The rates of a Plus Loan are fixed and they are changed annually. This type of loan is the best alternative to private loans or traditional loans. A Plus Loan is offered to the parents of undergraduate students. The loan can also be taken for half-time students as long as they are not married and under 24 years old. The parents have to be United States citizens or at least permanent residents.
The interest rate in 2007 was 7.94 percent and even if it changes annually it can never exceed 9 percent. When you get a Plus Loan, you should know it requires a 4 percent administrative fee. An additional 3 percent origination fee will be charged, as well as a 1 percent guaranty fee. An advantage of the Plus Loan is that the borrower can lower the interest rate of the loan. If the borrower has a bank account and opts for automatic deduction payments, they will get a 0.25 percent interest rate reduction. Another way to reduce the interest rate is by making 36 consecutive on-time payments. This will reduce the total interest rate by up to 3 percent. These reductions can save thousands of dollars, depending on the amount of the loan.
A Plus Loan is a form of financial aid and any student can apply by submitting a Free Application for Federal Student Aid. The best way to make sure that you do everything right is to talk with someone from your school’s financial aid department. You can even apply for a Plus Loan mid-year, but you can find out the exact period in which you can apply from the financial aid department. The money that you will receive can be used for tuition, fees, supplies, computers or any other items that are related to your school activity.