PLUS Loans Explained

PLUS Loans are federal student loans that allow parents to borrow the total cost of their dependent child’s college education at a relatively low interest rate. Parent PLUS Loans can be used for any education expenses, including tuition, books and housing. These unsubsidized loans have a 10-year repayment term; the borrower is responsible for accrued interest over the life of the loan. 

Types of PLUS Loans
There are two types of PLUS Loans. The funds from a Direct PLUS Loan are awarded by the Department of Education, while funds from an FFEL Plus Loan are awarded by a local lender.

Determining Eligibility
PLUS Loans are not need-based federal student loans, meaning that applicants do not have to prove financial need to qualify. To be eligible for a PLUS Loan, the parent(s) must undergo a credit check, and in some cases, the borrower must fill out a FAFSA (Free Application for Federal Student Aid).

Who Receives the Money?
With the parent as the borrower and the student as the recipient, a common question associated with PLUS Loans is, “Who receives the money?”. In most cases, the money will be sent directly to the school to be applied to the student’s education expenses. If loan funds remain, a check is sent to the parent(s), or the parent(s) may give the school permission to deposit the extra funds directly into the student’s school account.

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