Graduate students are eligible to take out the Federal Direct PLUS Loan after they have applied for their annual limit in Federal Direct Unsubsidized Loans. They must be enrolled in at least six credits, not have an adverse credit history and be otherwise eligible to receive federal aid.

The Federal Direct PLUS Loan is not a need-based loan.

A credit check is required on all Direct PLUS Loan applicants. 

• If you have placed a security freeze on your credit file , you must lift or remove the freeze at each credit bureau before you continue. Your application will not be processed if you have a security freeze on your credit file. 

• To qualify for a Direct PLUS Loan, you must not have an adverse credit history. If the credit check shows that you have an adverse credit history, we will explain how you may still be able to qualify for a Direct PLUS loan. 

If you have an adverse credit history, you may still receive a PLUS loan through one of these two options: 

• Obtaining an endorser (co-signer) who does not have an adverse credit history.  

• Documenting to the satisfaction of the U.S. Department of Education that there are extenuating circumstances relating to your adverse credit history. 

Adverse credit history is described as a credit report shows that you are experiencing any of the following credit conditions: 

• Accounts with a total outstanding balance greater than $2,085 that are 90 or more days delinquent as of the date of the credit report, or that have been placed in collection or charged off* during the two years preceding the date of the credit report. 

• Default determination during the five years preceding the date of the credit report. 

• Bankruptcy discharge during the five years preceding the date of the credit report. 

• Repossession during the five years preceding the date of the credit report. 

• Foreclosure during the five years preceding the date of the credit report 

• Charge-off/write-off of a federal student aid debt during the five years preceding the date of the credit report. 

• Wage garnishment during the five years preceding the date of the credit report. 

• Tax lien during the five years preceding the date of the credit report 

* charged off means a debt that a creditor has written off as a loss, but that is still subject to collection action 

What is PLUS Credit Counseling? 

PLUS Credit Counseling will help students and parents understand the obligations associated with borrowing a PLUS loan and assist them in making careful decisions about taking on student loan debt. This is available at www.studentaid.gov. 

PLUS Credit Counseling is required if the U.S. Department of Education has informed you that you have an adverse credit history and you have: 

• Obtained an endorser or 

• Documented extenuating circumstances to the satisfaction of the U.S. Department of Education 

PLUS Credit Counseling can be completed voluntarily at any time. If PLUS Credit Counseling is completed voluntarily and you are determined to have an adverse credit history by the U.S. Department of Education within 30 days of PLUS Credit Counseling completion, your PLUS Credit Counseling requirement will be considered to be fulfilled. 

The interest rate on Federal Direct PLUS Loan varies each year. The interest rate for a loan taken in any given year is fixed for the life of that specific loan.

Interest accrues from the time of disbursement. Students can make interest only payments to keep interest accrual to a minimum.

If a student does not pay the interest before entering repayment, the interest will be capitalized, meaning the interest will be added to the principal. Then the student will be paying interest on their interest.

Direct PLUS Loans have an original fee which are taken out of each disbursement.

Currently, the fee is equal to 4.228% of the disbursement. So if a student borrowed $1000 they would receive $957, but they would owe back $1000.

The amount of Federal Direct PLUS Loan that can be borrowed in any given year is equal to the Cost of Attendance (COA) minus other aid received.

A student who borrows $30,000 at an average interest rate of 7% and uses the standard repayment schedule (120 equal payments) will have monthly payments of $348. When the loan is paid in full after 10 years they will have paid a total of $41,799.

To receive a customized loan repayment schedule, which shows multiple repayment options, a student can access the US Department of Education's Loan Simulator.

The first time a student takes out a Federal Direct PLUS Loan they must sign a Master Promissory Note (MPN) through StudentAid.gov.

A new MPN does not need to be completed in subsequent years. Students who have an endorser on their loan are required to sign a new MPN each year an endorser is used.  

First-time borrowers of a Federal Direct PLUS Loan must complete entrance counseling as a graduate before they can receive their first loan disbursement.

Entrance counseling teaches students about their rights and responsibilities as student borrowers. The counseling is completed online at StudentAid.gov and should take approximately 20 to 30 minutes to complete. Students will need to log in using their FSA ID.

Returning or transfer students who have an outstanding Federal Direct PLUS loan do not need to complete this requirement.

Students will be notified by the US Department of Education if their Federal Direct PLUS Loan is denied due to an adverse credit history.

If it is denied, a student may attempt to override the credit decision by either obtaining an endorser (co-signor), or choosing to document extenuating circumstances relating to the reason they were declined. Once either action is taken the student must complete PLUS Credit Counseling on StudentAid.gov.

Generally, a Federal Direct PLUS Loan will be for the full academic year, the money being disbursed in two payments, half each term. Loans taken out for the summer term are delivered in one payment.

When the funds are disbursed they are used to pay the balance owed to the school first. If there are excess funds they will be paid as a refund, to help cover educational expenses not charged by UM.

Repayment of a Federal Direct PLUS Loan begins six months after a student ceases to be enrolled in at least six credits. Though there are multiple repayment options, the standard plan requires that the student pay a minimum of $50 a month and have the loan paid off in ten years.

Students who are having difficulty making payments should contact their loan servicer as there are many options available to prevent them from going into default on their loans. Students can find the contact information for their loan servicer by logging into NSLDS.ed.gov using their FSA ID.

UM's Financial Education Program is available to assist students with loan repayment issues. If a student is having difficulty getting cooperation from their loan servicer they can contact the US Department of Education's Loan Ombudsman's Office.

Information about a student's loan is submitted to the National Student Loan Data System (NSLDS). Schools, lenders, servicers and guarantors authorized by the US Department of Education have access to the information in NSLDS.

Students and parent borrowers can also access the information recorded in NSLDS using their FSA ID

Federal student loans are borrowed funds that must be repaid with interest. Failure to repay a loan can result in default. All institutions are required to publish their Cohort Default Rate, which is the percentage of a school’s federal student loan borrowers who enter repayment within the cohort fiscal year (denominator) and default (or met other specified condition) (numerator) within the cohort default period. Below is a chart of UM’s past year year’s cohort default rate: 

We also annually publish our rates on the IPEDS - College Navigator website: College Navigator - The University of Montana (ed.gov) 

SOURCE: Default Management | Knowledge Center