Grad PLUS loans: PLEASE READ THIS IF YOU ARE CONSIDERING ONE

[NileBDS]

Hello everyone.

I just wanted to warn/share with you guys my recent experience with Grad PLUS loans (since they are new, and you might not have any other way of finding out about stuff like this).

First off, the guidelines for being approved for this kind of loan are federal guidelines. In other words, set by the government, not private banks (hint: if you get denied by one lender, you will be denied by all lenders since lenders have no or little say on application approvals).

Now, you can get the guidelines from any other website, but her are some of the tings that do not count when considering a Grad PLUS loan application:

• It has nothing to do with your credit score (FICO)
• Nothing to do with your debt/income ratio
• It does not matter how long you have established your credit for (no credit is good credit).

Basically, all they require is that you do not have any late payments reported to your credit file (and obviously no defaults on previous student loans); ie; One payment more than 90 days past due OR 2 or more payments more than 30 days past due reported to your credit file.

Now even though I personally have great credit (score and history), my Grad PLUS loan application was denied because I have a collection account (only one, and a small one too) reported to my credit file.

That was all it took. I asked them even though I have good credit, a high score, and have never had any late payments/bills in my life, and they answered yes.

Long story short, I had to settle that collection account, get proof from the collecting agency that my new account balance was zero, send that information to the lender, and have my application re-viewed by the lender.

So for anyone considering this (very good by the way) alternative loan in the future, start working on your credit file now. Get a copy of your credit report and settle any “outstanding” or “open collection” accounts on your file prior to applying for the Grad PLUS.

If not, then do not count on it. Start looking for co-signers, private loans or any of the other (already available) alternatives.

Please verify this information directly from any of the many lenders out there, and ask for a full list of guidelines/approval criteria for this loan and do not take my word for any of this, because I wouldn’t.

Good Luck.

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[remify]

How did you decide to get a Grad PLUS loan over a private, let's say, citibank one?

I know that the federal grad plus has a capped interest rate. do you think that is cheaper on the long run?

Hello everyone.

I just wanted to warn/share with you guys my recent experience with Grad PLUS loans (since they are new, and you might not have any other way of finding out about stuff like this).

First off, the guidelines for being approved for this kind of loan are federal guidelines. In other words, set by the government, not private banks (hint: if you get denied by one lender, you will be denied by all lenders since lenders have no or little say on application approvals).

Now, you can get the guidelines from any other website, but her are some of the tings that do not count when considering a Grad PLUS loan application:

• It has nothing to do with your credit score (FICO)
• Nothing to do with your debt/income ratio
• It does not matter how long you have established your credit for (no credit is good credit).

Basically, all they require is that you do not have any late payments reported to your credit file (and obviously no defaults on previous student loans); ie; One payment more than 90 days past due OR 2 or more payments more than 30 days past due reported to your credit file.

Now even though I personally have great credit (score and history), my Grad PLUS loan application was denied because I have a collection account (only one, and a small one too) reported to my credit file.

That was all it took. I asked them even though I have good credit, a high score, and have never had any late payments/bills in my life, and they answered yes.

Long story short, I had to settle that collection account, get proof from the collecting agency that my new account balance was zero, send that information to the lender, and have my application re-viewed by the lender.

So for anyone considering this (very good by the way) alternative loan in the future, start working on your credit file now. Get a copy of your credit report and settle any “outstanding” or “open collection” accounts on your file prior to applying for the Grad PLUS.

If not, then do not count on it. Start looking for co-signers, private loans or any of the other (already available) alternatives.

Please verify this information directly from any of the many lenders out there, and ask for a full list of guidelines/approval criteria for this loan and do not take my word for any of this, because I wouldn’t.

Good Luck.

 

[Yah-E]

Grad Plus can be used to help out graduate students who exhausted all their Stafford sub and unsubsidized Loans ($189K total aggregate). Like for me, I had Stafford loans in undergrad, post-bac, and in dental school. I now have no more eligibilities for Staffords so when I start medical school and need student loans, I now will apply for Grad Plus because I don't want to fund an entire year of medical school budget with Alternative (private) loans.

For pre-doctoral dental students, you should apply and use alternative loans such as Access, Citibank, etc. Of course these alternative loans are based on credit scores, most of the time, a co-signer is required.

Grad Plus approval criteria is bit less stringent, but interests is fixed at 8.5%and can be more than an alternative/private loan. Usually with a credit worthy co-signer, an alternative/private loan can have a very low interests rate.

 

[NileBDS]

How did you decide to get a Grad PLUS loan over a private, let's say, citibank one?

I know that the federal grad plus has a capped interest rate. do you think that is cheaper on the long run?

Short answer, yes.

