plus loans

"Loans: The PLUS Loan Program"

The government awards three types of financial aid for higher education: grants, loans, and work-study. In the loan category there are four major programs backed by Uncle Sam: The Stafford Loan Program, PLUS Loan Program, Consolidation Loan Program, and the Perkins Loan Program.

The following are details about the PLUS Loan Program:

Details: Federal Parent Loans for Undergraduate Students, also known as PLUS loans, are low-interest education loans that allow parents with good credit histories to fund the cost of their child's education. Available through both the Direct PLUS Loan and FFEL PLUS Loan Program. For FFEL PLUS Loans, you will locate a lender by contacting your school or the Federal Student Aid Information Center.

Eligibility: You must:
  • be a natural, step, or adoptive parent of a dependent student
  • be a U.S. citizen, or eligible non-citizen, and provide a valid Social Security number
  • pass a credit check

Eligibility also depends on the student. The student must:
  • be less than 24 years of age
  • have no dependents
  • be enrolled at least half-time
  • be unmarried

Based on: Not based on financial need.

Is there a credit check involved: Yes. In order to obtain a PLUS loan, you will be subject to a credit evaluation verifying that you have no adverse credit history. A parent with adverse credit history can still qualify for a PLUS loan by securing an endorser who must pass all credit requirements.

Amount: Maximum is the Cost of Attendance minus any other financial aid you receive. For example, if your Cost of Attendance is $10,000 and you receive $6,000 in financial aid, the maximum amount your parents could borrow is $4,000.

Note: The Cost Of Attendance (COA) is the estimate for the total cost of attending a specific college and includes the annual tuition, room and board, books, travel, and personal expenses.

Cost: The interest rate varies from year to year but will never exceed nine percent. There is also a fee of up to four percent of the loan.

To apply: Complete a Direct PLUS Loan application for Direct PLUS Loans or a PLUS Loan application for FFEL PLUS Loans. If this is your first time learning about your PLUS loan options and your child has already begun their college education, don't worry! Parents may apply for a PLUS loan retroactively to cover educational costs they've already incurred for the current school year. Simply stated, parents can take out a loan equal to the total out of pocket expenses paid for their child's school-related costs.

How you get the money: The money will be disbursed to your school either by the Department of Education for Direct PLUS Loans or by the lender for FFEL PLUS Loans. The money must first be used for tuition, fees, and room and board. After these expenses are paid, your parents will receive the remaining amount in a check.

How you repay the money: Repayment begins within 60 days after the first loan disbursement, and interest starts to accumulate from the first disbursement. For Direct PLUS Loans, you can pay using one of three methods: the Standard Repayment Plan of a fixed amount per month; the Extended Repayment Plan, which extends the repayment period; or the Graduated Repayment Plan, in which your payments start lower and increase generally every two years.

For FFEL PLUS Loans, your parents will follow a repayment schedule provided by the lender, which has a minimum of $600 per month for a maximum period of 10 years.

What is the interest rate on PLUS loans: Interest rates on PLUS loans are variable and adjusted every July 1st (based on the 91 day T-Bill + 3.1%). PLUS loan interest rates are capped and will not exceed 9%.

Under certain circumstances, you can receive a deferment to temporarily postpone payments on your loan. Under certain circumstances you can receive forbearance, a limited and temporary postponement or reduction of your payments if you are unable to meet your repayment schedule and are not eligible for a deferment.

These circumstances may include poor health, serving in a medical or dental internship or residency, or if the payments exceed 20 percent of your monthly gross income. Deferments and forbearance must be approved by the Direct Loan Servicing Center if you have a Direct PLUS Loan or with the lender if you have an FFEL PLUS Loan.

Thank you for visiting,

Al Brouillard

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