Federal PLUS Loans
PLUS Loans enable parents to borrow money for education expenses of each child who is a dependent undergraduate student enrolled at least half time. PLUS Loans are available through both the Direct Loan and Federal Family Education Loan (FFEL) programs.
Are there any borrowing requirements my parent(s) have to meet?
To be eligible to receive a PLUS Loan, your parent will be required to pass a credit check. Some lenders offer a PLUS pre-approval service, which allows potential PLUS Loan borrowers to determine their eligibility before applying for the loan.
If your parent does not pass the credit check, they may still be able to receive a loan if someone, such as a relative or friend, who is able to pass the credit check, agrees to endorse the loan.
You must meet the eligibility requirements for federal student financial aid to receive a PLUS Loan. Your parent must also meet some of these requirements. For example, your parent must meet citizenship requirements and may not be in default or owe a refund to any Student Financial Aid Program.
How much can my parent(s) borrow?
The yearly limit on a PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. For example, if your cost of attendance is $8,000 and you receive $3,000 in other financial aid, your parent could borrow up to $5,000.
What is the interest rate on PLUS Loans?
For PLUS Loans disbursed on or after July 1, 2006, the interest rate is fixed (at 7.90% for Direct PLUS Loans and 8.50% for FFEL PLUS Loans.) For PLUS Loans disbursed between July 1, 1998 and June 30, 2006, the interest rate is variable and is determined on July 1 of every year. For 2006-2007, the variable rate for these PLUS Loans (in both Direct and FFEL programs) is 7.94%. Interest is charged on a PLUS Loan from the date of the first disbursement until the loan is paid in full.
How will the money be sent?
For a FFEL Program PLUS Loan, the loan funds will be sent to your school by the lender. For a Direct Program PLUS Loan, the U.S. Department of Education will send the loan funds to your school. In most cases, the loan will be disbursed in at least two installments. The funds will first be used to pay for your tuition and fees, room and board, and other school charges. If any loan money remains, your parent will receive that amount from your school, unless they authorize it to be released to you or to be put into your school account. Any remaining loan money must be used to pay your education expenses only.
Is there any charge for a PLUS Loan?
Your parent will pay a fee of up to 4% of the loan. The amount of their fees may vary as many lenders and guarantors offer rebates and discounts on loan fees. These fees are deducted proportionately from each disbursement of your parent's loan. For a FFEL PLUS Loan, a portion of this fee goes to the federal government to help reduce the cost of running the loan program. For a Direct Loan Program PLUS Loan, the entire fee goes to the government to help reduce the cost of running the loan program. Also, if your parents do not make their loan payments when they are due, they may be charged collection costs and late fees.
When must my parent(s) begin repaying the PLUS loan?
Repayment must begin within 60 days of the final loan disbursement. There is no grace period for PLUS loans. Your parent must begin repaying both principal and interest while you are in school.
Is it ever possible to postpone repayment of a PLUS loan?
Yes. Under certain circumstances, your parent can receive a deferment or forbearance for their loan. Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance for PLUS Loans are the same as those for Stafford Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance.
Direct PLUS Loans
How does my parent apply for a Direct PLUS Loan?
Your parent must fill out a Direct PLUS Loan Application and promissory note, which is available from your school's financial aid office.
Does my parent need to find a lender?
No. Under the Direct Loan Program, the lender will be the U.S. Department of Education. Your school assists the federal government in administering the Direct Loan Program by distributing the loan application, processing the loan, and disbursing the loan funds.
FFELP PLUS Loans
How does my parent apply for a FFEL Program PLUS Loan?
Your parent must submit a completed PLUS Loan Application and Promissory Note (available from your school, a lender, or your state guaranty agency) to your school. After the school completes its portion of the application, it must be sent to the lender for a credit check and processing.
How does my parent pay back the loan?
The lender will send a payment schedule after the loan is completely disbursed. The payment schedule will outline the balance of the loan and indicate when payments are due. The schedule will provide for a minimum of $600 to be paid annually and a maximum repayment period of 10 years (excluding periods of deferment and forbearance).