Direct PLUS Loan for Parents
Parents of dependent students may be able to borrow a Direct PLUS Loan for Parents to help pay education expenses of an undergraduate student enrolled at least half time in an eligible program at an eligible school. Unlike Direct Student Loans that are made in the name of students, there are no maximum amounts for the PLUS loan. The amount a parent may borrow is based on the cost of attendance of the school minus any financial aid including other loans.
As of July 1, 2010, all federal student loans are provided exclusively by the federal government through the Direct Loan Program. The US Department of Education is the lender. While they do require a credit check, the credit criteria to obtain a PLUS are not as stringent as they are for other types of consumer loans since they do not consider a borrower's income or debt. A person must also meet other criteria to qualify as well such as not having recent adverse credit reporting.
Borrowing Process for PLUS Loans
In order to receive a PLUS Loan, the student must first file the Free Application for Federal Student Aid (FAFSA).
Because all schools now use the Direct Loan Program, a parent will need to contact the school in order to request a PLUS loan. Generally, the school will provide instructions with the financial aid award letter about how to request a PLUS loan.
The parent borrower 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 family member without adverse credit to act as an endorser. The endorser agrees to repay the loan in the event the parent borrower fails to do so. The student and parent must also meet other general eligibility requirements for federal student aid.
Federal PLUS Loan Limits
A parent may borrow up to the cost of attendance (established by the school) minus other financial aid including other student loans.
Federal PLUS Loan Interest Rate
Direct PLUS Loans disbursed between July 1, 2014 and June 30, 2015 have a fixed interest rate of 7.21%.
Federal PLUS Loan Fees
Loans disbursed on or after December 1, 2013 and before October 1, 2014 will have an origination fee of 4.288%. Loans disbursed on or after October 1, 2014 and before October 1, 2014 will have a 4.292% fee. The 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 $9,571.20 will be sent to the school.
Federal PLUS Loan 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 July 1, 2008, parents may now postpone repayment until six months after their student ceases to be enrolled on at least a half-time basis. Contact the loan servicer to request a deferment. While the loan is deferred, interest will accrue. You may pay the interest or allow it to be added to the pricipal.
The standard repayment term is 10 years. However, depending on the total amount borrowed, the repayment term can be extended up to 25 years for borrowers eligible for the Extended Repayment Plan. You can review all available options at our Federal Student Loan Repayment Plans page.
If extenuating circumstances develop during repayment, a borrower may request forbearance (temporary suspension of repayment). 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.
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