Federal PLUS Loan
What are PLUS Loans?
The Federal PLUS Loan (Parents Loan for Undergraduate Students) is a smart way for parents to help cover a dependent child’s education costs.
Parents at all income levels are welcome to apply, but qualified applicants must have no adverse credit history. PLUS Loans are unsubsidized and parents must pass a basic credit check.
How much can my parents borrow?
A PLUS Loan can cover all of your remaining education costs, including tuition, fees, books, housing, transportation, and more.
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 $6,000 and you receive $4,000 in other financial aid, your parents could borrow up to—but no more than—$2,000.
Do my parents get the money or do I?
Your school first receives the loan funds and 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.
Are there any borrowing requirements my parents have to meet?
Yes, generally they have to pass a credit check. If they don’t pass, they might still be able to receive a loan if they can demonstrate that extenuating circumstances exist, or if someone they know - who can pass - agrees to endorse the loan and promises to repay it if your parents don’t.
Also, you must meet the general eligibility requirements for federal student aid, and your parents must also meet some of these general requirements. For example, they must be citizens or eligible non-citizens and may not be in default or owe a refund to any FSA program.
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, they can cancel just as you can.
What’s the interest rate on PLUS Loans?
The interest rate for PLUS Loans is fixed at 6.41 percent. Interest is charged on the loan from the date the first disbursement is made until the loan is paid in full.
Other than interest, is there a charge to get a PLUS Loan?
Your parents will pay a fee of up to 4 percent of the loan.
When do my parents begin repaying a PLUS Loan?
Generally, repayment must begin within 60 days after the loan is fully disbursed. There is no grace period for these loans. This means 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.
How do my parents pay back the loan?
Your parents have nearly all the repayment options that Stafford Loan borrowers have. The only exception is the Income Contingent Repayment Plan, which is not an option for Direct PLUS borrowers. Direct PLUS Loans can also be consolidated.
Are there any tax incentives available for paying back these loans?
Yes, there are tax incentives for certain higher education expenses, including a deduction for student loan interest for certain borrowers. This benefit applies to all loans taken out to pay for post-secondary education costs. IRS Publication 970, Tax Benefits for Higher Education, explains these credits and other tax benefits. You can find out more at www.irs.gov or by calling the IRS at 1-800-829-1040. TTY callers can call 1-800-829-4059.
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, as long as it isn’t in default. Generally, the same deferment or forbearance provisions that apply to Stafford Loans also apply to PLUS Loans.
Can a PLUS Loan be discharged (canceled)?
Yes, under certain conditions. A discharge releases your parents from all obligation to repay the loan.
Your parents’ PLUS Loan can’t be canceled because you didn’t complete your program of study at your school (unless you couldn’t complete the program for a valid reason—because the school closed, for example). Cancellation also is not possible because you didn’t like the school or the program of study, or you didn’t 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.
For More Information
Contact your school’s financial aid office for more details about the Federal PLUS Loan.