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Federal Parent PLUS Loans, Federal Student Loans at CollegeSpot.com
PLUS Loans
Overview
The Parent PLUS Loan allows credit worthy parents to borrower money to pay for education expenses for each dependent, undergraduate, student enrolled at least half time in an approved college or university. The PLUS Loan is available through both the Direct Loan and FFEL programs.
PLUS loans differ from other federal student loans, like the Stafford and Perkins loans, in that it can cover a large amount of the cost of education, has a higher interest rate, and the commitment is undertaken by the parent, rather than the student. The primary benefit of the Parent PLUS Loan is that parents can borrower federally-guaranteed low interest loans to help pay for their child’s education. PLUS loans require no collateral, unlike home equity loans and the interest may be tax deductible.
Parent PLUS Loan Borrowing Limits
A Parent PLUS Loan allows parents to borrow the total cost of undergraduate education (including tuition, room and board, supplies, lab expenses, travel, etc.) less any other aid.
The yearly limit on a Parent PLUS or Graduate PLUS Loan is equal to the cost of attendance minus any other financial aid that is received.
For example, if the cost of attendance is $60,000 and you receive $40,000 in other financial aid, then you could borrow up to but no more than $20,000.
Parent PLUS Loan Eligibility
Your child must be enrolled at least half-time (based on your school’s definition of full and half time status) in a Title IV accredited college or university. Check with your school’s financial aid office or consult its website if you are not sure your school is eligible. Parent PLUS loans are non-need based. Unlike federal student loans, PLUS loans are based on your credit rating, and the rating average that is considered “good” is usually 625 or better.
Parent PLUS Loans for Online Degrees
Because online college degrees are offered at many top institutions that accept federal financial aid, you may be able to use a Parent PLUS Loan to help your children pay for their tuition. It primarily depends on whether or not the school you are getting your online college degree from is Title IV accredited.
How to Apply for a Parent PLUS Loan
Your child first must complete the Free Application for Federal Student Aid (FAFSA) or Renewal FAFSA (for returning students). After the FAFSA is processed, your child’s school will review the results and inform them of their loan eligibility by sending them an award letter. Once the award letter is received, you will be able to see how much financial aid your child will need in order to pay for their college education. If the Stafford Loan and other forms of federal financial aid will not be enough to cover the costs, you then must complete the Master Promissory Note for the Parent PLUS Loan, which is the promissory note/application for your loan. If for some reason you are denied a PLUS Loan, the denial letter can be provided to the school’s financial aid office and your child will be awarded additional unsubsidized Stafford Loan funds. If your child is not eligible for federal student loans or needs additional money for college, you can then apply for private student loans.
Parent PLUS Loan Disbursement
Your lender will disburse your Parent PLUS Loan funds directly to the school. The school might require you 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 loan funds will first be applied to the tuition, fees, room and board, and other school charges. If any loan funds remain, you will receive the amount as a check or in cash, unless you authorize the amount to be released to your child’s school account. Any remaining loan funds must be used for child’s education expenses.
Parent PLUS Loan Cancellation
Your school must notify you in writing whenever your account is credited with your loan proceeds. This notification must be sent to you no earlier than 30 days before and no later than 30 days after the school credits your account. You may cancel all or a portion of your loan if you inform your school within 14 days after that date that your school sends you 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 you receive Parent PLUS Loan funds directly by check, you may refuse the funds by not endorsing the check.
Parent PLUS Loan Interest Rates
The interest rate on a new Parent PLUS Loan first disbursed after July 1, 2006 is a fixed rate of 8.5% in the FFEL program and 7.9% in the Direct Loan program.
The interest rate on existing variable rate Parent PLUS Loans will continue to change annually on July 1st, based on the last 91-day T-bill auction in May. The current interest rate on the PLUS loan is 8.5%.
Parent PLUS Loan Fees
There may be fees associated with the Parent PLUS Loan. The fees vary by lender and can include a 1% default (or guarantee) fee plus a 3% origination fee. The 1% default fee is a fee used by the lender to create a reserve to protect the loan program in instances when borrowers default on their loans. Some lenders will waive fees as a benefit for using their company as your lender. Default and origination fees, if charged, are deducted from the loan funds before they are sent to the school.
Parent PLUS Loan Repayment Options
The standard repayment term for a Parent PLUS Loan is 10 years. You may be able to extend repayment by deferring or consolidating your federal loans.
You can choose one of the following plans:
The Standard Repayment Plan (or Level Repayment Plan) requires you to pay a fixed amount each month based on your principle and interest but will be no less than $50 or the interest that has accrued.
The Graduated Repayment Plan allows you to make lower payments at the beginning of repayment then, over time, your payments begin to increase. Each of your payments must equal the interest accrued on the loan between scheduled payments. Initial payments generally cover “interest-only” for the first few years. There are different types of graduated plans, so check with your lender on what is available.
The Income-Sensitive Repayment Plan bases your monthly payment on your yearly income and your loan amount. Payments may change as your income rises or falls.
