Which student loan type allows you to borrow up to the cost of attendance minus other aid you have received?

Paying for higher education can be a challenge, especially when grants, scholarships, and traditional student loans don't fully cover expenses. In such cases, some borrowers seek federal loans that allow them to bridge the gap between other financial aid and the full cost of attendance (COA) at their institution.

One of the few loan options that provides this flexibility is the Direct PLUS Loan, which allows eligible borrowers to cover the remaining cost of attendance minus any other aid received.

This loan program, offered by the U.S. Department of Education, is available in two forms: the Parent PLUS Loan, which is designed for parents of dependent undergraduate students, and the Graduate PLUS Loan, which is available for graduate and professional students.

Unlike standard Direct Subsidized and Unsubsidized Loans, which have annual and lifetime borrowing limits, PLUS Loans can cover the entire cost of tuition, housing, books, and other educational expenses as determined by the school.

How do PLUS loans work?

The Direct PLUS Loan program was created to give students and parents additional borrowing options when other sources of financial aid are insufficient. The amount you can borrow is determined by your school's cost of attendance, which includes tuition, fees, room and board, books, supplies, and other essential expenses.

From this total, the school subtracts any grants, scholarships, and other federal student loans received, and the remaining balance is the maximum amount a borrower can take out through a PLUS Loan.

Unlike standard federal student loans, PLUS Loans require a credit check to determine borrower eligibility. While a high credit score is not required, applicants cannot have an adverse credit history, which includes delinquent s, bankruptcy, default on previous loans, or significant debt write-offs.

However, even if an applicant fails the credit check, they may still qualify by obtaining an endorser (co-signer) or providing additional documentation of extenuating financial circumstances.

Another important aspect of PLUS Loans is that they accrue interest immediately upon disbursement, unlike Direct Subsidized Loans, where interest is covered by the government while the student is in school. The borrower is responsible for all interest charges, even if they opt to defer payments while the student is enrolled at least half-time.