying a monthly payment higher than what you initially signed up for.

-Even if your family has a lot of money, you are still eligible to take out this loan if you would rather pay for your college expenses over 10+ years instead of 4.


Disadvantages:

-Much higher interest rate; if you will have to resort to a private loan in order to pay for college, you can’t do much better than this, but this interest rate is much higher than the Perkins and Stafford Loans. So if you will only need a few more thousand dollars per year to afford paying for college, look into those before applying for the PLUS Loan.

-Credit check; for some of you this won’t be a problem, but this might make others of you ineligible for this loan. And if you need a source of money to pay for all of your college expenses right now, one like this is essential to paying for college.

-No grace period and responsible for all interest. That will definitely make this loan an even costlier one. Being responsible for all of the interest means that you will end up paying thousands of extra dollars on this loan. And no grace period means that it doesn’t matter where you or your parents are at graduation; it HAS to be repaid.


My advice:

While the PLUS loan has some advantages, it doesn’t have many of the benefits that loans such as the Perkins and Stafford programs offer. Look into the Perkins and Stafford programs first, as they have many more benefits that will make paying for college easier. Benefits like a grace period, no credit check, and possibly the government picking up the tab on interest will save you thousands of dollars in the end and will make paying off the loan much easier. Unfortunately the PLUS loan doesn’t offer incentives like this, so only apply for it ONLY if you have received Stafford/Perkins loans but still really need money to pay for college. The PLUS Loan will cover the costs, but at a price. As you saw also, the interest rate for this loan is much higher than that of the Perkins and Stafford Loans. Overall, look at all of the terms that I mentioned above, and you will see that the PLUS Loan is a pricier one and more of a hassle in many different ways.