As a result of the Health Care and Education Reconciliation Act, beginning July 1, 2010, federal student loans will no longer be made by private lenders under the Federal Family Education Loan (FFEL) Program. Instead, all new federal student loans will come directly from the U.S. Department of Education under the William D. Ford Federal Direct Loan Program. This change does not impact the process of applying for federal grants, loans and work-study or the amount of federal aid that students are eligible to receive.
The Parent Loan for Undergraduate Students (PLUS) is a federal loan for parents to borrow on behalf of their dependent students. The parent PLUS loan has a fixed interest rate of 6.41%. For parents to be eligible to borrow this loan, students are required to be enrolled at least halftime (6+ credit hours) and have submitted the FAFSA. Parents must be a U.S. citizen or an eligible non-citizen and pass a credit check. The PLUS loan has a 4.204% origination fee.
The maximum amount a parent can request in a PLUS loan is the student’s cost of attendance minus any other Financial Aid and/or scholarships they are awarded. PLUS loans do not become a final part of the award unless a parent chooses to apply and is approved for the PLUS loan.
Students must be offered their final award notification before a PLUS loan application will be processed. During the application processes parents will indicate the amount of PLUS loan, and the payment method you wish to use. Remaining funds, after a student’s account balance has been paid, can be delivered to either the student via their student account, or the parent in the form of a paper check.
Once Direct Loans receives a PLUS loan application from the school, they will search for a Master Promissory Note (MPN). If you have previously signed a MPN, Direct Loans will match your active MPN which they have on file to your PLUS loan, notify the school and begin disbursement according the disbursement that the school has set up. If you do not have an active MPN, you will receive a request via mail from the Direct Loan Servicer with your MPN electronic and paper signature options.
Parents of dependent students may apply for a Direct PLUS Loan to help pay for their child’s education expenses as long as certain eligibility requirements are met. For more information, click on Direct PLUS Loans for Parents.
Parent Eligibility Requirements for a Direct PLUS loan
You must be the student’s biological or adoptive parent or the student’s stepparent, if the biological or adoptive parent has remarried. Your child must be a dependent student who is enrolled at least half-time (6-8 credits). For financial aid purposes, a student is considered dependent if they are under 24, unmarried and have no legal dependents at the time the Free Application for Federal Student Aid is submitted. Exceptions are made for veterans, wards of court and other special circumstances. If a student is considered dependent then income and assets of parents must be reported on the FAFSA.
The repayment period for a Direct PLUS Loan begins at the time the PLUS loan is fully disbursed, and the first payment is due within 60 days after the final disbursement. However, a graduate student PLUS Loan borrower (as well as a parent PLUS borrower who is also a student) can defer repayment while the borrower is enrolled at least half-time, and, for PLUS loans first disbursed on or after July 1, 2008, for an additional six months after the borrower is no longer enrolled at least half-time. Interest that accrues during these periods will be capitalized if not paid by the borrower during the deferment.
Parent PLUS Loan borrowers whose loans were first disbursed on or after July 1, 2008, may choose to have repayment deferred while the student for whom the parent borrowed is enrolled at least half-time and for an additional six months after that student is no longer enrolled at least half-time. Interest that accrues during these periods will be capitalized if not paid by the parent during the deferment.
Here are some resources to learn more about financial aid, understand the application process and save for college. Click here for more information: Federal Student Aid: A Parent Resource Guide.