The Federal Plus Loan Explained

The Federal PLUS loan program is offered through the US Department of Education for the parents of a qualified college student. Instead of having the student carry the burden of responsibility to repay education debts, parents can elect to have the loans issued in their name. The loans work like most federal student loans, with the key difference being who carries the burden of the debt.

Applying for a PLUS Loan

All federal student loans are given based on credit worthiness and not just based on need. In fact, only a few federal loan options are even partly need-based. These are the subsidized loan programs. The loans in those cases are still issued based on credit worthiness, but the terms are designed to help economically-disadvantaged individuals. The PLUS loan program is similar. The credit history and income of the parent applicants will be considered to determine if a loan should be distributed. Then, if there is a great need, the loans can be subsidized, meaning repayment can be interest free for a portion of time.

PLUS Loan Limits

PLUS loan limits are rather low because they are not designed to cover the entire cost of education. Instead, students are encouraged to seek grants, scholarships and private student loans for a portion of the total cost needed for tuition. Then, a PLUS loan may be distributed in the excess amount of tuition in a given term or semester. It is important to realize the loans can only be as large as the cost of tuition, and they will not cover any living expenses. The loans are provided directly to a student's account at the college. Funds are never provided to the parents themselves or to the students themselves. Parents who need assistance supporting the living expenses their college-aged student may experience will need to seek private loan options.

PLUS Loan Repayment

Parents can begin repaying loans right away while the students are in college, and this will be the most likely scenario. Since new loans need to be issued each term in the total cost of tuition for that term, the parents will actually have multiple loans issued over the course of sending a student to college. Some parents may even send more than one student to college through the PLUS loan program. In either case, the parents can elect to consolidate the debts without penalty through the federal student loan debt consolidation program to make payments more manageable.

PLUS Loan Discharge or Forgiveness

Federal student loans are discharged if the student who took the loans dies or becomes severely disabled. They can also be discharged if the student was wrongfully admitted to a college or the school closes while the student is getting a degree. In the case of PLUS loans, since the burden of debt falls on the parents, many fear these discharge rules will not apply. In fact, the same rules apply. If the student for whom the loans were taken qualifies for discharge, then the parents will receive the discharge. The same applies to forgiveness programs.

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