Student Loan FAQs

Type of Loan

PLUS Loans

What is a PLUS Loan?
The Parent Loan for Undergraduate Students, or PLUS, is a low-interest federally backed loan that parents can take out on behalf of their undergraduate children to pay for educational costs.

Am I eligible to borrow a PLUS loan?
There are some requirements for parents and their children to be eligible to borrow a PLUS loan.

PARENT:

1. Must be a parent (or step-parent or adopted parent) of a dependent student
2. Be a U.S. citizen or eligible non-citizen and provide a valid Social Security number
3. Pass a credit check
4. Cannot be in default on another federal student loan or owe a refund on any federal student aid program

STUDENT:

1. Must be enrolled at least half-time
2. Must be less than 24 years of age
3. Must have NO dependents
4. Cannot be in default on another federal student loan or owe a refund on any federal student aid program

Do I have to file the FAFSA before I apply for a PLUS loan?
No, the PLUS loan does not require completion of the FAFSA.

However, filing the FAFSA may allow for other aid sources (such as Stafford or Direct student loans) to be included in the financial aid package.

How much can I borrow using PLUS?
The maximum amount you or your parents can borrow is the cost of attendance minus any other financial aid that is received.

What is the cost of attendance (COA)?
The cost of attendance (COA) is a number (generally a yearly figure) that is designed to help summarize the various costs of attending a school that takes into account

1. tuition and fees
2. on-campus room and board (or an allowance for these amounts for off-campus students)
3. allowances for books, supplies, transportation, loan fees, and if applicable, dependent care,

It also generally includes various miscellaneous and personal expenses including an allowance for a purchase or rental of a personal computer and can also include additional costs related to a disability.

Most schools publish the COA annually in brochures and online college search sites, so it may help to check with some of these resources. Additionally, if you have unusual circumstances which have higher costs, it might help to discuss these with the financial aid office.

What is the current interest rate for a PLUS loan?
The current interest rate on the PLUS loan is 8.5% fixed for the life of the loan.

*Note: older loans, made before July 1, 2006 carry a variable interest rate that is equal to the 91 day T-Bill rate + 3.1% which is currently 3.28%. This rate is capped at 9.0%.

Are there fees on PLUS loans?
The federal regulations call for both a 3% origination fee and a 1% guarantee fee to be charged on the loan amount. These fees are structured in such a way that they are charged against the loan amount and the fee is removed prior to disbursement. Basically, they take the money out up front.

Who gets the funds on a PLUS loan?
PLUS loan disbursements are first sent directly to the school. Sometimes the school will ask the parent to endorse a check and send it back to the school.

The school will then verify the student’s enrollment and apply the funds toward tuition, room and board, and other school charges.

If any loan funds remain, it will be sent to the parent unless the school is authorized to release the funds to the student or place them in a school account.

When does interest begin to accrue and when is interest capitalized?
Interest begins to accrue as soon as the first disbursement is made. Interest is capitalized when the accrued interest is added to the loan principal. Interest capitalization can occur when loan repayment begins, but may occur at other times, depending on your lender.

When do I have to begin repaying my PLUS loan?
In most cases, the first payment is required within 60 days after the final loan disbursement for the enrollment period for which you borrowed. Some lenders will offer to defer payment of these loans while the student is attending school at least half time. There is currently no provision for a grace period on the PLUS loan, which means that parents would begin repayment immediately upon graduation or if the student were to drop below half-time status. As with other federal loans, however, parents may be eligible for an economic hardship forbearance.

What is the difference between a PLUS and private loan?
Consider these differences when making your selection between a PLUS and a private student loan:

PLUS Loans

• are federal loans
• have fixed interest rates that do not vary based on the borrower’s profile
• require a very limited check for adverse credit history when you apply
• allow borrowing up to the full cost of attendance, less other aid

Private Loans for Parents (Parent-Sponsored Loans)

• have variable interest rates
• can be taken out in the parent's name for their child's educational expenses, or in the student’s name. NOTE: If a private loan is taken out in the student’s name, the student needs to have a credit history and good credit score. Otherwise, the student will need a credit-worthy co-signer for the loan.
• may vary rates / fees based on the borrower's credit profile
• require a credit check when you apply

You can compare the terms and features of private student loans and PLUS loans together by searching at http://www.simpletuition.com/student_loans_in_parent_name.

Will applying for a loan hurt my credit score?
Each time you apply for a loan, whether it is a student loan, a car loan, a mortgage or other, the lender may request your credit report from one or all three credit reporting agencies. Each time an inquiry is made, it is noted on your report. Too many inquiries may have a negative impact on your credit score. However, most recently developed credit scores recognize when a consumer is shopping for the best rates and either ignore multiple inquiries or count them as only one inquiry if they occur within a specific period of time. In such cases, shopping around will have little or no impact on a credit score.