PLUS Loans
PLUS Loans: Students aren't the only ones eligible to receive student loans - parents of students can also qualify for loans to help pay for their child's education. PLUS loans are available to parents who have solid credit. They are available through both the Direct and FFEL Loan Programs. Parents receive similar benefits in both programs.
Your parents have to qualify for a PLUS loan by passing a credit check. If they pass, they can receive the loan. If they do not pass the check, they may need to find another friend or relative with good credit who can will endorse the loan. This means that if your parents are unable to pay, that friend or relative will be responsible for the payments. If your parents are experiencing extenuating circumstances and they can document this, they still may be able to qualify for the loan. There are also some general requirements they must meet, including citizenship requirements and not being in default on any student financial assistance program.
Through PLUS Loans, parents are allowed to borrow up to the student's cost of attendance minus other financial aid the student receives. Interest rates are subject to change every year of repayment, but are not allowed to go over 9%. Parents are notified of the annual interest rate changes on July 1st every year. For Direct PLUS Loans, the funds are sent directly from the U.S. Department of Education to the student's school. For FFEL PLUS Loans, the lender sends the funds to the school. Most loans are paid in two installments per year. The funds must be used first for tuition, fees, room and board, and other educational expenses. If there are remaining funds, parents will receive the funds by check or cash, or the money can be deposited into the student's school account.
Parents can always cancel their PLUS Loan within 14 days of the date the funds are received. Parents are charged a fee for PLUS Loans of 4% of the loan amount. For FFEL PLUS Loans, this fee goes to the Federal government and to the guaranty agency. For Direct PLUS Loans, the fee goes only to the government. Parents must usually begin repaying their PLUS Loan within 60 days of the final loan disbursement for the period of enrollment for which they borrowed. PLUS Loans do not have grace periods, so interest accumulates immediately. Parents may be able to qualify for deferment or forbearance on their PLUS Loans. PLUS Loans can also be canceled if parents die or become permanently disabled, as well as under a number of other circumstances. The loan cannot be discharged because you didn't complete your program of study at your school, didn't like the school or the program of study, or didn't obtain employment after completing the program.
Parents can apply for a Direct PLUS Loan by filling out a Direct PLUS Loan Application available from the financial aid offices of schools. No FAFSA is required because financial need is not a consideration for these loans. Parents do not need to locate a lender because the U.S. Department of Education loans them the money. Parents can choose from Standard, Extended, or Graduated Repayment plans.
Parents can apply for a FFEL PLUS Loan by completing a FFEL PLUS Loan application. The school must complete a part of the application as well. The application is then sent to a lender and evaluated. FAFSAs are not necessary because financial need is not a consideration. Parents can find a lender by contacting the school and obtaining a list of qualified lenders. Repayment schedules allow for a minimum of $600 to be paid annually and a maximum repayment period of 10 years.
