- PLUS Loans. These loans are available to graduate students and the parents of dependent undergraduate students. PLUS loans have generally had higher interest rates than Stafford loans and, like unsubsidized Stafford loans, accrue interest while the student is in school. Unlike Stafford loans, PLUS loans are limited only by the student’s cost of attending a school. They accounted for 24 percent of the total volume (in dollars) of federal student loans disbursed in 2017.
Repayment, Default, and Forgiveness
When borrowers finish their schooling, they are automatically assigned to the standard repayment plan, which amortizes the loan principal and accrued interest over a 10-year period. Other repayment plans, as well as various tools for pausing or reducing payments, are available and have expanded over time. For example, borrowers may select a graduated repayment plan or an IDR plan. In a graduated repayment plan, the required monthly payments increase over time, with the expectation that the borrower’s income will also increase over time. In IDR plans, borrowers’ payments are based on their incomes and may be as low as zero if their income falls below a certain threshold. After selecting a plan and beginning repayment, borrowers may apply for payment deferment or forbearance, which temporarily reduces or pauses their payments. 4
Borrowers who miss a required monthly payment and have not obtained deferment or forbearance from their loan servicer are considered to be 30 days delinquent. Borrowers who continue to miss payments and become 270 days delinquent are declared by the government to have defaulted on their loans. When borrowers default, they lose eligibility for further federal aid until the default is resolved, and the default is reported to consumer credit reporting agencies. Continue reading “Growth in the Volume of Federal Student Loans Over Time”
