The Federal PLUS is a no-collateral, simple-interest, federally-guaranteed loan program. The interest rate is a fixed rate of 7.9%.

Tax Deduction
Some or all of the interest on the PLUS may be tax deductible under the Tax Payer Relief Act:

• If you filed a single tax return, and your adjusted
gross income (AGI) was below $55,000, then you qualify for a deduction.

• If you filed a joint tax return, and your AGI was
below $75,000, then you qualify for the deduction.
Consult your tax accountant for information on your personal situation with regard to a tax deduction.

Costs & Benefits
The government charges a one-time, 4% fee that is taken out of the proceeds of the loan upon disbursement. This fee pays for the following program guarantees:

• Deferment option - in case of medical or financial hardship,
the loan can be deferred for up to one year three times during
the life of the loan with no negative impact on credit rating.
• Insurance - the loan is fully insured. It is forgiven with the death
of the parent, or the student, or the total disability of the parent.
Again, there is no negative impact on credit rating in such
circumstances.

Payment
• Payment begins about seven months after the start of the school
year(usually in February or March).
• Payments starts with a 10-year note, which can be reduced or
extended.
• There is no prepayment penalty.