PLUS Loans (Parent Loans)

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 Program (FFELP) 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.

Update on Student Loan Programs

As a result of the Health Care and Education Reconciliation Act, beginning July 1, 2010, federal student loans will no longer be made by private lenders under the Federal Family Education Loan (FFEL) Program. Instead, all new federal student loans will come directly from the
U.S. Department of Education under the Direct Loan Program.

This change does not impact the process of applying for federal grants, loans and work-study or the amount of federal aid that students are eligible to receive. Students interested in receiving federal student aid should continue to complete a Free Application for Federal Student Aid (FAFSASM) for each school year that they wish to be considered for aid. If you have any questions about applying for federal student aid, please contact
1-800-4-FED-AID.

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 don’t 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.

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 isn’t 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 don’t 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 the PLUS Loan (Parent PLUS Loan) be transferred to the student so that it becomes the student’s responsibility to repay?

No. A PLUS Loan made to the parent cannot be transferred to the student. The parent is responsible for repaying the PLUS Loan.

Can a PLUS Loan be discharged (canceled)?

Yes, under certain conditions. A discharge (cancellation) releases your parents from all obligations to repay the loan.

Your parents PLUS Loan can’t be canceled for these reasons: You didn’t complete your program of study at your school (unless you couldn’t complete the program for a valid reason because the school closed, for example), you didn’t like the school or the program of study, or you didn’t 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.