GradPlus loans...what are they? Forum

[askhos]

So far I've filled out the Need Access application and the FAFSA, but when I went to look at the current aid one of the schools is offering me, I noticed pretty quickly that it wasn't enough to cover everything.

Then I heard about GradPlus loans, but I'm not sure what they are, how they work, or how to apply for them. Any help would really be great!

[GATORTIM]

GradPlus allows you to borrow up to the "cost of attendance" less scholarships and other loans.

[vanwinkle]

GradPLUS loans are federal loans that should be offered by your school. They can be offered up to the full cost of attendance including tuition, fees, and estimated cost-of-living (COL) expenses.

For example, if your tuition is $40,000/year and your school estimates your COL will be $20,000/year, you should receive up to $60,000/year in total aid. If the grants, scholarships, and other loans your school offers doesn't add up to $60,000, then you should be able to take out GradPLUS loans to cover the entire difference.

If your school isn't offering you GradPLUS loans, call them and ask why. It should be part of your total financial aid offer.

[askhos]

If your school isn't offering you GradPLUS loans, call them and ask why. It should be part of your total financial aid offer.

I haven't decided if I'm going to that school yet (USC). I went on the SallieMae website though and couldn't find USC listed in the California schools. Any indication what this might mean?

[wadeny]

I was offered some GradPlus loans as well and I'm curious about whether they're better to take out than, say, federal unsubsidized loans. I don't really need all the loans, so I've been thinking about choosing one or the other. From what I can tell, the interest rate is fixed on my available GradPlus loans. Any advice?

[Rutgers1L_10]

So far I've filled out the Need Access application and the FAFSA, but when I went to look at the current aid one of the schools is offering me, I noticed pretty quickly that it wasn't enough to cover everything.

Then I heard about GradPlus loans, but I'm not sure what they are, how they work, or how to apply for them. Any help would really be great!

All schools calculate a student budget which is tuition+fees+books+room/board+incidentals
The financial aid office (and other administrators) determine what the "incidentals" and "average room and board" are to determine the total cost

The FAFSA determines your expected family contribution EFC

The student budget is the MAXIMUM amount of money you can borrow from federal load sources (Perkins, Stafford both subsidized and unsubsidized, GradPlus)

So if your student budget is
$30,000 tuition +
$2000 fees+
20,000-Room/board +
1,000-books +
1,000- Incidentals=
Your total student budget is= $54,000 (barring any public math mistakes on my part)

You are allowed to borrow $20,800 from Stafford Loans a portion of that is subsidized
If you borrow the maximum from Stafford Loans you will still owe $33,200
That amount you will have to pay "out of pocket" based on the money in your checking account, and money you borrow from Grad Plus Loans.
GradPlus will ONLY cover the difference of what your Stafford (minus any scholarships and work study you get) can give minus what you still owe. I this case you could borrow the entire $33,200. but GradPlus has a lifetime limit. So you could potentially borrow the entire amount you need for 3 years and you could be just under the GradPlus cap. The benefit of Gradplus is that it's a federal loan program subject to deferred payment while you are a student, and the interest is not due until you graduate or leave school for 6+months. Also the interest rate is fairly low ~8% and it is available for LRAP programs for law graduates that take low paying employment. GradPlus also is not based on your credit score and typically will not require you to have a guarantor. However, if you are in default on any loans you may be denied.

If for some reason you need more money than you can get from Stafford+GradPlus+your checking account/personal sources, then you will have to borrow from a private source (private bank, credit union, etc.). Private loans will be based on your credit score/credit rating, you may be required to have a guarnator (someone with a job that can pay it back), and the interest could be very high, and the payments will be due almost immediately after the loan is disbursed. Also these are not available for consolidation, nor are they available for federal LRAP programs.

[Anonymous Loser]

I went on the SallieMae website though and couldn't find USC listed in the California schools. Any indication what this might mean?

Sallie Mae is not originating federal loans that will be disbursed after June 30, 2010, and neither is any other private lender. Federal educational loans will only be available through the Direct Lending program.

[Anonymous Loser]

I was offered some GradPlus loans as well and I'm curious about whether they're better to take out than, say, federal unsubsidized loans. I don't really need all the loans, so I've been thinking about choosing one or the other. From what I can tell, the interest rate is fixed on my available GradPlus loans. Any advice?

If you are seriously unable to determine which of these loan options is best for you, please contact the financial aid office at the school you plan on attending. Personally, I can't imagine a situation where taking on a loan at 7.9% is preferable to taking on a loan with a rate of 6.8% that has more favorable terms.

[Bert]

For most people:

fed subsidized > fed unsubsidized > gradPLUS

[Anonymous Loser]

*** but GradPlus has a lifetime limit ***

No. GradPLUS loans have neither an annual nor an aggregate limit.

[Rutgers1L_10]

*** but GradPlus has a lifetime limit ***

No. GradPLUS loans have neither an annual nor an aggregate limit.

Yeah, you're right! My bad

[legalease9]

For most people:

fed subsidized > fed unsubsidized > gradPLUS

This ^^^ Grad Plus has the worst terms of all Federal loans. It's just unlimited so you can keep on borrowing.

