PLUS Loans (Loans To Parents)

PLUS Loans enable parents who do not have an adverse credit history to borrow to pay the education expenses of each child who is a dependent undergraduate student (see pages 8 and 9) enrolled at least half time.* PLUS Loans are available through both the Direct Loan and FFEL programs. Most of the benefits to parent borrowers are identical in the two programs.

Are there any borrowing requirements my parents have to meet?
Yes. To be eligible to receive a PLUS Loan, your parents generally will be required to pass a credit check. If they don't pass the credit check, they might still be able to receive a loan if someone, such as a relative or friend who is able to pass the credit check, agrees to endorse the loan and promises to repay it if your parents should fail to do so. Your parents might also qualify for a loan even if they don't pass the credit check if they can demonstrate that extenuating circumstances exist.

You must meet the general eligibility requirements for federal student aid. Your parents must also meet some of these general requirements. For example, your parents must meet citizenship* requirements and may not be in default* or owe a refund to any SFA program.

How much can my parents borrow?
The yearly limit on a PLUS Loan is equal to your cost of attendance* minus any other financial aid you receive. For example, if your cost of attendance* is $6,000 and you receive $4,000 in other financial aid, your parents could borrow up to-but no more than-$2,000.
NOTE: Your school can refuse to certify your parents' loan application, or can certify a loan for an amount less than they would otherwise be eligible for, if the school documents the reason for its action and explains the reason to your parents in writing. The school's decision is
final and cannot be appealed to the U.S. Department of Education.

What's the interest rate on PLUS Loans?
The interest rate could change each year of repayment, but, by law, it will never exceed 9 percent. The interest rate for PLUS Loans in repayment from July 1, 2001 to June 30, 2002, was calculated at 6.79 percent. The interest rate is adjusted each year on July 1. Your parents will be notified of interest rate changes throughout the life of their loan.
Interest is charged on the loan from the date that the first disbursement is made until the loan is paid in full. Congress changed the interest rate calculation for PLUS loans made on or after July 1, 1998. If your parents had PLUS loans that were first disbursed before July 1, 1998, the interest rate on these loans might be different.

How will my parents be paid?
For a Direct PLUS Loan, the U.S. Department of Education will send the loan funds to your school. For a FFEL PLUS Loan, the loan funds will be sent to your school by the lender. 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 funds will first be used to pay for your tuition, fees, room and board, and other school charges. If any loan money remains, your parents will receive the amount as a check
or in cash, unless they authorize it to be released to you or to be put in your school account. Any remaining loan money must be used for your education expenses.

Will my parents have an opportunity to cancel their PLUS Loan after they sign the promissory note?*
Yes. Your school must notify your parents in writing whenever it credits your account with your PLUS Loan funds. This notification must be sent to your parents no earlier than 30 days before and no later than 30 days after the school credits your account. Your parents may cancel all or a portion of their loan if they inform your school that they wish to do so within 14 days after the date that your school sends 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 your parents receive PLUS Loan funds directly by check, they may
refuse the funds by not endorsing the check.

Is there a charge for a PLUS Loan?
Your parents will pay a fee of up to 4 percent of the loan. This fee is deducted proportionately each time a loan disbursement is made. For a FFEL PLUS Loan, a portion of this fee goes to the federal government and a portion goes to the guaranty agency* to help reduce the cost of the loans. For a Direct PLUS Loan, the entire fee goes to the government to help reduce the cost of the loans. Also,
if your parents don't make their loan payments when they're scheduled, your parents may be charged collection costs and late fees.

When do my parents begin repaying a PLUS Loan?
Generally, repayment must begin within 60 days after the final loan disbursement for the period of enrollment for which you borrowed. There is no grace period for these loans. This means that interest begins to accumulate at the time the first disbursement is made. Your parents must begin repaying both principal and interest while
you're in school.

Is it ever possible to postpone repayment of a PLUS Loan?
Yes. Under certain circumstances, your parents can receive a deferment or forbearance on their loan. Deferment and forbearance are explained on page 16. Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance that apply to Stafford Loans also apply to PLUS Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during
periods of deferment or forbearance. If they do not pay the interest as it accrues, it will be capitalized (see page 14).

Can a PLUS Loan be discharged (canceled)?
Yes, under certain conditions. A discharge releases your parents from all obligations to repay the loan. A complete listing of cancellation provisions is given on page 17. Your parents' loan cannot be discharged because you didn't complete your program of study at your school (unless you were unable to complete the program because the school closed), didn't like the school or the program
of study, or didn't obtain employment after completing the program of study.

For more information about loan discharge or repayment, Direct PLUS Loan borrowers should contact the Direct Loan Servicing Center at 1-800-848-0979. FFEL PLUS Loan borrowers should contact the lenders or agencies that hold their loans.

Go on to FFEL Loans Page 19 - Direct PLUS Loans Page 21 - Direct FFEL Loans Page 22