Parents Borrowing For Student
Parents of dependent college students can borrow a PLUS Loan to help pay for educational expenses of an undergraduate college student enrolled at least half time in an eligible program at an eligible school. PLUS Student Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Student Loan (Direct Student Loan) Program. An acceptable credit history is mandatory to receive a PLUS loan.
While filing a Free Application for Federal Student Aid (FAFSA) is generally not a requirement to receive a PLUS loan, most schools will require a FAFSA to be filed before they will certify a PLUS loan. I would always recommend families to file a FAFSA whether you believe you will qualify for federal assistance or not.
If your chosen school is a Direct Student Loan school, a parent must contact the school directly in order to receive the student loan. Funds for Direct Student Loans will come directly from the federal government.
If the school is a FFEL school, you must obtain your student loan through a bank or financial institution. Your school may be able to provide a list of lenders to help you narrow your choices down. However, you can choose any lender or financial institution you wish. It is important to compare your options before you sign. There are many lenders that offer repayment incentives that can lower the cost of a PLUS loan.
A parent will generally be required to pass a credit check. However, the it is not as stringent as it is for other college student loans with which you may be more familiar. If the parent borrower has been denied based on credit, they should still be able to get the student loan if they can get someone such as a relative to co-sign the student loan. The college student as well as the parent must also meet other general eligibility requirements for federal student aid loans.
A parent can borrow up to the cost of attendance minus other financial aid assistance including other college student loans.
For a PLUS Loan disbursed on or after July 1, 2006, the interest rate is fixed at 7.90 for a Direct PLUS Loan and 8.50 percent for a FFEL PLUS Loan.
Realize a fee of up to 4% can also be charged to borrow a PLUS loan. Many lenders will pay this fee on behalf of the borrowers, but not all of them. It is important to carefully review the terms and conditions of your student loan when they are presented by your lender.
Repayment of a PLUS loan will begin immediately after the last disbursement of the student loan. PLUS loans, like all federal student loans, are disbursed in equal amounts over the course of the 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 have to begin after the spring disbursement.
The normal repayment term is ten years. However, depending on the amount borrowed the repayment term might be extended up to 25 years. If extenuating circumstances happen during repayment, a borrower can request forbearance (temporarily stop paying). During forbearance, the student or borrower will not have to make payments, but interest will continue to accrue and will be added to the principal if no payments of interest are made.
