PLUS Student Loan Program
What is a PLUS student loan?
The PLUS student loan (Parent Loans for Undergraduate Students) is a federal loan that is available to parents of dependent students enrolled at least half-time in a program that is offered by participating post-secondary institutions.
Who may take out a PLUS Student loan?
The Federal PLUS student loan program allows credit-worthy parents to borrow money to pay for education expenses for each dependent, undergraduate student enrolled at least half time in an approved college or university. These loans are available through both the Direct Loan and Federal Family Education Loans (FFEL) programs. The FFEL program provides insurance and default subsidies to allow private lenders to implement student loan programs. (Stafford and PLUS loans that are not made directly by the Department of Education are made under the FFEL Program.)
It takes parents applying for the PLUS student loan little more than having an acceptable credit history to be approved. The yearly borrowing limit on PLUS loans is equal to your school costs minus other financial aid amounts you receive. For example, if your costs are $10,000 and you collect $7,000 in other assistance, your parents can borrow up to $3,000 for you.
What are the benefits of a PLUS loan?
Most of the benefits to parent borrowers are identical in the two programs; however, some lenders do offer repayment and other savings benefits. Things to note:
- The primary benefit of the PLUS loan is that parents can borrow federally-guaranteed low interest loans to help pay for their child's education.
- A Federal Parent PLUS loan allows parents to borrow the total cost of undergraduate education such as tuition, room and board, supplies, lab expenses and travel, less any other financial aid.
- PLUS loans are not need-based. PLUS loans are based on your credit rating, and the rating average that is considered "good" is usually 625 or better.
- The interest rate is fixed but adjusted annually by the Department of Education based on the 91-day Treasury Bill rate for the last auction in May of each calendar year.
- PLUS loans require no collateral.
- Interest may be tax deductible.
When do I begin repaying a PLUS student 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. Parents must begin repaying both principal and interest while you're in school.
Do I need to fill out the FAFSA?
It is not required at all schools, but it is strongly recommended. The PLUS Loan is a federal student loan and therefore must be "certified" (approved) by the college's or university's financial aid office. If your college or university requires the Federal Financial Student Aid (FAFSA) for all students, they will not certify a PLUS Loan (even though it's a loan for the parents) without a FAFSA on file. Check with your school's financial aid office.
Grad PLUS Loan Program
The Grad PLUS loan program is a low interest federally subsidized student loan, guaranteed by the U.S. government. Like its undergraduate counterpart, the Grad PLUS loan can be used to pay for the total cost of education less any aid you've already been awarded. Also, like the undergraduate Parent PLUS loan, eligibility for the Grad PLUS loan is largely dependent on the borrower's credit rating and history, as opposed to the purely financial need-based Graduate Stafford loan.
A federal Grad PLUS loan allows graduate students to borrow the total cost of graduate education including tuition, room and board, supplies, lab expenses and travel. Grad PLUS loans can be deferred while you are in school.
What are the benefits of a Grad PLUS loan?
- Federally subsidized loan based on credit worthiness
- Now available directly to graduate students
- Covers cost of education, less other aid received (must apply for a Stafford Loan).
- Fixed interest rates
How is the money disbursed to me after I am approved?
Your lender will send the loan funds directly to your school. Your school might require you to endorse a disbursement check and send it back to the school. In most cases, your 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, you will receive the amount as a check or in cash, unless you authorize the amount to be released to your school account. Any remaining loan funds must be used for your education expenses.
What kind of credit do I need?
An adverse credit history will make it more difficult for you to qualify for a Grad PLUS loan. (Defined in regulations as being 90 days or more delinquent on any debt, or having a credit report that shows default, discharge, foreclosure, repossession, tax lien, wage garnishment or write-off of a Title IV debt during the five years preceding the date of the credit report.) Note that Graduate and Professional Student PLUS loans do not use any kind of a debt-to-income ratio or FICO score, unlike private education loans.
Do I need a co-signer?
You might need a co-signer for a Grad PLUS loan if your credit is insufficient. However, graduate students with excellent credit should not need a co-signer to apply for the loan.
How do I apply for the Grad PLUS Loans?
You first must complete the Free Application for Federal Financial Student Aid (FAFSA) or Renewal FAFSA (for returning students). After the FAFSA is processed, your school will review the results and inform you of your loan eligibility by sending you an award letter. Once your award letter is received, you should apply for the Grad PLUS Loan, as well as look at other federal student loans. If you aren't eligible for federal loans, you can then apply for private student loans.