Direct PLUS loans are meant to help your parents cover the costs of your
undergraduate school expenses. Your parents do not have to prove financial
need, but the loans are unsubsidized - this means that the interest accumulates
while you are in school.
They are loans your parents can take out to pay for your education expenses
- you must be their financial dependent and enrolled at least half time. Also,
your parents must pass a credit check. PLUS loans come directly from the
U.S. Department of Education under the Direct Loan Program.
Note: Prior to July 1, 2010, some PLUS Loans were through private
lenders under the Federal Family Education Loan (FFELSM) Program. This program
has been discontinued.
How much can my parents borrow?
The yearly limit on a PLUS Loan is equal to your cost of attending school,
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 $2,000.
How do my parents apply?
For a Direct PLUS Loan, your parents must complete a Direct PLUS Loan application
and a promissory note. A promissory note is a legal document listing the terms
and conditions of the loan. The application and note are in a single form
you can get from your school's financial aid office.
Although it's not a requirement, parents are encouraged to have their dependent
children file a Free Application for Federal Student Aid (FAFSA). This will
ensure that you can receive the maximum student aid you're eligible for.
Are there any borrowing requirements my parents have to meet?
Yes, generally they have to pass a credit check. This is a review of their
credit history to determine if they are likely to be able to pay back the
loan.
If they don't pass, they might still be able to receive a loan with the
help of a relative or friend who can pass the credit check. This person must
agree to endorse the loan and promise to repay it if your parents don't.
If your parents don't qualify for a loan because they didn't pass the credit
check, they may qualify if they can demonstrate that extenuating (difficult
and unusual) circumstances exist.
For your parents to borrow money for you, you must meet the general eligibility
requirements for federal student aid. Your parents must also meet some of
these general requirements. For example, they must meet citizenship requirements
or be eligible non-citizens. They may not be in default or owe a refund to
any FSA program.
Do they need to find a lender?
No. Their lender will be the U.S. Department of Education.
Can the school refuse the loan application?
Your school can refuse to certify your parents' loan application, or they
can approve a loan for a smaller amount than your parents are eligible for.
The school must document the reason for its decision and explain the reason
to your parents in writing. The school's decision is final and cannot be appealed
with the U.S. Department of Education.
Do my parents get the money or do I?
The U.S. Department of Education will send the loan funds to your school.
The school will use the loan money first to pay your tuition, fees, room
and board, and any other schools charges. If any loan funds remain, your parents
will receive the amount as a check or other means.
In most cases, the loan will be disbursed in at least two installments.
(Disbursement is the release of loan funds to the school for delivery to the
borrower.)
In other words, your school will receive at least two payments. No single
payment will be more than half the loan amount.
What's the interest rate on PLUS Loans?
The interest rate is 7.90 percent.
Other than interest, is there a charge to get a PLUS Loan?
Your parents will pay a fee of four percent of the loan amount. This fee
is deducted proportionately each time a loan disbursement is made. In other
words, because it is a percentage of the amount, the fee will get smaller
as the loaned amount gets smaller.
If your parents don't make their loan payments when scheduled, they may
be charged collection costs and late fees.
How do my parents pay back the loan?
When your parents first receive the loan, there will be a loan servicer
listed on the disclosure statement. They will make their payments through
this loan servicer. The loan servicer will also be listed in your parents'
account at www.nslds.ed.gov.
Are there any tax credits available for paying back these loans?
Yes, there are tax incentives for certain higher education expenses. For
certain borrowers, student loan interest can be deducted. This benefit applies
to federal and non-federal loans taken out to pay for post-secondary education
costs. The maximum deduction is $2,500 a year.
You can find out more about these credits and other tax benefits through
the Internal Revenue Service (IRS) :
IRS Publication 970 -- Tax Benefits for Education
Internet: http://www.irs.gov/index.html
Phone: 1-800-829-1040
TTY: 1-800-829-4059
Can my parents cancel the loan if they change their minds, even
if they've signed the promissory note?
Yes, under certain conditions. Your parents should contact the loan servicer
for more information.
Is it ever possible to postpone repayment of a PLUS Loan?
The Direct PLUS Logan Program offers three repayment plans, designed to
meet the needs of individual borrowers. However, your parents can receive
a deferment or forbearance on their loan under certain circumstances. Forbearance
means the payments are postponed or reduced. Deferment is a period during
which a borrower who meets certain criteria may suspend loan payments. To
qualify, the loan may not be in default.
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 don't pay the interest as it accumulates, it will be capitalized.
This means that the interest will be added to the principal amount of the
loan, and additional interest will be based on that higher amount. In other
words, the loan will get bigger!
Can a PLUS Loan be discharged (canceled)?
Yes, under certain conditions. A discharge releases your parents from all
obligation to repay the loan.
Take note: the following reasons are not good enough to cancel your parents'
PLUS Loan:
- You didn't complete your program of study at your school (unless you couldn't
complete the program for a valid reason, for example, the school closed)
- You didn't like the school or the program of study
- You didn't obtain employment after completing the program of study
For more information about a Direct PLUS Loan discharge or repayment, contact
the Direct Loan Servicing Center:
Internet: http://www.dl.ed.gov/
Phone: 1-800-848-0979
TDD: 1-800-848-0983
How can I get more information?
For more information on Student Financial Assistance Programs, contact
the Federal Student Aid Information Center:
Internet: http://studentaid.ed.gov
Phone: 1-800-4-FED-AID (1-800-433-3243)
TTY: 1-800-730-8913
Spanish speakers are available (se habla espanol).