|Direct PLUS Loan
Q: How do I apply for a Direct PLUS Loan?
A: For a Direct PLUS Loan, your parents must complete a Direct PLUS Loan application and promissory note, contained in a single form that you get from your school financial aid office.
For a FFEL PLUS Loan, your parents must complete and submit a PLUS Loan application, available from your school, lender, or your state guaranty agency. After the school completes its portion of the application, it must be sent to a lender for evaluation.
(Check with your school financial aid office to find out if they participate in Direct Lending or FFEL.)
With Direct Loans, you:
- Borrow directly from the federal government and have a single contact-the Direct Loan Servicing Center-for everything related to the repayment of your loans, even if you receive Direct Loans at different schools;
- Have online access to your Direct Loan account information 24 hours a day, 7 days a week at Direct Loans on the Web at: www.dl.ed.gov
- Can choose from several repayment plans that are designed to meet the needs of almost any borrower, and you can switch repayment plans if your needs change.
Also, your parents generally will be required to pass a credit check. If your parents do not 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. An endorser promises to repay the loan if your parents fail to do so. Your parents might also qualify for a loan without passing the credit check if they can demonstrate that extenuating circumstances exist. You and your parents must also meet other general eligibility requirements for federal student financial aid.
How much can my parents borrow with a Direct PLUS Loan?
The yearly limit on a PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. If your cost of attendance is $6,000, for example, and you receive $4,000 in other financial aid, your parents can borrow up to $2,000.
Who gets the Direct PLUS Loan money?
Either the U.S. Department of Education (for a Direct PLUS Loan) or your 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.
What is the Direct PLUS Loan interest rate?
For PLUS Loans disbursed on or after July 1, 2006, the interest rate is fixed (at 7.90 for Direct PLUS Loans and 8.50 percent for FFEL PLUS Loans).
Does the Direct PLUS Loan come with any other fees?
Your parents will pay a fee of up to 4 percent of the loan, deducted proportionately each time a loan disbursement is made. For a FFEL PLUS Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the PLUS Loan Program in your state) to help reduce the cost of the loans. For a Direct PLUS Loan, the entire fee goes to the government to help reduce the cost of the loans. Also, your parents may be charged collection costs and late fees if they do not make their loan payments when scheduled.
When do my parents begin repaying the Direct PLUS Loan?
For PLUS loans made to parents that are first disbursed on or after July 1, 2008, the borrower has the option of beginning repayment on the PLUS loan either 60 days after the loan is fully disbursed or wait until six months after the dependent student on whose behalf the parent borrowed ceases to be enrolled on at least a half-time basis.
How do my parents pay back the Direct PLUS Loans?
They will repay a FFEL PLUS Loan to a private lender or loan servicer. They will repay their Direct PLUS Loan to the U.S. Department of Education Direct Loan Servicing Center. To read more about repayment options under both programs, read the PLUS Loans section in Funding Education Beyond High School: The Guide to Federal Student Aid.
Is it ever possible to postpone repayment of a PLUS Loan?
Yes, under certain circumstances, your parents can receive a deferment on their loans.
If they temporarily cannot meet the repayment schedule, they can also receive forbearance on their loan, as long as it is not in default. During forbearance, their payments are postponed or reduced.
Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance apply to both Stafford Loans and 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 (that is, added to the principal amount of the loan, and additional interest will be based on that higher amount).
Can a Direct PLUS Loan be discharged or canceled?
Yes, under certain conditions. A discharge (cancellation) releases your parents from all obligation to repay the loan.
The Direct PLUS Loan cannot be canceled for these reasons: You did not complete your program of study at your school (unless you could not complete the program for a valid reason - because the school closed, for example), you did not like the school or the program of study, or you did not obtain employment after completing the program of study.
For more information about loan discharge or repayment: If your parents have a Direct PLUS Loan, they should contact the Direct Loan Servicing Center at 1-800-848-0979, or go to www.dl.ed.gov. If they have a FFEL PLUS Loan, they should contact the lender or agency holding the loan.