Long answer,
1. Fixed interest rate
2. MUCH better repayment benefits/incentives offered by lenders
3. Insured against disability/death
4. Unlimited annual limits (Cost of attendance - any fin. aid/stafford received) - regardless
5. Option to consolidate
6. Intrest is only capitalized once over the life of your loan (upon graduation)

I personally was sold when I heard that it was a fixed (lower than %10) loan. Factor in repayment incentives (i'm getting a %1.3 rebate + %1.3 rebate on my staffords too - %7.2 and %5.5) and you're getting a pretty darn good deal.
I personally think this is the best thing that has happened to grad students in some time.

 

[ItsGavinC]

I agree about this being a good thing. My school has switched to using the Grad PLUS loans rather than Access private loans for amounts needed above and beyond the Stafford loans.

 

[Cold Front]

Hello everyone.

I just wanted to warn/share with you guys my recent experience with Grad PLUS loans (since they are new, and you might not have any other way of finding out about stuff like this).

First off, the guidelines for being approved for this kind of loan are federal guidelines. In other words, set by the government, not private banks (hint: if you get denied by one lender, you will be denied by all lenders since lenders have no or little say on application approvals).

Now, you can get the guidelines from any other website, but her are some of the tings that do not count when considering a Grad PLUS loan application:

• It has nothing to do with your credit score (FICO)
• Nothing to do with your debt/income ratio
• It does not matter how long you have established your credit for (no credit is good credit).

Basically, all they require is that you do not have any late payments reported to your credit file (and obviously no defaults on previous student loans); ie; One payment more than 90 days past due OR 2 or more payments more than 30 days past due reported to your credit file.

Now even though I personally have great credit (score and history), my Grad PLUS loan application was denied because I have a collection account (only one, and a small one too) reported to my credit file.

That was all it took. I asked them even though I have good credit, a high score, and have never had any late payments/bills in my life, and they answered yes.

Long story short, I had to settle that collection account, get proof from the collecting agency that my new account balance was zero, send that information to the lender, and have my application re-viewed by the lender.

So for anyone considering this (very good by the way) alternative loan in the future, start working on your credit file now. Get a copy of your credit report and settle any “outstanding” or “open collection” accounts on your file prior to applying for the Grad PLUS.

If not, then do not count on it. Start looking for co-signers, private loans or any of the other (already available) alternatives.

Please verify this information directly from any of the many lenders out there, and ask for a full list of guidelines/approval criteria for this loan and do not take my word for any of this, because I wouldn’t.

Good Luck.

Thanks for sharing your experience, as I am very much interested in PLUS loans - but my school won't offer it until December this year. I knew somehow that students would face some type of catch-22 in the process to qualify.

Now, hypothetically speaking, if you have an active collection account in your credit file, will the lender(s) allow you to overcome it by having a co-signer to get the loan?

 

[NileBDS]

Thanks for sharing your experience, as I am very much interested in PLUS loans - but my school won't offer it until December this year. I knew somehow that students would face some type of catch-22 in the process to qualify.

Now, hypothetically speaking, if you have an active collection account in your credit file, will the lender(s) allow you to overcome it by having a co-signer to get the loan?

Hey coldfront.
Yeah, that in fact was one of the options they gave me.

 

[Typo]

Just a heads up about the Grad Plus loans - this is what they told us in a school seminar today.

Apparently, there isn't currently an option to postpone payment on these loans if you do a postgrad residency/specialty program. In other words, you could end up having to pay off your Grad Plus loans while you're in the middle of a residency. If you're planning on applying to one, this is something to look into. It could just be that the program is so new that banks haven't created this option, but as far as they knew at my school, the option to postpone for a residency isn't currently available.

Anyone else have any more info on this?

 

[NileBDS]

Just a heads up about the Grad Plus loans - this is what they told us in a school seminar today.

Apparently, there isn't currently an option to postpone payment on these loans if you do a postgrad residency/specialty program. In other words, you could end up having to pay off your Grad Plus loans while you're in the middle of a residency. If you're planning on applying to one, this is something to look into. It could just be that the program is so new that banks haven't created this option, but as far as they knew at my school, the option to postpone for a residency isn't currently available.

Anyone else have any more info on this?

Yeah, you're right Typo.
Actually, on the preferred lender list my school sent us, it said 'contact lender' under that option. I am assuming that it's a case by case lender sort of thing. I doubt that they would not offer that sort of loan deferral, since these loans are exclusively for grad students to begin with.
There is not even a grace period option yet, like the standard 6 month one you would get on your stafford loans following graduation. However, when I asked the lender directly, they were like "yeah, sure ... we'll give you a 6 month grace on the grad plus too so you can align both loans on entering repayment".

 

[Cold Front]

Yeah, you're right Typo.
There is not even a grace period option yet, like the standard 6 month one you would get on your stafford loans following graduation. However, when I asked the lender directly, they were like "yeah, sure ... we'll give you a 6 month grace on the grad plus too so you can align both loans on entering repayment".

👎

I am sure the policy on this will change over time.

Here is more info on the new GRAD PLUS LOANS.

