Interest rates on PLUS Loans are fixed. The current interest rates for new PLUS Loans in 2018-2019 are 7.6% for parents of undergraduate students (Parent PLUS Loans) and for graduate students (Grad PLUS Loans). This rate is subject to change for 2019-2020 for loans first disbursed on or after July 1, 2019.
PLUS Loan Interest Rates
Interest rates on Parent PLUS and Grad PLUS Loans are the same.
Loan Disbursement and Default Fees
Loan disbursement and default fees are effectively a form of up-front interest. Assuming a 10-year repayment term, a 4% fee is the equivalent of an increase in the interest rate of about seven-eighths to one percentage point. Assuming a 30-year repayment term, a 4% fee is the equivalent of an increase in the interest rate of about one-third to half a percentage point.
The relative impact of a fee is greater with a shorter repayment term or if the borrower prepays the loan, since the fee will be amortized over less time. This is why borrowers who plan to pay off a loan early may wish to avoid up-front fees, if possible.
Fees on PLUS Loans