Direct Loan PLUS: What Parents Need to Know

A Direct Loan PLUS is a government loan granted to parents of qualifying undergraduate students. Rather than putting the burden of repayment on the student, these loans are repayed by the parents of the student.

Getting a Direct Loan PLUS

To get a Direct Loan PLUS, you will need to fill out an application form and a promissory note, which are available as one document from the U.S. Department of Education. You will also need to pass a credit check. If you do not pass the credit check, you may still be able to obtain the loan if a relative with good credit endorses it or if you can prove extenuating circumstances.

How the Money is Paid Out

The yearly limit of the loan is equal to the cost of your student's attendance minus any other financial aid he or she is receiving. The money will be paid directly to your student's school. There will be at least two disbursements made. The funds are applied to tuition, room and board, fees and other school-related expenses. If there are any funds left over, these will be paid to you as cash or a check. You may also authorize the excess to be released into your student's college fund. Either way, the money must be used for educational purposes.

Fees and Repayment

The variable interest rate for 2008-2009 Direct PLUS loans is 5.01%. There is also a fee of up to 4% of the total loan, which is deducted proportionally from each disbursement. You may begin repaying the loan 60 days after the last disbursement, or, if your student is no longer enrolled at least half-time, up to six months after that time begins. Loans may be cancelled under certain circumstances, but your student not graduating or deciding to pursue another program or attend another school are not considered valid reasons for cancellation. For more information on the Direct Loan PLUS program, see this page at the U.S. Department of Education's Web site.

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