1. Comparison of Grad PLUS or graduate student loans with Private Loans

Interest Rates – While GradPLUS or graduate student loans offer a fixed interest rate for the term of the loan, private loans tend to have a variable rate based on your credit score and credit history and may increase or decrease according to market conditions.

Repayment – Graduate student loans are based on a 10-year repayment while private loans offer variable repayment terms mostly in the range of 12-30 years.

Consolidation – Graduate student loans may be consolidated with other federal education loans such as Stafford or Direct Plus while private loans are more of personal loans with no consolidation features. The consolidation loan program in GradPLUS allows for better debt management and repayment options.

Credit Scores – Although both require a credit check, graduate student loans have a lighter sentence and are open to people with bad credit. Private loans are stricter in their credit check and may even look at your FICO scores, debt to income ratio, income employment status and other credit factors. You may also need a creditworthy co-signer to approve the loan.

Deferment and Forbearance – GradPLUS loans are federal loans offering same payment deferment and forbearance options as the federal Stafford loan. Forbearance covers factors such as unemployment and economic hardships up to three years and deferment of payments while in-school is unlimited provided you maintain at least part time enrolment. Many private loans only offer one year of forbearance.

2. What is the amount that can be borrowed using GradPLUS?

The loan amount at Gradaute student loans cannot exceed your total cost of attendance unless other financial aid is received.

3. Is FAFSA required to apply for GradPLUS loans?

Yes, FAFSA must be filed before applying for GradPLUS.

4. Are there fees on GradPLUS loans?

There is a 3% origination fee and a 1% guarantee fee charged on the loan amount and both have to be paid up front.

5. What is adverse credit?

Adverse Credit is when:

The applicant has been unable to pay his debts for more than 90 days.

The applicant has had a debt discharged under bankruptcy in the five years prior to the date of the credit report.

The applicant has been the subject of a default determination on any debt, foreclosure, tax lien, repossession, wage garnishment or a write-off of a Title IV debt during the five year period prior to the date of the credit report.

6. Who is an endorser?

An endorser is a credit-worthy person who co-signs your graduate student loan.

7. What are the Repayment Options in GradPLUS and when does one have to start paying up?
Level Payment Plan: equal monthly payments over the term of the loan.

Graduated Repayment Plan: two years of interest-only payments, followed by increased payments covering interest and principle for the remainder of the loan.

Income Sensitive Plan: payments adjusted to the borrower’s income.

Extended Repayment Plan: payments can be extended up to a 25 year term.

The first payment is usually required within 60 days after the final loan is disbursed. However, many lenders do offer a deferred payment option if you are still in school attending at least half time. There is currently no provision for a grace period on the GradPLUS loan, which means that students would begin repayment immediately upon graduation or if they drop below half-time status.

8. What is COA – Cost of Attendance?

The cost of attendance is usually a yearly figure summarizing the various costs of attending the school. These include tuition, fees, on-campus room and board, allowances for books, supplies, transportation etc. It also includes miscellaneous personal expenses like allowances on purchase of a computer as well as disability expenses.

9. When does interest begin to accrue and when is it capitalized?

Interest starts to accrue as soon as the first disbursement is made. Interest is capitalized when the accrued interest is added to the loan principal.

10. Graduate Student Loan V/s Private Loan – what is right for me?

The Private loan should be taken if:

You do not mind an increase in the interest rate which is usually fixed with a GradPLUS loan.
You have a good credit score.

There is little possibility for you to use the deferment or forbearance options.
The loan is short term.

The GradPLUS loan should be taken if:

Fixed Rate Interest security

Costs are lower notwithstanding your credit score

Greater protection with deferment and forbearance

By: William Brister