The Grad PLUS
Submitted by Kay Egbert, Director of Financial Aid, Baylor College of Dentistry-Texas A&M University System Health Science Center

The Grad PLUS program was included in the Higher Education Reconciliation Act (HERA) that was passed in February this year and technically available to students on July 1, 2006. However, very few student information systems, lenders, or guarantors were able to handle such a quick start-up. Most, if not all, have updated their systems by now. This is not a new program, but rather a change that allows graduate level students to borrow funds under the PLUS loan designation. For those of us who have been around for a while, it is reminiscent of the old Supplemental Loans for Students (SLS) loans or even the older Student-PLUS loan program.

The Grad PLUS is credit-based but uses federal standards which make it easier to qualify for, with interest accruing at 8.5% from date of disbursement. The annual amount available is COA minus other aid, with no annual or aggregate maximum, and it has no affect on the student’s subsidized and unsubsidized aggregates. Payment options, deferments and forbearances are the same as for sub and unsub loans. The Grad PLUS is federally insured against death and disability. Consolidation with other FFEL loans is also possible. The credit criteria for determining eligibility is less strict than for private/alternative loans, because the law allows the lender to make the loan unless the potential borrow has adverse credit events during the previous 5 years (bankruptcy, foreclosure, etc.). However, a lender may apply more stringent criteria, if they choose. There is a 3% origination fee and a 1% Federal Default fee. Lenders are prohibited from paying the origination fee for the borrower, but they may provide repayment incentives to cover this cost.

This program is likely to grow significantly in the next couple of years as more and more students become aware of it. It presents an interesting alternative to private education loans.