Federal Loans: Parent PLUS Loans
PLUS loans can be taken out by parents of undergraduate students to help pay for college costs that aren't covered by other funds or financial aid. PLUS loans are offered through the Federal Direct Loan Program (FDLP).
Who can take out a PLUS loan?
There is no financial-needs test for this type of loan. Any parent of a dependent undergraduate student can take out a PLUS Loan if the student is enrolled at least half-time and if the parents have an acceptable credit history. They must also be citizens, permanent residents or eligible non-citizens.
How much can parents borrow?
Parents can borrow up to the difference between the cost of attendance and other financial aid that has been awarded.
How does a parent apply for a PLUS loan?
Even though the loan is for a parent, some schools require that the student submit the Free Application for Federal Student Aid(FAFSA). Some award letters will even calculate the amount a parent can borrow based on cost of attendance and other aid being offered. Parents must also fill out a PLUS loan application provided by the school’s financial aid office and then sign a promissory note.
How is the money disbursed?
The loan money is sent to the school and used to pay tuition and other costs. If there is left-over money after school charges are paid, the remainder may be sent to the student’s parents or put in the student’s account. All remaining funds must be used to pay school expenses.
What are the interest rate and fees involved?
Interest rates have been in the seven percent to eight percent range in recent years but vary year to year. Interest is accrued from the date of disbursement until the loan is paid in full. There is up to a three percent origination fee and a one percent default fee which are taken out of the disbursed amounts. Late fees and collection costs may also be charged if payments are not made according to the repayment schedule.
When does the loan have to be repaid?
Repayment can begin sixty days after the loan is fully disbursed or can wait until six months after the student is no longer attending college at least half-time.
Parent PLUS Loan Tips
- Don’t forget tax deductions – student loan interest is often deductible.
- Start repayments early if possible – interest payments can be reduced and there is no pre-payment penalty.
- PLUS loans are not just for tuition – money can be used to pay for books, supplies, living expenses, transportation and fees.
Resources
U.S. Department of Education: Student Aid on the Web’s PLUS Loans – Provides description of the Parents PLUS loans.
U.S. Department of Education Direct Loan program – Describes details of all Direct Loan Program loans including Parent PLUS Loans.
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