Parent PLUS Loans
For parents with acceptable credit who need help paying for their child's college, parent PLUS Loans can be a very good option. PLUS Loans are federal loans and currently have a fixed interest rate of 7.9%. These loans can help a parent make college more affordable by spreading out college costs over at least 10 years. Smart use of PLUS Loans can help parents avoid depleting long-term financial resources, such as home equity or retirement plans, in order to pay for college.
How much can you borrow?
PLUS Loans are available to cover up to the full cost of attendance, minus any financial aid received by the student. For example, if college costs $20,000/yr and the student has been offered a financial aid award of $12,000, the parent is eligible to request a PLUS Loan of up to the amount of $8,000 for that year.
Key Facts about PLUS Loans
- In most cases parents must pass a simple credit check or have a creditworthy relative or friend who agrees to endorse the loan and repay the loan if your parents fail to do so. The credit check only tests for adverse credit history (such as default on a prior federal student loan), not for a favorable credit score or debt-to-income ratio.
- The borrower of the PLUS Loan has the option of beginning repayment either 60 days after the loan is fully disbursed or waiting until six months after the student is no longer enrolled on at least a half-time basis.
- Stafford Loans offer lower interest rates than PLUS Loans, so it's usually best to maximize Stafford Loan limits before using the PLUS Loan.
How to Apply
- Complete the FAFSA.
- After reviewing the student's financial aid award, determine whether you'll need a PLUS Loan to help pay for the school.
- Contact the school's financial aid office and request a PLUS Loan application and promissory note.
Students whose parents are denied a PLUS Loan will be eligible for additional unsubsidized Stafford Loans. Also, private loans can be used if PLUS Loans aren't an option, or if you find that the borrowing limits on federal loans aren't enough to cover your college costs.
FAQs
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.
There are some requirements parents and children must meet for the parent to be eligible to borrow a PLUS loan.
PARENT:
- Must be a parent (or step-parent or adopted parent) of a dependent student
- Be a U.S. citizen or eligible non-citizen and provide a valid Social Security number
- Pass a credit check
- Cannot be in default on another federal student loan or owe a refund on any federal student aid program
STUDENT:
- Must be enrolled at least half-time
- Must be less than 24 years of age
- Must have NO dependents
- Cannot be in default on another federal student loan or owe a refund on any federal student aid program
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
- tuition and fees
- on-campus room and board (or an allowance for these amounts for off-campus students)
- 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.
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.
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.
Am I eligible to borrow a PLUS loan?
What is the cost of attendance (COA)?
Are there fees on PLUS loans?
Do I have to file the FAFSA before I apply for 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.
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Federal Loan Information
All colleges participate in the Direct Lending program, which means a student enrolled at that school receives their federal student loans (including Stafford, PLUS and GradPLUS loans) directly from the school instead of from a lender.
