PLUS Loan Program

PLUS LOANS

For parents of dependent, undergraduate students, the Parent Federal PLUS Loan is an attractive financing solution. With a PLUS Loan, parents may finance up to the full cost of education, minus costs not already covered by the student's financial aid package.

Who is eligible?

To qualify for a Parent Federal PLUS Loan, borrowers must:

1. Be a parent of a dependent, undergraduate student who is enrolled full or half-time.

2. Be a U.S. citizen, national or eligible non-citizen.

3. Have a satisfactory credit history.

NOTE: Dependent students should apply for a Federal Stafford Loan before a parent applies for a Parent Federal PLUS Loan. Then, if a parent does not qualify, the student may be eligible to apply for additional unsubsidized Federal Stafford Loan funds.

Some parents choose to co-sign an alternative/private loan for their child rather than taking out a PLUS Loan. (Although possibly a higher-cost option, an alternative/private loan helps their child begin to build his or her credit history.)

What are the annual loan limits?

A parent can borrow up to the total cost of the student's education less any other financial aid received.

What is the maximum lifetime loan amount?

The maximum lifetime amount you can borrow per student cannot exceed the total cost of education for the student.

What is the loan minimum?

There is no minimum loan amount.

What is the interest rate?

For PLUS Loans with first disbursements on or after July 1, 2006, the interest rate is fixed at 8.50%.

What are the repayment terms?

Repayment begins within 60 days after the loan is fully disbursed. Standard repayment terms allow up to 10 years to repay a Parent Federal PLUS Loan, in addition to any periods of deferment or forbearance. An Extended Repayment term of 25 years is available if your total Federal Family Education Loan Program (FFELP) loan debt exceeds $30,000 and your first federal loan was disbursed on or after October 7, 1998. A Graduated Repayment plan is also available.

The good news is that interest on student loans is tax deductible, so parents should be sure to consult with a tax advisor when repaying education loans.

What about payment deferral?

Your lender may offer a forbearance to PLUS borrowers. This option allows borrowers to postpone repayment of their PLUS Loan for up to four years if they experience financial difficulty while the student is in school or waiting for that second child to complete college.

To see if you are eligible to postpone payments, contact your lender.

How do I apply?

Financial institutions such as banks, credit unions, and savings and loan associations offer funds to students and parents for educational loans. When comparing lenders, be sure to consider service and convenience factors, such as easy online applications, online account maintenance and quick credit approval decisions.

It is important to understand who will actually service your loan once it is obtained. Ask your lender if the service on your account will be outsourced to a third party, or if your loan will be sold to another company. This affects the service you will receive and who will actually "own" your loan.

There are many things to consider when thinking about borrowing money for college. It has to be paid back!

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