What are Federal PLUS Loans?
Federal PLUS Loans are student loans parents, graduate
students, and professional degree students can take out to pay for your education
expenses. To be eligible, students must be enrolled at least
half time, and the applying party must have a good credit history. However,
unlike applying parents, graduate and professional degree students who apply for
the loan must submit their FAFSA information. Graduate and professional degree students
must also have their maximum Stafford Loan eligibility reviewed by their school
before they apply for the loan.
As is true for Federal Stafford Loans, there are FFEL PLUS Loans and Direct PLUS
Loans. PLUS Loans are unsubsidized (see web page).
Can parents and graduate students get both a Direct PLUS Loan and a FFEL PLUS Loan?
They can apply for either a Direct PLUS Loan or a FFEL PLUS Loan, but not for both
during the same enrollment period. Parents can, however, apply for a Direct PLUS
Loan for one of their children and a FFEL PLUS Loan for another child.
How do my parents apply?
For a Direct PLUS Loan, parents or graduate students must complete a Direct PLUS
Loan application and promissory
note, contained in a single form that you get from your school’s
financial aid office.
For a FFEL PLUS Loan, parents or graduate students must complete and submit a PLUS
Loan application, available from your school, lender, or your state
guaranty agency. After the school completes its portion of the application,
it must be sent to a lender for evaluation.
Although it’s not a requirement, parents are encouraged to have their dependent
children file a FAFSA, so their children can receive the maximum student aid they’re
eligible for.
Are there any borrowing requirements parents or graduate students 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 someone, such as a relative or friend who can
pass the credit check, agrees to endorse the loan and promises to repay it if your
parents don’t. Your parents might also qualify for a loan if they don’t pass the
credit check if they can demonstrate that extenuating circumstances exist. For them
to borrow for you, 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 meet citizenship requirements or be
eligible non-citizen and may not be in
default or owe a refund to any FSA program.
Does the applicant need to find a lender?
Not if they borrow under the Direct Loan Program, because their lender will be the
U.S. Department of Education. Your school assists the federal government in administering
the Direct Loan Program by distributing the loan application, processing the loan,
and disbursing the loan funds.
Under the FFEL Program, the applicant will need to find a participating lender.
For help, they should contact your school or the
guaranty agency that serves your state. For your state agency’s address
and telephone number, and for more information about borrowing, the applicant can
contact the Federal Student Aid Information Center at the address or toll-free number
listed on the web page. A directory of guaranty agencies is also available at this
U.S. Department of Education Web site:
www.ed.gov/Programs/bastmp/SGA.htm
NOTE: Your school can refuse to certify an applicant’s loan application,
or can certify a loan for an amount less than they would otherwise be eligible for,
if the school documents the reason for its action and explains the reason in writing.
The school’s decision is final and cannot be appealed to the U.S. Department of
Education.
How much can the applicant borrow?
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,
the applicant could borrow up to—but no more than—$2,000.
If my parents apply, do they get the money or do I?
Either the U.S. Department of Education (for a Direct PLUS Loan) or your parents’
lender (for a FFEL PLUS Loan) will send the loan funds to your school. Your school
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.
Can applicants cancel the loan if they change their minds, even if they’ve signed
the promissory note
agreeing to the loan’s terms?
Yes. Your school must notify the applicant in writing whenever it credits your account
with PLUS Loan funds. This notification must be sent to the applicant no earlier
than 30 days before, and no later than 30 days after, the school credits your account.
The applicant may cancel all or a portion of their loan if they inform your school
within 14 days after the date your school sends this notice, or by the first day
of the payment period, whichever is later. (Your school can tell you the first day
of your payment period.) If the applicant receive PLUS Loan funds directly by check,
they may refuse the funds by not endorsing the check.
What’s the interest rate on PLUS Loans?
The interest rate on FFEL PLUS loans disbursed after July 1, 2006 is
fixed at 8.5% and the interest rate on Direct PLUS loans disbursed after
July 1, 2006 is fixed at 7.9%
The interest rate for loans disbursed between July 1, 1998 and June 30, 2006 could
change each year of repayment but does not exceed 9 percent. Interest rates are
adjusted each year on July 1. The applicant will be notified of interest rate changes
throughout the life of their loan. Interest is charged on the loan from the date
the first disbursement is made until the loan is paid in full.
For interest rates on a FFEL Stafford Loan, the applicant should check with their
lender. For interest rates on a Direct Stafford Loan, they should check with the
Direct
Loan Servicing Center.
Other than interest, is there a charge to get a PLUS Loan?
The applicant will pay a fee of up to 4 percent of the loan, deducted proportionately
each time a loan disbursement is made. For a FFEL PLUS Loan, a portion of this fee
goes to the federal government, and a portion goes to the
guaranty agency to help reduce the cost of the loans. For a Direct PLUS
Loan, the entire fee goes to the government to help reduce the cost of the loans.
Also, if your parents don’t make their loan payments when scheduled, your parents
may be charged collection costs and late fees.
When does the applicant begin repaying a PLUS Loan?
For PLUS Loans disbursed on or after July 1, 2008, repayment may begin either 60
days after the loan is fully disbursed, or six months after the student graduates
or drops below half-time enrollment.
For PLUS Loans disbursed before July 1, 2008, repayment must begin within 60 days
after the final loan disbursement for the period of enrollment for which you borrowed.
There is no grace period for these loans. This means interest begins to accumulate
at the time the first disbursement is made. The applicant must begin repaying both
principal and interest while the student is in school.
How does the applicant pay back the loan?
For Direct PLUS Loans, the applicant can choose the Standard, Extended, or Graduated
Repayment Plan. The Income Contingent Repayment Plan is not an option for Direct
PLUS borrowers. A Direct PLUS Loan can also be consolidated.
For FFEL PLUS Loans, parents can usually choose the Standard, Extended, Graduated,
or Income Sensitive Plan. FFEL PLUS Loans can also be consolidated.
Are there any tax credits 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 federal and nonfederal loans taken out to pay for postsecondary education costs.
The maximum deduction is $2,500 a year. IRS Publication 970, Tax Benefits for Higher
Education, explains these credits and other tax benefits. You can find out more
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 the loan isn’t in
default. Generally, the conditions for eligibility and procedures for requesting
a deferment or forbearance that apply to Stafford Loans also apply to 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
accrues, it will be capitalized.
Can a Federal 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), 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, your parents should contact
the Direct Loan Servicing Center at 1-800-848-0979 if they have a Direct PLUS Loan.
If they have a FFEL PLUS Loan, they should contact the lender or agency holding
the loan.