Federal Parent PLUS Loan

2011 Update

• As of July 1, 2010 all federal student loans (Stafford, PLUS, GradPLUS and consolidation loans) are now exclusively provided by the US government through what is called the "Direct Loan Program."
• All lending from the bank-based Federal Family Education Loan Program (FFELP) has been transferred to the Direct Loan Program. Private banks will no longer lend government-backed loans to students.
• Every student applying for federal student loans will do so through their college or university (contact your Financial Aid office to learn how).

Overview

Parents of dependent students can borrow a PLUS Loan to help pay education expenses of an undergraduate student enrolled at least half time in an eligible program at an eligible school. Unlike the Stafford loan, there are no maximum amounts for the PLUS loan.  The amount you may borrow is based on the cost of attendance of your school minus any financial aid including other loans. PLUS Loans are available through William D. Ford Federal Direct Loan (Direct Loan) Program. While they do require a credit check, the credit criteria to obtain a PLUS are generally not as stringent as they are for other types of consumer loans since they are based on Federal requirements. A person must also meet other criteria to qualify as well.

Applying for a Federal PLUS Loan

While filing the Free Application for Federal Student Aid (FAFSA) is technically not a requirement to receive a PLUS loan, most schools do require a FAFSA be filed before they will certify a PLUS. We always recommend families file a FAFSA whether you think you will qualify for federal assistance or not.

Because all schools now use the Direct Loan program, a parent will need to contact the school directly in order to receive the loan. Funds for "Direct Loans" come directly from the federal government. Your school will most likely direct you to the proper link within the ed.gov website where parent loans are processed.

Eligibility

A parent is required to pass a credit check. However, the check is not as stringent as it is for other loans with which you may be more familiar (e.g. an auto loan or mortgage). For example, assets are not a requirement to qualify for a PLUS loan. If the parent borrower is denied based on credit, they may still be able to get the loan if they can get someone such as a relative to endorse (co-sign) the loan. The student and parent must also meet other general eligibility requirements for federal student aid.

Loan Limits

A parent may borrow up to the cost of attendance (established by the school) minus other financial aid including other loans.

Interest Rate

For PLUS Loans disbursed on or after July 1, 2006, the interest rate is fixed at 7.90% for Direct PLUS Loans (the old FFEL PLUS loans were slightly more expensive at 8.50%).

Fees

A fee of 4% is charged to borrow a PLUS loan. This amount of this fee is deducted from the amount sent to the school up front, so it's important to keep in mind that a $10,000 loan actually means that $9,600 will be sent to the school.

Repayment

Repayment of a PLUS loan begins within 60 days after the final disbursement of the loan. PLUS loans, like all federal loans, are disbursed in equal amounts over the course of an academic year. For a school that uses semesters, that would mean one disbursement in the beginning of the Fall and one in the beginning of the Spring. Payment would begin after the Spring disbursement. However, for loans disbursed on or after 7/1/2008, parents may now postpone repayment until six months after their student ceases to be enrolled on at least a half-time basis. Pay particular attention to the disclosures provided by your lender.

Repayment Term

The standard repayment term is ten years. However, depending on the total amount borrowed, the repayment term can be extended up to 25 years for borrowers eligible for an extended repayment.

If extenuating circumstances develop during repayment, a borrower may request forbearance (temporarily stop paying). In addition, there are federal deferment options available as well. During forbearance or deferment, the borrower does not have to make payments, but interest does continue to accrue and is added to the principal if no payments of interest have been made.