 

[Typo]

Yeah, you're right Typo.
Actually, on the preferred lender list my school sent us, it said 'contact lender' under that option. I am assuming that it's a case by case lender sort of thing. I doubt that they would not offer that sort of loan deferral, since these loans are exclusively for grad students to begin with.
There is not even a grace period option yet, like the standard 6 month one you would get on your stafford loans following graduation. However, when I asked the lender directly, they were like "yeah, sure ... we'll give you a 6 month grace on the grad plus too so you can align both loans on entering repayment".

You're right, that's another thing they mentioned in the seminar. We were told exactly what the bank told you - that when you graduate, you'll need to request a 6 month "forebearance" so that the two loans can align, since there isn't an automatic grace period.

I agree with you, it wouldn't make any sense for banks not to offer an extension, especially since they're all clamoring to service this loan. Competition will probably eventually force them all to do it, but maybe no one wants to make the first move by offering it.

 

[remify]

i spoke to two different people who work for HESC about the grad PLUS loan. person 1 told me that i can go ahead and fill out the grad PLUS loan on their website even though the loan doesn't come into play until july the 1st. person 2 told me that i have to wait till july 1st to fill out the online application.

does anyone know anything about this?

 

[NileBDS]

i spoke to two different people who work for HESC about the grad PLUS loan. person 1 told me that i can go ahead and fill out the grad PLUS loan on their website even though the loan doesn't come into play until july the 1st. person 2 told me that i have to wait till july 1st to fill out the online application.

does anyone know anything about this?

I'm not sure why the second person told you that. As long as your school participates in the Grad PLUS loan program with that specific lender, you should be able to apply/get pre-approved anytime.
The loan will not be "approved" anyways until your school certifies it. You just get pre-approved now, so when your school certifies the requested amount (after July 1st), your application is approved almost right away, and your dispersments are ready.

 

[dentwannabe]

I'm sort of slow financially, so let me get this straight (NILEBDS, feel free to help me here), in a nutshell, the main quality about the GRAD PLUS loan that makes it attractive is its fixed 8.5% because theoretically the interest rate will increase in the coming years? So once should get locked in at this "low" rate because private lenders go by the current interest rate and not a fixed one? What about consolidation? Can't you consolidate private loans? At NYU, Citibank gives us the prime rate minus 1%. The gradplus gives you -1.25% in repayment. So, that sounds better.

How come people are not rushing to grad loans? Whats the catch, when compared to private loans?

 

[NileBDS]

Hey there dent.
Ok, i'll try to tackle this post one by one.

QUOTE=dentwannabe
I'm sort of slow financially, so let me get this straight (NILEBDS, feel free to help me here), in a nutshell, the main quality about the GRAD PLUS loan that makes it attractive is its fixed 8.5% because theoretically the interest rate will increase in the coming years?

Not only that, but private loans are usually based on variable interest rates. Plus these variable rates rarely have a cap, and when they do, it's usually somewhere between %25 and %30. Just the thought of such numbers scares me. Who knows what could screw your credit some time within the next 30 years ? And when that happens, they will be the first to let you know, by jacking up your APR.


So once should get locked in at this "low" rate because private lenders go by the current interest rate and not a fixed one? What about consolidation? Can't you consolidate private loans?

I am pretty sure that you can not consolidate private loans. You might be able to refinance the private loan later on with a different lender, but not consolidate it with your Staffords (federal).


At NYU, Citibank gives us the prime rate minus 1%. The gradplus gives you -1.25% in repayment. So, that sounds better.

Yeah, I heard about that offer that you guys are getting at NYU. It sounds very reasonable too, but again, is it capped ? It could be prime minus 1 now, and by the time you graduate it jumps to prime plus 2 or 3. Even the prime may change (which I guarantee you it will) by then. Who knows what will happen 10 or 20 years from now.
What I am trying to say is think long term. These are huge numbers, and might be around for a good time of your career. My opinion is if you have an option to lock in a reasonable APR, do it.


How come people are not rushing to grad loans? Whats the catch, when compared to private loans?

No catch.
They are just new. Some schools don't have them yet, and some students don't know about them.
I guess private loans are just more popular and have been around for much longer (and are more understood), hence people seem to be more comfortable with them.
Another advantage to the Grad PLUS loan is that it is federally insured against disability/death of the primary borrower. If anything ever happens to me, I don't want my family to have to worry about it.

I hope I answered all your questions.
I would like to hear the opinion of other members also who have opted for the private loans over the Grad PLUS. I think this would best put both arguments in front of dentwannabe, and hopefully will be able to reach a better conclusion and make a beter decision.

Good Luck.

 

[ItsGavinC]

I'm not sure why the second person told you that. As long as your school participates in the Grad PLUS loan program with that specific lender, you should be able to apply/get pre-approved anytime.
The loan will not be "approved" anyways until your school certifies it. You just get pre-approved now, so when your school certifies the requested amount (after July 1st), your application is approved almost right away, and your dispersments are ready.

Perfect (and true) advice. For example, my lender has approved me, however I can't sign my promissary note until July 1--but the funds will be ready shortly thereafter (or so my wife hopes). 🙂