PLUS Loans (Parent Loans)

Plus Loan (Parent Loan)

Parents can borrow a PLUS Loan to help pay your education expenses if you are a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Your parents can get either loan, but not both, for you during the same enrollment period. They also must have an acceptable credit history.

How do my parents get a loan?

For a Direct PLUS Loan, your parents must complete a Direct PLUS Loan application and promissory note, contained in a single form that you get from your schools financial aid office.For a FFEL PLUS Loan, your parents must complete and submit a PLUS Loan application, available from your school, lender, or your state guaranty agency. After the school completes its portion of the application, it must be sent to a lender for evaluation.Also, your parents generally will be required to pass a credit check. If your parents don't pass the credit check, they might 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. An endorser promises to repay the loan if your parents fail to do so. Your parents might also qualify for a loan without passing the credit check if they can demonstrate that extenuating circumstances exist. You and your parents must also meet other general eligibility requirements for federal student financial aid.

How much can my parents borrow?

The yearly limit on a PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. If your cost of attendance is $6,000, for example, and you receive $4,000 in other financial aid, your parents can borrow up to $2,000.

Who gets my parents' loan money?

Either the U.S. Department of Education (for a Direct PLUS Loan) or your parents lender (for a FFEL PLUS Loan) will send the loan funds to your school. Your school might require your parents to endorse a disbursement check and send it back to the school. In most cases, the loan will be disbursed in at least two installments, and no installment will be greater than half the loan amount. The funds will first be applied to your tuition, fees, room and board, and other school charges. If any loan funds remain, your parents will receive the amount as a check or in cash, unless they authorize the amount to be released to you or to be put into your school account. Any remaining loan funds must be used for your education expenses.

What's the interest rate?

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 percent 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 2009-2010, the variable rate for these PLUS Loans (in both the Direct and FFEL programs) is 3.28percent. Interest is charged on a PLUS Loan from the date of the first disbursement until the loan is paid in full.

Other than interest, is there a charge to get a PLUS Loan?

Your parents will pay a fee of up to 4 percent of the loan, deducted proportionately each time a loan disbursement is made. For a FFEL PLUS Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the PLUS Loan Program in your state) to help reduce the cost of the loans. For a Direct PLUS Loan, the entire fee goes to the government to help reduce the cost of the loans. Also, your parents may be charged collection costs and late fees if they dont make their loan payments when scheduled.

When do my parents begin repaying the loan?

For PLUS loans made to parents that are first disbursed on or after July 1, 2008, the borrower has the option of beginning repayment on the PLUS loan either 60 days after the loan is fully disbursed or wait until six months after the dependent student on whose behalf the parent borrowed ceases to be enrolled on at least a half-time basis.

How do my parents pay back these loans?

They'll repay a FFEL PLUS Loan to a private lender or loan servicer. They'll repay their Direct PLUS Loan to the U.S. Department of Education's Direct Loan Servicing Center. To read more about repayment options under both programs, read the PLUS Loans section in Funding Education Beyond High School: The Guide to Federal Student Aid.

Is it ever possible to postpone repayment of a PLUS Loan?

Yes, under certain circumstances, your parents can receive a deferment on their loans.If they temporarily cant meet the repayment schedule, they can also receive forbearance on their loan, as long as it isnt in default. During forbearance, their payments are postponed or reduced.Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance apply to both Stafford Loans and PLUS Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance. If they dont pay the interest as it accrues, it will be capitalized (that is, added to the principal amount of the loan, and additional interest will be based on that higher amount).

Can a PLUS Loan be discharged (canceled)?

Yes, under certain conditions. A discharge (cancellation) releases your parents from all obligation to repay the loan.Your parents PLUS Loan cant be canceled for these reasons: You didnt complete your program of study at your school (unless you couldnt complete the program for a valid reasonbecause the school closed, for example), you didnt like the school or the program of study, or you didnt obtain employment after completing the program of study.For more information about loan discharge or repayment: If your parents have a Direct PLUS Loan, they should contact the Direct Loan Servicing Center at 1-800-848-0979, or go to www.dl.ed.gov. If they have a FFEL PLUS Loan, they should contact the lender or agency holding the loan.

