T.H.E. Federal Graduate PLUS Loan

Strategies to Consider
 

	Encourage applicants to pull their credit report in advance of applying for the Federal Graduate PLUS loan. If they have a delinquency, they may be able to repair their credit in time and still obtain a Federal Graduate PLUS loan. If a student is no longer 90 days late, the first item in the credit section will not be cause for denial. If a student has a collection or write-off item that can be “settled in full”, they may be able to get past that hurdle. If a student does not pass the credit criteria on their own, they can simply apply with an Endorser who meets the credit criteria as outlined by the Department of Education.
	The fixed interest rate for a T.H.E. Federal Graduate PLUS borrower is 8.5%.
	T.H.E. Federal Graduate PLUS borrowers may not want to consolidate and here’s why: The effective interest rate for a non-consolidated T.H.E. Federal Graduate PLUS is 8.5%. Up to 25 years repayment.
Helpful guidance you may wish to share with your staff and/or students, as provided by a distinguished Law School financial aid director: You may prefer the Federal Graduate PLUS: You like the certainty that a fixed-rate loan provides. Your credit is good, fair, or poor, your cost will likely be lower with Federal Graduate PLUS. You like the protection of greater deferment and forbearance options. You may prefer a Private loan: You are comfortable with the possibility of interest rates increasing beyond the interest rate cap of the Federal Graduate PLUS loan. You have top-tier credit. Borrowers with great credit scores may be charged less interest now, but if interest rates continue to climb, it could cost you more. You believe that there is very little possibility that you may use the deferment or forbearance options. You plan to borrow the loan only for a short time.

• When a student is denied the Federal Graduate PLUS, they will receive information that will help them consider their options. The options include; a) apply with an endorser, b) correct any erroneous information that may appear on the credit report that caused the denial, or c) submit an appeal to have their application reconsidered based on their unique circumstances.
   
• Some schools may not be aware of the impact a borrower's requested loan amount has on the GradPLUS loan and that a distinct difference exists between this loan type and Stafford. The primary difference is the federal requirement that a borrower provide the lender, guarantor or school a "borrower requested loan amount" for each loan request they make. (Refer to the original PLUS MPN Dear Colleague Letter (G-03-345) of February 7, 2003 for more about this requirement. The specifics are outlined in the Implementation guidance provided as enclosure A to the above referenced Dear Colleague Letter, page 2 under the "Requested Loan Amount" section.)
  To summarize, a lender may not approve a loan for an amount higher than the borrower's requested loan amount. For example, if a borrower provides a $15,000 borrower request loan amount and the school certifies the loan for $21,325, the loan will approve for $15,000. The general logic is that it should be the least of: (a) the borrower requested, (b) school certified, or (c) annual/aggregate loan limits (which is cost minus other aid for Grad PLUS).
   
• To clarify the Common Manual's disbursement provision: To be eligible for a single disbursement, the loan period must be a single term and the cohort default rate must be under 10%. Both conditions listed in the provision must apply for a single disbursement.
   
• Schools acting as their own lender are not able to run the Federal Graduate PLUS through their School as Lender model.
   
• T.H.E. has developed a question and answer document geared towards students to help them understand what this new loan type is and how it may impact their education financing choices.
   
• The current PLUS forms used for undergraduate borrowing will be used by Federal Graduate PLUS borrowers and will require lenders to provide the new Promissory Note Addendum at the time the borrower either electronically signs or completes a wet (original) signature. At the time of disclosure (typically at approval) the revised Plain Language Disclosure will be provided to the borrower. These forms were made available through the April 24, 2006 Dear Colleague Letter.