The Extended Repayment Plan is for borrowers with FFELP loans totaling more than $30,000. This plan offers a choice of fixed or graduated payments over a period of up to 25 years.
Other Financial Aid Options
Scholarships are a great way for your child to get extra money for college. Also, the Federal Stafford Loan is a low-interest loan that children can take out for themselves. Then, after you and your family have exhausted your free-money and federal loan options, you should consider taking out Private Student Loans. Private student loans lend up to the total cost of education, do not require the FAFSA, and can be used for any education related expense, including computers, books, housing, etc.
PLUS Loans
Overview
The Parent PLUS Loan allows credit worthy parents to borrower money to pay for education expenses for each dependent, undergraduate, student enrolled at least half time in an approved college or university. The PLUS Loan is available through both the Direct Loan and FFEL programs.
PLUS loans differ from other federal student loans, like the Stafford and Perkins loans, in that it can cover a large amount of the cost of education, has a higher interest rate, and the commitment is undertaken by the parent, rather than the student. The primary benefit of the Parent PLUS Loan is that parents can borrower federally-guaranteed low interest loans to help pay for their child’s education. PLUS loans require no collateral, unlike home equity loans and the interest may be tax deductible.
Parent PLUS Loan Borrowing Limits
A Parent PLUS Loan allows parents to borrow the total cost of undergraduate education (including tuition, room and board, supplies, lab expenses, travel, etc.) less any other aid.
Parent PLUS Loan Eligibility
Your child must be enrolled at least half-time (based on your school’s definition of full and half time status) in a Title IV accredited college or university. Check with your school’s financial aid office or consult its website if you are not sure your school is eligible. Parent PLUS loans are non-need based. Unlike federal student loans, PLUS loans are based on your credit rating, and the rating average that is considered “good” is usually 625 or better.
Parent PLUS Loans for Online Degrees
Because online college degrees are offered at many top institutions that accept federal financial aid, you may be able to use a Parent PLUS Loan to help your children pay for their tuition. It primarily depends on whether or not the school you are getting your online college degree from is Title IV accredited.
How to Apply for a Parent PLUS Loan
Your child first must complete the Free Application for Federal Student Aid (FAFSA) or Renewal FAFSA (for returning students). After the FAFSA is processed, your child’s school will review the results and inform them of their loan eligibility by sending them an award letter. Once the award letter is received, you will be able to see how much financial aid your child will need in order to pay for their college education. If the Stafford Loan and other forms of federal financial aid will not be enough to cover the costs, you then must complete the Master Promissory Note for the Parent PLUS Loan, which is the promissory note/application for your loan. If for some reason you are denied a PLUS Loan, the denial letter can be provided to the school’s financial aid office and your child will be awarded additional unsubsidized Stafford Loan funds. If your child is not eligible for federal student loans or needs additional money for college, you can then apply for private student loans.
Parent PLUS Loan Disbursement
Your lender will disburse your Parent PLUS Loan funds directly to the school. The school might require you 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 loan funds will first be applied to the tuition, fees, room and board, and other school charges. If any loan funds remain, you will receive the amount as a check or in cash, unless you authorize the amount to be released to your child’s school account. Any remaining loan funds must be used for child’s education expenses.
Parent PLUS Loan Cancellation
Your school must notify you in writing whenever your account is credited with your loan proceeds. This notification must be sent to you no earlier than 30 days before and no later than 30 days after the school credits your account. You may cancel all or a portion of your loan if you inform your school within 14 days after that date that your school sends you 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 you receive Parent PLUS Loan funds directly by check, you may refuse the funds by not endorsing the check.
Parent PLUS Loan Interest Rates
The interest rate on a new Parent PLUS Loan first disbursed after July 1, 2006 is a fixed rate of 8.5% in the FFEL program and 7.9% in the Direct Loan program.
The interest rate on existing variable rate Parent PLUS Loans will continue to change annually on July 1st, based on the last 91-day T-bill auction in May. The current interest rate on the PLUS loan is 8.5%.
Parent PLUS Loan Fees
There may be fees associated with the Parent PLUS Loan. The fees vary by lender and can include a 1% default (or guarantee) fee plus a 3% origination fee. The 1% default fee is a fee used by the lender to create a reserve to protect the loan program in instances when borrowers default on their loans. Some lenders will waive fees as a benefit for using their company as your lender. Default and origination fees, if charged, are deducted from the loan funds before they are sent to the school.
Parent PLUS Loan Repayment Options
The standard repayment term for a Parent PLUS Loan is 10 years. You may be able to extend repayment by deferring or consolidating your federal loans.
You can choose one of the following plans:
Other Financial Aid Options
Scholarships are a great way for your child to get extra money for college. Also, the Federal Stafford Loan is a low-interest loan that children can take out for themselves. Then, after you and your family have exhausted your free-money and federal loan options, you should consider taking out Private Student Loans. Private student loans lend up to the total cost of education, do not require the FAFSA, and can be used for any education related expense, including computers, books, housing, etc.