PLUS Loans for Graduate & Professional Students

(GradPLUS Loans)

Mark Maidlow

KHEAA

KASFAA 2007 Spring Conference

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Agenda

• Shared features

• Unique features

• Specific issues

• Negotiated rulemaking

• Benefits

• Private loan comparison

• Your issues

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GradPLUS = Parent PLUS

• COA – EFA• Loan limits (or lack there of)• Disbursement requirements• Interest rate• MPN• Credit evaluation• Deferment, forbearance, discharge options• Repayment

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GradPLUS ≠ Parent PLUS

• FAFSA required

• Stafford eligibility must be determined

• Borrower must meet all general student eligibility requirements

• Entrance counseling proposed for all first time GradPLUS borrowers

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Eligibility Requirements

• Eligible Student– 34 CFR §668.32

• Eligible Borrower– 34 CFR §682.201

• Definition of Graduate and Professional Student– 34 CFR §682.200(b)

• Current location

– 34 CFR §668.2(b)• Proposed location

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Definition of Graduate/Professional Student

• Enrolled in a program above the baccalaureate level or enrolled in a first professional degree program

• Completed the equivalent of at least three academic years of full-time study at an institution of higher education, either before entrance into the program or as part of the program itself; and

• Not receiving Title IV aid as an undergraduate student for the same period of enrollment.

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Proposed Regulatory Language Definition of First Professional Degree

§668.2(b) General DefinitionsFirst professional degree: A degree that signifies both completion

of the academic requirements for beginning practice in a given

profession and a level of professional skill beyond that normally

required for a bachelor’s degree. Professional licensure is also

generally required. Examples of a first professional degree

include but are not limited to Pharmacy (Pharm.D.), Dentistry

(D.D.S. or D.M.D.), and Veterinary Medicine (D.V.M.),

Chiropractic (D.C. or D.C.M.), Law (L.L.B., J.D.), Medicine (M.D.),

Optometry (O.D.), Osteopathic Medicine (D.O.), Podiatry

(D.P.M., D.P., or Pod.D.), and Theology (M.Div., M.H.L.).

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Ø• Can’t be used for preparatory

coursework necessary for enrollment in a graduate or professional program

• Can’t be used for teacher certification coursework unless part of graduate program

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Adverse Credit History

• 34 CFR 682.201(c)(2)(i)-(v)– 90 days or more delinquent on any debt– Default determination, bankruptcy

discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a Title IV debt, during the five years preceding the date of the credit report.

• Lenders may develop more

restrictive credit standards

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Adverse Credit History

• Endorser

• Extenuating circumstances

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Certification/Processing Issues

• Process for collecting requested amount

• Determine student’s Stafford eligibility

– FP-06-05

• Negotiated Rulemaking—proposed reg

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Proposed Regulatory LanguageLoan Certification-- §682.603

d) Before certifying a PLUS loan application for a graduate or professional student borrower, the school must determine the borrower’s eligibility for a Stafford loan. If the borrower is eligible for a Stafford loan but has not requested the maximum Stafford loan amount for which the borrower is eligible, the school must—

(1) Notify the graduate or professional student borrower of the maximum Stafford loan amount that he or she is eligible to receive and provide the borrower with a comparison of--

(i) The maximum interest rate for a Stafford loan and the maximum interest rate for a PLUS loan;

(ii) Periods when interest accrues on a Stafford loan and periods when interest accrues on a PLUS loan; and

(iii) The point at which a Stafford loan enters repayment and the point at which a PLUS loan enters repayment.

(2) Give the graduate or professional student borrower the opportunity to request the maximum Stafford loan amount for which the borrower is eligible.

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Disbursement Issues

• Conduct entrance counseling if required before first disbursement (proposed)

• Multiple disbursement requirements apply

• No direct disbursement for foreign school study or study abroad

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Proposed Regulatory Language Entrance Counseling

§682.604

(f)(2) A school must ensure that initial counseling is conducted with each graduate or professional student PLUS loan borrower prior to its release of the first disbursement, unless the student has received a prior Federal PLUS loan or Direct PLUS loan.   

(3) Initial counseling must be conducted either in person, by audiovisual presentation, or by interactive electronic means.

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Exit Counseling

• HEA Sec.485(b)

• Not required, but recommended

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Proposed Regulatory Language Entrance & Exit Counseling

• Require inclusion of amounts borrowed by student PLUS loan borrowers in the sample monthly repayment calculations

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Proposed Regulatory Language Entrance Counseling--§682.604(f)(5)

(v) Inform the student borrower of sample monthly repayment amounts based on a range of student levels of indebtedness or on the average indebtedness of Stafford loan borrowers, or graduate or professional student PLUS loan borrowers, or student borrowers with Stafford and PLUS loans, depending on the types of loans the borrower has obtained, at the same school or in the same program of study at the same school.

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Proposed Regulatory Language Exit Counseling-- §682.604(g)(2)

(i) Inform the student borrower of the average anticipated monthly repayment amount based on the student borrower's indebtedness or on the average indebtedness of student borrowers who have obtained Stafford loans or student borrowers who have obtained Stafford and PLUS loans, depending on the types of loans the student borrower has obtained, for attendance at the same school or in the same program of study at the same school;

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Repayment Issues

• Begins on date loan is fully disbursed

• No in-school period

• No grace period

• In-school deferment available

• Consolidation

• No repayment alignment

• Forbearance

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PLUS MPN Issues

• Serial feature not approved for use at any foreign schools

• Can’t borrow under the same PLUS MPN as both a graduate/professional student & as a parent

• New PLUS MPN if borrower changes lender

• New PLUS MPN required with use

of an endorser

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GradPLUS Interest Rates

• Fixed for life of loan

• 8.5% FFELP

• 7.9% Direct

• Many lenders offer 1% or more interest rate discounts

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GradPLUS Loan Fees

• 3% Origination Fee—may not be paid by lender on borrower’s behalf

• 1% Default Fee—may be paid by lender or guarantor on borrower’s behalf

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NSLDS

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GradPLUS/Alternative Loans Comparison

• Credit evaluation

• Interest rates

• Deferment, forbearance, discharge options

• Federal loan consolidation

• Fees

• Benefits/rewards

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Miscellaneous

• If your school participates in the PLUS Loan program, you must offer GradPLUS

• PLUS Loans are not included in your cohort default rate calculation

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Dear Partner Letters

• GEN-06-02– Summary of HERA changes to loan programs

• FP-06-05– PLUS MPN Addendum & PLD– Guidance for awarding GradPLUS Loans