Plus Loan Interest Rate

The Federal Parent PLUS Loan for Undergraduate Students enables parents and legal guardians with good credit history to pay the education expenses of each dependent child enrolled as an undergraduate at least half time in an approved college or university. These loans are available through the Federal Family Education Loan (FFEL) Program.

• PLUS Loan interest rates are fixed for all new PLUS Loans at a rate of 8.5%. These loans will not have variable interest rates.
• You may receive a 0.25% repayment interest rate credit when payments are set up for automatic debit from a bank account
• Interest may be tax deductible under the Hope Education Tax Credit.
• There is no penalty for early repayment, and consolidating your loans after each academic year is easy. It also lowers your monthly payment. Click here for PLUS Consolidation!
• Funds are usually disbursed quickly, during the first weeks of the semester. Interest accrues from the time of disbursement.

The primary benefit is that families can borrow federally guaranteed, low interest loans to help pay for their child's education, without needing to worry about collateral, need-based forms, or FAFSA preparation time. Use our online application to Apply Today!

Compare Federal PLUS Loan to Private Loans

Federal Parent PLUS Loans and Private Student Loans can both help cover the difference between your total cost of education and other financial aid you have received. Both loans can be used to pay for educational expenses such as tuition, books, housing, school fees, student computers, supplies and more.One of the biggest differences between these two student loans is the interest rate. Federal PLUS loans are based on a fixed interest rate (8.50%). Private Loans have a variable rate and are based on a published index (Prime or LIBOR) plus a margin for borrower credit.We recommend that you always exhaust Scholarships, Grants and Federal Loans, like the Parent PLUS Loan, before applying for Private Loans.

Federal PLUS Loan and Private Student Loan Comparison

Federal PLUS and "Certified" Private Student Loans are both disbursed to the school's financial aid office. The chart below illustrates differences and similarities:

A Parent 's Credit Report and PLUS Loans

The PLUS Loan can be provided to you, the parent, as a non-need based loan specifically because it is a credit-based loan, similar to a personal line of credit. As such, it's vital to know exactly where your credit stands.

What is credit?

Credit is a record of how timely you are in paying back money you have borrowed. Your credit is stored as a report and a score at a credit bureau. The Student Credit Card Center has put together a wealth of information of how to get credit, improve your credit, repair your credit, and apply for the best student credit cards.For those of you who need information on where your credit is now, Click here to obtain your credit report and score!

How is credit judged?

Credit scores are numerical indexes based on an algorithm developed by Fair Isaac Company, called a FICO score. Scores are negatively impacted by events such as late payment, incomplete or partial payments, defaults, and judgments or liens, and range from 300 to 900. The actual algorithm is a trade secret of Fair Isaac, but the following breakdown approximates the weighted values that compose your score.

• 35% Payment history
• 30% Outstanding debt
• 15% Length of your credit history
• 10% Recent inquiries on your credit report
• 10% Types of credit in use

The "average" credit score for "good" credit is 675 or better for most major lenders, such as mortgage lenders. Scores lower than 625 demand scrutiny, while scores lower than 600 will often be denied outright. For in depth articles and research on student credit, please visit the Student Credit Card Center.

What is the required credit score for the Parent PLUS Loan?

Eligibility for the PLUS Loan depends on a modest credit check that determines whether the parent as an adverse credit history. An adverse credit history is defined as being more than 90 days late on any debt or having any Title IV debt (including a debt due to grant overpayment) within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off.

Plus Loan Borrower Benefits

With rising tuition costs, the Parent Plus loan is a practical way to fund your child's education. While Stafford loans and other financial aid may help to cover some costs, they usually are not enough to cover what is due. The PLUS loan can be used to pay tuition and any eligible school expenses, minus any other aid the child receives. Parent Plus loan benefits include:

• Fixed 8.5% interest rate
• 0.25% repayment interest rate credit when payments are set up for automatic debit from a bank account
• Fund up to the cost of education minus other aid received
• Deferment and forbearance options if you experience financial difficulties
• 10 year repayment term

The primary benefit is that families can borrow federally guaranteed, low interest loans to help pay for their child's education, without needing to worry about collateral, need-based forms, or FAFSA preparation time. Use our online application to Apply Today!

