University of Pittsburgh at Johnstown
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PLUS vs. Alternative Loans

Parent Loan for Undergraduate Students (PLUS)
The PLUS loan program is a program administered by the federal government which allows parents of dependent, undergraduate students to borrow up to the cost of education less any financial aid annually.  In order to be eligible for the PLUS loan, parents must not have an adverse credit history.  Repayment on the PLUS loan generally begins 60 days after the second disbursement, but some lenders offer a delayed repayment option.

Alternative Loans
Alternative loans are a popular resource used in meeting the cost of your child's education. These loans are made in the student's name and usually require creditworthy co-signers.  These loans generally require no payments while the student is enrolled in school; however, interest begins accumulating immediately.   

How does the PLUS loan program compare to Alternative loans?

PLUS Loan Program

Alternative Loans

Variable interest rate (set annually on July 1)

Variable interest rate (monthly or quarterly)

Interest rate will never exceed 9%

Interest rate usually will not exceed 18% to 21%

Accrued interest capitalizes once at final repayment

Accrued interest may be capitalized monthly, quarterly, or once at repayment

May borrow up to the cost of attendance less other aid

May borrow up to the cost of attendance less other aid

Credit check based upon federal standards (easier to qualify); no debt-to-income ratios or credit-scoring

Borrowers must pass a comprehensive credit check

Parent is responsible for repayment

Student is responsible for repayment; however, a co-signer is equally liable and the loan—and payment history—are listed on a co-signer’s credit report

Federally insured against death and disability for both the parent and the student

Not federally insured against death and disability

Wide selection of deferment privileges available; ability to easily consolidate PLUS Loans (even for multiple students)—consolidated PLUS loans are capped at 8.25%

Limited forbearance and consolidation options available

Repayment begins 60 days after the second disbursement of the loan (some lenders do offer a delayed repayment option); interest begins accruing after the first disbursement

Payments may be deferred while the student is enrolled at least half time; interest begins accruing at the time of the first disbursement

Last Reviewed: November 15, 2004