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PLUS vs. Alternative Loans

With so many borrowing options available to parents and students, there are always reasons to feel positive about your ability to finance a college education. If your federal and state grants along with your maximum Direct loan do not provide adequate funding for college expenses, students and parents may be eligible for either a PLUS loan or an Alternative loan.

What is a PLUS loan?

Federal PLUS loans are low-interest loans for parents of dependent students. The Federal PLUS loan is not asset-based; approval is based on creditworthiness. It picks up where financial aid leaves off, enabling the parent to borrow up to 100 percent of the student’s educational expenses, minus financial aid received.

If parents do not qualify for a PLUS loan, the student may be able to borrow additional funds through an Unsubsidized Direct loan or an Alternative loan.

How to Apply

Parents may request the PLUS loan through the ECC Financial Aid Office or download form at this link: PLUS Loan Application. Parents of a dependent student can take out a PLUS loan to pay for the student’s education.  It is the parents’ responsibility to repay this loan.  The interest rate is fixed at 7.9%.

Note:  First time parent borrowers must complete a Master Promissory Note (MPN) at www.studentloans.gov.

Eligibility

Parent

  • Must be a parent or guardian of the student
  • Credit approval
  • U.S. citizen or eligible non-citizen

Student

  • Registered for at least 6 credit hours
  • Matriculated
  • U.S. citizen or eligible non-citizen
  • Good academic standing

What is an Alternative loan?

Beyond the Federal Stafford loan, students are sometimes able to borrow what is commonly referred to as an Alternative loan. Alternative loans are credit-based private loans offered by banks that are specifically targeted to address educational costs. Many lenders require that an undergraduate student with a limited credit history have a co-signer for this type of loan.

If you have any questions regarding what option is best for you and your family, contact your Financial Aid Office.

Remember: Always apply for financial aid www.fafsa.gov and apply for a Stafford loan prior to exploring your PLUS and Alternative loan options.

 

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