[whattodo2008]

So far I've filled out the Need Access application and the FAFSA, but when I went to look at the current aid one of the schools is offering me, I noticed pretty quickly that it wasn't enough to cover everything.

Then I heard about GradPlus loans, but I'm not sure what they are, how they work, or how to apply for them. Any help would really be great!

All schools calculate a student budget which is tuition+fees+books+room/board+incidentals
The financial aid office (and other administrators) determine what the "incidentals" and "average room and board" are to determine the total cost

The FAFSA determines your expected family contribution EFC

The student budget is the MAXIMUM amount of money you can borrow from federal load sources (Perkins, Stafford both subsidized and unsubsidized, GradPlus)

So if your student budget is
$30,000 tuition +
$2000 fees+
20,000-Room/board +
1,000-books +
1,000- Incidentals=
Your total student budget is= $54,000 (barring any public math mistakes on my part)

You are allowed to borrow $20,800 from Stafford Loans a portion of that is subsidized
If you borrow the maximum from Stafford Loans you will still owe $33,200
That amount you will have to pay "out of pocket" based on the money in your checking account, and money you borrow from Grad Plus Loans.
GradPlus will ONLY cover the difference of what your Stafford (minus any scholarships and work study you get) can give minus what you still owe. I this case you could borrow the entire $33,200. but GradPlus has a lifetime limit. So you could potentially borrow the entire amount you need for 3 years and you could be just under the GradPlus cap. The benefit of Gradplus is that it's a federal loan program subject to deferred payment while you are a student, and the interest is not due until you graduate or leave school for 6+months. Also the interest rate is fairly low ~8% and it is available for LRAP programs for law graduates that take low paying employment. GradPlus also is not based on your credit score and typically will not require you to have a guarantor. However, if you are in default on any loans you may be denied.

If for some reason you need more money than you can get from Stafford+GradPlus+your checking account/personal sources, then you will have to borrow from a private source (private bank, credit union, etc.). Private loans will be based on your credit score/credit rating, you may be required to have a guarnator (someone with a job that can pay it back), and the interest could be very high, and the payments will be due almost immediately after the loan is disbursed. Also these are not available for consolidation, nor are they available for federal LRAP programs.

I don't think 8% is necessarily "fairly low" especially in this economy, with the 3-month LIBOR at .25% (although I think they raised it to .4%). Some private loans will give a rate of LIBOR + 3.5% (for excellent credit history). Yes, true, they are variable, and it is simpler to just go with the fixed GRAD PLUS loan, but given the historical averages of the LIBOR rate, in the end, one may still be ahead by having taken a private loan. I don't think interest rates will increase drastically in the next few years. Matter of fact, I think they will stay low, so I'm considering private loans over the GRAD PLUS this year. Also, you can defer the repayment with some of them.

NOTE: This is all based on the assumption that one is not interested for LRAP!

Thoughts are appreciated!

[longhornnyc]

My understanding is that GradPlus full under IBR. Can anyone confirm this? This would play a huge role in deciding to go PI for 10 years route.

[Renzo]

I don't think 8% is necessarily "fairly low" especially in this economy, with the 3-month LIBOR at .25% (although I think they raised it to .4%). Some private loans will give a rate of LIBOR + 3.5% (for excellent credit history). Yes, true, they are variable, and it is simpler to just go with the fixed GRAD PLUS loan, but given the historical averages of the LIBOR rate, in the end, one may still be ahead by having taken a private loan. I don't think interest rates will increase drastically in the next few years. Matter of fact, I think they will stay low, so I'm considering private loans over the GRAD PLUS this year. Also, you can defer the repayment with some of them.

NOTE: This is all based on the assumption that one is not interested for LRAP!

Thoughts are appreciated!

It also assumes that from the day you graduate until you pay off the loans, you will never, ever, ever encounter a period of unemployment or financial hardship that would make the flexibility of federal loans worth the higher interest rate.

Personally, I cannot imagine taking a private loan over a gov't loan for this reason. If you do get a good job, you can always pay down the principle or take a private loan after school at a lowwer rate; but god help you if it takes you 9 mos. to find a job after school and you have private loans.

[whattodo2008]

I don't think 8% is necessarily "fairly low" especially in this economy, with the 3-month LIBOR at .25% (although I think they raised it to .4%). Some private loans will give a rate of LIBOR + 3.5% (for excellent credit history). Yes, true, they are variable, and it is simpler to just go with the fixed GRAD PLUS loan, but given the historical averages of the LIBOR rate, in the end, one may still be ahead by having taken a private loan. I don't think interest rates will increase drastically in the next few years. Matter of fact, I think they will stay low, so I'm considering private loans over the GRAD PLUS this year. Also, you can defer the repayment with some of them.

NOTE: This is all based on the assumption that one is not interested for LRAP!

Thoughts are appreciated!

It also assumes that from the day you graduate until you pay off the loans, you will never, ever, ever encounter a period of unemployment or financial hardship that would make the flexibility of federal loans worth the higher interest rate.

