PLUS Loans – Parent Loan for Undergraduate Students

Federal PLUS loans are offered to parents of undergraduate students to pay for qualifying tuition and school fee expenses. Graduate students can also apply for these loans themselves. The U.S. Department of Education funds and services PLUS loans through schools. Only students attending schools that participate in the Direct Loan Program will qualify for these federal loans.

PLUS Loans Can Fill the Gap Between Financial Aid and Tuition

The maximum amount of your parent loan will be determined by subtracting any financial aid received from cost of attendance. Your school will determine the cost of attendance. The cost can include tuition, room and board, school fees, and other related expenses, such as textbooks.

Borrowers Credit History Must be Adequate

During the application process your credit will be checked. You must not have an adverse credit history in order to qualify for a loan. Typically, your application may be rejected if your credit history is not acceptable. But, you may ask an endorser with good credit to sign on your parent loan. Students may not serve as endorsers for their parents. Another option for those with poor credit records is to provide detailed information that can sufficiently explain any late payments or outstanding debt that is reported.

The Costs of PLUS Loans

You will be charged a fixed interest rate of 7.9% on your parent loan. You will also be responsible for a 4% loan origination fee which will be withdrawn automatically from each of your loan disbursements. The loan will enter the repayment period upon final disbursement. Both graduate students and parents of undergraduates may receive deferments until six months post enrollment. You should be aware, though, that your parent loan will continue to accrue interest during any period of deferment.

How to Apply for a PLUS Loan

The first step in the application process is submitting the Free Application for Federal Student Aid. After your school receives your Expected Family Contribution resulting from information processed in your FAFSA, the financial aid office can give you information about applying for the Direct Loan. Upon receiving notification of your eligibility in the loan program, you will be asked to sign a Master Promissory Note agreeing to the terms and conditions of repayment.

Who is Really Responsible for Repayment

If you are a parent who receives a loan for your undergraduate student, then you are ultimately responsible for the repayment of the parent loan. You will never be allowed to transfer responsibility of the debt to your student, even after graduation. In signing the Master Promissory Note, you are personally guaranteeing loan repayment. Graduate students will attend mandatory entrance counseling before signing the Master Promissory Note in order to gain an understanding of the importance of being current with loan repayment. As they are federal loans, you will not be able to discharge them. Only in very specific circumstances may debt from PLUS loans be forgiven. Typically, these exceptions will be made for public service workers.

PLUS Loans
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PLUS loans provide an additional source of funds for college expenses. It is important, though, for parents and graduates who choose this option to understand that this money must be repaid once disbursed. The borrower will be held responsible for repayment, regardless of whether the student completes their intended program of study. This debt will only be forgiven in very rare cases and cannot be discharged. You should carefully consider your responsibilities under this loan before signing the Master Promissory Note

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