PLUS Loans: Parent Loan Details

PLUS Loans: Parent Loan Details

PLUS Loans are non-need based, which means you do not have to demonstrate financial need to qualify. Eligibility for the PLUS Loan depends on a modest credit check that determines whether the parent has adverse credit. An adverse credit history is defined as being more than 90 days late on any debt or having any Title IV debt within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off.

Your school may require the FAFSA Financial Aid Application to qualify for the PLUS Loan. Be sure to check with your school's financial aid office first.
The interest rate on the PLUS Loan is fixed at 8.5% as of July 1, 2006.*
You may receive a 0.25% repayment interest rate credit when payments are set up for automatic debit from a bank account
There is a 3% origination fee, and no guarantor or prepayment fees
Unlike other non-education loans (including home equity), Parent PLUS Loans require no collateral
Interest may be tax deductible.

How much can my parents borrow?
The yearly limit on PLUS Loans is equal to the cost of attendance* minus any other financial aid you receive. For example, if your cost of attendance* is $6,000 and you receive $4,000 in other financial aid, your parents could borrow up to, but no more than, $2,000.

Do they get the money or do I?
Either the U.S. Department of Education (for a Direct PLUS Loan) or your parents' lender (for a FFEL PLUS Loan) will send the loan funds to your school. Your school might require your parents to endorse a disbursement check and send it back to the school. In most cases, the loan will be disbursed in at least two installments, and no installment will be greater than half the loan amount. The funds will first be applied to your tuition, fees, room and board, and other school charges. If any loan funds remain, your parents will receive the amount as a check or in cash, unless they authorize the amount to be released to you or to be put into your school account. Any remaining loan funds must be used for your education expenses.

Can my parents cancel the loan if they change their minds, even if they've signed the promissory note* agreeing to the loan's terms?
Yes. Your school must notify your parents in writing whenever it credits your account with PLUS 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 if they inform your school within 14 days after the date 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.

What's the interest rate on PLUS Loans?
PLUS Loans are fixed rate loans at 8.5% (as of July 1, 2006).
What other options should we be looking at?
Parent should consider PLUS Loan Consolidation as a way to lower their monthly payment. Learn more about consolidation in our Student Loan Consolidation Center.
Also consider Stafford Loans and private student loans
Don't forget to search for College Scholarships