Personally, I cannot imagine taking a private loan over a gov't loan for this reason. If you do get a good job, you can always pay down the principle or take a private loan after school at a lowwer rate; but god help you if it takes you 9 mos. to find a job after school and you have private loans.

I'm considering taking some private loans for the first year. I also will use a good amount of my savings. I admit, maybe I missed something or made a simplification...Are there benefits in gov't loans during times of "financial hardship"? The only benefit I have always known about is that one doesn't have to start repaying until six months after graduation...If you can fill me in, that would be great!

[Renzo]

I don't think 8% is necessarily "fairly low" especially in this economy, with the 3-month LIBOR at .25% (although I think they raised it to .4%). Some private loans will give a rate of LIBOR + 3.5% (for excellent credit history). Yes, true, they are variable, and it is simpler to just go with the fixed GRAD PLUS loan, but given the historical averages of the LIBOR rate, in the end, one may still be ahead by having taken a private loan. I don't think interest rates will increase drastically in the next few years. Matter of fact, I think they will stay low, so I'm considering private loans over the GRAD PLUS this year. Also, you can defer the repayment with some of them.

NOTE: This is all based on the assumption that one is not interested for LRAP!

Thoughts are appreciated!

It also assumes that from the day you graduate until you pay off the loans, you will never, ever, ever encounter a period of unemployment or financial hardship that would make the flexibility of federal loans worth the higher interest rate.

Personally, I cannot imagine taking a private loan over a gov't loan for this reason. If you do get a good job, you can always pay down the principle or take a private loan after school at a lowwer rate; but god help you if it takes you 9 mos. to find a job after school and you have private loans.

I'm considering taking some private loans for the first year. I also will use a good amount of my savings. I admit, maybe I missed something or made a simplification...Are there benefits in gov't loans during times of "financial hardship"? The only benefit I have always known about is that one doesn't have to start repaying until six months after graduation...If you can fill me in, that would be great!

You can elect to repay on an income-contingent basis, so that if you take a low-paying job (either by choice or necessity) you won't be bankrupt by payments. You can also at any time request a temporary hardship deferral, during which interest will accrue but no payments need to be made, without adversely effecting your credit. And while the interest rate is higher on federal loans (right now), there's no prepayment penalty, so if you are making bank you can pay down the principle and lower the total interest paid on the loan.

[whattodo2008]

I don't think 8% is necessarily "fairly low" especially in this economy, with the 3-month LIBOR at .25% (although I think they raised it to .4%). Some private loans will give a rate of LIBOR + 3.5% (for excellent credit history). Yes, true, they are variable, and it is simpler to just go with the fixed GRAD PLUS loan, but given the historical averages of the LIBOR rate, in the end, one may still be ahead by having taken a private loan. I don't think interest rates will increase drastically in the next few years. Matter of fact, I think they will stay low, so I'm considering private loans over the GRAD PLUS this year. Also, you can defer the repayment with some of them.

NOTE: This is all based on the assumption that one is not interested for LRAP!

Thoughts are appreciated!

It also assumes that from the day you graduate until you pay off the loans, you will never, ever, ever encounter a period of unemployment or financial hardship that would make the flexibility of federal loans worth the higher interest rate.

Personally, I cannot imagine taking a private loan over a gov't loan for this reason. If you do get a good job, you can always pay down the principle or take a private loan after school at a lowwer rate; but god help you if it takes you 9 mos. to find a job after school and you have private loans.

I'm considering taking some private loans for the first year. I also will use a good amount of my savings. I admit, maybe I missed something or made a simplification...Are there benefits in gov't loans during times of "financial hardship"? The only benefit I have always known about is that one doesn't have to start repaying until six months after graduation...If you can fill me in, that would be great!

You can elect to repay on an income-contingent basis, so that if you take a low-paying job (either by choice or necessity) you won't be bankrupt by payments. You can also at any time request a temporary hardship deferral, during which interest will accrue but no payments need to be made, without adversely effecting your credit. And while the interest rate is higher on federal loans (right now), there's no prepayment penalty, so if you are making bank you can pay down the principle and lower the total interest paid on the loan.

Helpful info! Thanks. Gotta do some more thinking. It's just hard grappling with the fact that I'll be accruing a bunch of interest on grad plus loans at a higher interest rate while in school...

[NewLobo]

GradPlus also is not based on your credit score and typically will not require you to have a guarantor. However, if you are in default on any loans you may be denied.

I believe it also extends to any "90 day late" marks within the last five years.

[sk08]

Does anyone know what happens if you take out GradPlus loans and you don't end up using the loan amount? Can you return at the end of semester and not incur any interest or penalty on those fees? If that is the case, could you do this multiple semesters?

[dkim1359]

Does anyone know what happens if you take out GradPlus loans and you don't end up using the loan amount? Can you return at the end of semester and not incur any interest or penalty on those fees? If that is the case, could you do this multiple semesters?

Edit: I misread your question. I'm curious, as well, to see if there's some way you can avoid incurring interest on unused loan disbursements, but I get the feeling that the answer is no.