Like many students and families, you may find that supplemental loans are an important resource for financing college. Federal Direct PLUS Loans and private education loans are two available options for families who need additional funds. These loans are not included in the U-M financial aid package; you must apply for them separately:
- Direct PLUS Loans are part of the federal Direct Loan Program and are for graduate students and parents of dependent undergraduates. The loans have favorable loan terms and are backed by the federal government, which has a record of good service. Several types of repayment plans are offered.
- Private student loans are offered through a variety of banks and other lenders and are available to all students who qualify. The best rates are offered to borrowers who have good credit and/or who have a cosigner with good credit. Note that the majority of lenders require a minimum of half-time enrollment at the point of disbursement of the loan.
Supplemental loans may be of interest if you:
- have little or no eligibility for need-based financial aid programs,
- need additional resources beyond your financial aid in order to pay college costs,
- are classified as a nonresident and need additional resources to fill the gap between need-based financial aid and college costs, or
- have circumstances (such as a medical condition) leading to unusual costs above the standard cost of attendance
When students and parents are looking for a supplemental loan, we encourage them to compare Direct PLUS Loan interest rates, credit check conditions, terms, and repayment plans with those of private loan options. Direct PLUS Loans offer a number of distinct advantages, including:
- Stability of federal funding
- Option to consolidate with other federal loans
- Fixed interest rate
- Several options of repayment plans
- Deferment option
The table below compares the terms of the Direct PLUS Loan program with terms typically offered by private lenders. Included are some questions to ask when you are considering loan options.
— Comparison of PLUS and Private Loan Terms —
|Federal Direct PLUS Loans||Private Education Loans|
U.S. Department of Education (federally funded)
Banks and loan companies
> Will the company sell your loan to another company?
> How long has the company been offering student loans?
Graduate student or parent of dependent undergraduates
Student who is a U.S. citizen or permanent resident
Eligible for Cost of Attendance minus financial aid offered. No cumulative loan maximum.
Loan amounts often are Cost of Attendance minus financial aid offered. Sometimes set by school. Often include a yearly and/or cumulative cap (can be as high as $250,000 for undergraduates).
INTEREST RATES AND FEES:
INTEREST RATES AND FEES:
> What is the interest rate of the loan? Is it fixed or variable? If it is variable, does it have a cap?
> How is the interest rate calculated and capitalized?
> Does the lender charge any fees?
> When does repayment begin?
> If payments begin immediately, can you afford to make the monthly payments?
> If payments begin later (deferred), how will the interest be calculated?
> What do other students have to say about the company? This is one of the best ways to gauge a company's customer service reputation. Customer service will be important to you when you begin repaying the loan.
To find out how much you may be eligible to borrow with the Direct PLUS Loan program or a private lender, select Financial Planning Calculators from within Wolverine Access.
Remember, borrow only what you absolutely need: What you borrow today you must pay back later (with interest)! You determine how much or how little to borrow (up to the maximum allowed). For more information on repaying your loans (including a loan repayment chart), see Repaying Your Student Loans or contact the Office of Financial Aid.