PLUS loan or Alternative Loan

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In this section you'll find dozens of articles about Financial Aid. You can read about student loans, the FAFSA & Profile as well as the Expected Family Contribution (EFC) and what it means for you. You'll also find some of the tips and tricks we recommend to save you money throughout your college adventure.

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Written by Michael Karp

Saturday, 22 August 2009 09:56

PLUS vs Alternative Loans

The PLUS loan carries a fixed interest rate of 8.5% (7.9% for Direct Loans and some FFELP lenders). PLUS loans can also be consolidated after graduation into an extended 20 year repayment. .

Alternative loans offer attractive interest rates for people with good credit (as low as 4.25% currently). The loan is a responsibility of both the student and his or her parents (or cosigner) and provides for automatic deferment of principal and interest payments for four years or more depending on your lender.

While the PLUS loan rate might be higher for some borrowers right now, alternative loans have variable interest rates, meaning the rate can exceed the 8.5% cap on PLUS loans. PLUS loans now offer automatic deferment until six months after graduation. Alternative loans usually only have a 4 year deferment meaning a student could enter into repayment while in school if they take more than four years to graduate or enter into a post graduate degree program. Each Lender has different incestives starting after repayment begins. We recommend using simpletution.com to find the best lender for you. Some lenders will allow a co-signer to be removed after a certain number of payments have been made and the borrower can now qualify on their own.

Last Updated on Tuesday, 08 September 2009 08:35

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