The Federal Direct PLUS Loan: A Parent's Guide

The Federal Direct PLUS loan program helps students and parents borrow money to pay for higher education expenses. PLUS loans are funded through the Federal Family Education Loan (FFEL) and William D. Ford Federal Direct Loan (Direct Loan) programs. As a parent you may apply for either program.

Loan Application and Promissory Note

To obtain a Direct PLUS Loan you must complete a loan application with a promissory note. The application can be obtained from a college or university’s financial aid office. FFEL PLUS Loan must be applied for using a PLUS Loan application. This application is available from a college or university or any lender or state agency.

A PLUS loan requires a good credit history. If you do not have a good credit rating, a guarantor or co-signor may be necessary to endorse the loan on your behalf. In some cases, you may also qualify for a PLUS loan if you meet criteria with respect to financial need or are a member of a disadvantaged group.

Amount Borrowed
The amount of money that you are permitted to borrow, with a PLUS loan, is based on the cost of the school less any aid that the student receives. If the cost for a particular institution is $12,000 and the student receives $6,000 in aid, the maximum amount that you can borrow is $6,000. This amount can be adjusted for each year that the student is in school and that you need to borrow using the PLUS loan program.

Where the Money Comes From

The money is sent from the lender, or the U.S. Department of Education, directly to the institution to meet your tuitions costs. This can be done as a direct payment or with installments, based on the school’s semesters or quarterly system. Any amount that is in excess of what is needed to meet the student’s tuition cost is payable to the parent in the form of a check.

Interest Rate
A PLUS loan carries an interest rate that is capped by the government. The loan also has an administrative fee of up to 4 percent that is deducted directly from the loan. This fee is used to pay the state agency that administers the program and the federal government in the case of the FFEL PLUS loan and directly to the Federal government in the case of a Direct PLUS loan.

Loan Repayment
The loan repayment begins 60 days after the money has been disbursed to the school. The parent may also arrange for deferment. The deferment delays payments for 6 months, after the student is no longer enrolled in school, or at least attending half time. In some circumstances, the loan can be forgiven if the parent experiences extraordinary financial hardship related to the death or disability of a primary breadwinner. Payments are made directly to the U.S. Department of Education.

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