PLUS Loans enable parents with good credit histories to borrow to pay the education expenses of each child enrolled at least half time.
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Direct PLUS Loans
Are there any borrowing requirements that parents have to meet?
Yes. To be eligible to receive a PLUS Loan, your parents generally will be required to pass a credit check. If they 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, promising to repay it if your parents should fail to do so. Your parents might also qualify for a loan even if they don't pass the credit check if they can demonstrate that extenuating circumstances exist. You must meet the general eligibility requirements for federal student financial aid. Your parents must also meet some of these general requirements. For example, your parents must meet citizenship requirements and may not be in default or owe a refund to any SFA Program.
How much can parents borrow?
The yearly limit on a PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. For example, if your cost of attendance is $12,000 and you receive $4,000 in other financial aid, your parents could borrow up to but no more than $8,000.
NOTE: Your school can refuse to certify your parents' loan application, or can certify a loan for an amount less than they would otherwise be eligible for, if the school documents the reason for its action and explains the reason to your parents in writing.
What is the interest rate on PLUS loans?
The interest rate is variable, but it will never exceed nine percent. The interest rate is adjusted each year on July 1. Your parents will be notified of interest rate changes throughout the life of their loan(s). Interest is charged on the loan from the date the first disbursement is made until the loan is paid in full.
How will the PLUS Loan get to your parents?
For a Direct PLUS Loan, the U.S. Department of Education will send the loan funds to your school. In most cases, the loan will be disbursed in at least two installments (no installment can be greater than half the loan amount). The funds will first be used to pay for your tuition and fees, room and board, and other school charges. If any loan money remains, your parents will receive the amount as a check or in cash, unless they authorize it to be released to you or to be put in your school account. Any remaining loan money must be used for your education expenses.
Will your parents have an opportunity to cancel their PLUS loan after they apply?
Yes. Your school must notify your parents in writing whenever it credits your account with your Direct Loan funds. This notification must be sent to your parents no earlier than 30 days before and no later than 30 days after the school credits your account. Your parents may cancel all or a portion of their loan by informing your school that they wish to do so within 14 days after the date that your school sends this notice, or by the first day of the payment period, whichever is later. Your school can tell you the first day of your payment period. If your parents receive PLUS Loan funds directly by check, they may refuse the funds by not endorsing the check.
Is there any charge for a PLUS loan?
Your parents will pay a fee of up to four percent of the loan. This fee is deducted proportionately each time a loan payment is made. For a Direct PLUS Loan, the entire fee goes to the government to help reduce the cost of the loans. Also, if your parents don't make their loan payments when they're scheduled, they may be charged collection costs and late fees.
When do your parents begin repaying a PLUS loan?
Generally, repayment must begin within 60 days after the final loan disbursement for the academic year. There is no grace period for these loans. This means that interest begins to accumulate at the time the first disbursement is made. Your parents must begin repaying both principal and interest while you're in school.
Is it ever possible to postpone repayment of a PLUS loan?
Yes. Under certain circumstances, your parents can receive a deferment or forbearance on their loan. Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance that apply to Stafford Loans also apply to PLUS Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance. If they do not pay the interest as it accrues, it will be capitalized.
Can the loan be discharged (canceled)?
Yes, in certain circumstances. A discharge releases your parents from all obligations to repay the loan. See the Discharge/Cancellation Summary for a complete listing of discharge conditions.
The loan can't be discharged because you didn't complete the program of study at the school (unless you were unable to complete the program because the school closed), didn't like the school or the program of study, or didn't obtain employment after completing the program of study.
For more information about discharge or repayment assistance, Direct Loan borrowers should contact the Direct Loan Servicing Center. Stafford Loan borrowers should contact the lenders or agencies that hold their loans.
How do your parents apply for a Direct PLUS Loan?
Your parents must fill out a Direct PLUS Loan Application and Promissory Note, which is available from your school's financial aid office. Because your financial need does not have to be evaluated, it is not necessary for you or your parents to fill out a FAFSA to apply for this loan, unless your school requires it.
Do your parents need to find a lender?
No. Under the Direct Loan Program, their lender will be the U.S. Department of Education. Your school assists the federal government in administering the Direct Loan Program by distributing the loan application, processing the loan, and disbursing the loan funds.
How do your parents pay back the loan?
Your parents can choose the Standard, Extended, or Graduated Repayment Plan. (See Direct Stafford Loans for a description of the repayment plans.) The Income Contingent Repayment Plan is not an option for Direct PLUS borrowers.