PLUS Loan Frequently Asked Questions

Student Loans from the Student Loan Network offer a variety of education loan programs for students and families, including the PLUS Loan. Below are answers to our most frequently asked questions on the PLUS Loan.

Do I need to fill out the FAFSA?

It is not required at all schools, but it is strongly recommended. The PLUS Loan is a federal student loan and therefore must be "certified" (approved) by the college's or university's financial aid office. If your college or university requires the FAFSA for all students, they will not certify a PLUS Loan (even though it's a loan for the parents) without a FAFSA on file. Check with your school's financial aid office for their specific policy.Click here for information about how to file your FAFSAFiling the FAFSA is a good idea because you or your child may be eligible for more financial aid than you think. Filing the FAFSA does not impact your eligibility for the PLUS Loan, as the PLUS Loan is based on credit, not need.

What is the interest rate?

The interest rate for a Parent Plus loan is 8.5% fixed. Interest accrues on this loan when it is disbursed to the school. You may receive a 0.25% repayment interest rate credit when payments are set up for automatic debit from a bank account.If you are a parent with PLUS Loans and you want to lower your monthly payment, you may consider consolidating your PLUS Loans after the final disbursement for each academic year. Click here to consolidate your PLUS Loans!

What are the fees for a PLUS Loan?

Parents are required to pay a 3% origination fee. A federal default fee of 1% may also apply. These fees are deducted from the principal at each disbursement.

When my child is done with school, can I transfer the PLUS Loan to them?

No. The PLUS Loan is a Parent loan, taken out in the parent's name. The student is not the borrower. If, as a parent, you are interested in a loan that has such a feature, you'll need to resort to private student loans. These loans are in the student's name, and depending on the lender, may have a cosigner release option. After a certain number of consecutive on time payments, the parent (as a co-signer) can apply to be released from the loan, making it entirely the student's obligation.

I'm an uncle/grandmother/friend - can I take out a PLUS Loan?

PLUS Loans are restricted to the parents or legal guardians of a dependent undergraduate student. Again, if you're interested in cosigning a loan for someone who is not your child, you'll need to borrow a private student loan.

What kind of credit is required for a PLUS Loan?

Eligibility for the PLUS Loan depends on a modest credit check that determines whether the parent has an adverse credit history. An adverse credit history is defined as being more than 90 days late on any debt or having any Title IV debt (including a debt due to grant overpayment) within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off.Click here to learn more about credit!

What if I am not approved for the PLUS Loan?

There are several options if you are not approved for the PLUS Loan, as some applications are declined for reasons other than poor credit. If you are declined, you can:

• Apply for a Private Student Loan
• Find a co-signer and apply again

I already have a PLUS Loan. How can I find out more information about it?

You can check the status of your loans by using the National Student Loan Database System (NSLDS). You can access NSLDS for free at www.nslds.ed.govYou will need a Federal student aid pin to access this site. If you do not know your pin you can access it at www.pin.ed.gov

When do I begin repaying a PLUS Loan?

Parents now have the choice of making payments while the student is in school or deferring payments until the student graduates. If you choose to pay after graduation, interest will accrue from the time of full disbursement. You can choose to pay the interest monthly, or you can defer both interest and principle until the student graduates. If you choose not to pay the interest monthly, it is capitalized no more than four times per year.

Can I use a Parent Plus Loan for my child's off campus rent?

Parent Plus loans are typically used to cover the rest of tuition due after the student's aid is exhausted. The school must certify the loan amount, so if you want to borrow more than what is owed to the school you would have to check with the financial aid office at the school.

Are there any penalties for paying the loan off early?

There are never any pre-payment penalties for Parent Plus loans. If you pay the loan in full you will not be responsible for any future interest, and you will not be charged with any penalties.

Can I apply for all four years at once, or do I have to apply for a new PLUS loan every school year?

You cannot apply for all four years at once. You must apply for Parent Plus loan each school year that you wish to borrow it. If you borrow the PLUS loan for all four years of college, then you will end up with four separate Parent PLUS loans. You can choose to consolidate these together, or pay them separately. You can also consolidate your PLUS loans after each school year which would give you a lower monthly payment while your child is in school.