A PLUS Loan is a loan for students and parents to help pay for the cost of a student’s education after high school.
The lender is the U.S. Department of Education rather than a bank or other financial institution. Parents can borrow a Direct PLUS Loan to help pay your education expenses if you are a dependent undergraduate student enrolled at least half-time in an eligible program at an eligible school.
For financial aid purposes, a student is considered “dependent” if he or she is under 24, unmarried, and has no legal dependents at the time the Free Application for Federal Student Aid is submitted. (Exceptions are made for veterans, wards of court, and other special circumstances.) If a student is considered dependent, then the income and the assets of the parent have to be reported on the FAFSA.
Federal Direct PLUS Loan records will be submitted to the National Student Loan Data System (NSLDS) and will be accessible by guaranty agencies, lenders, and schools determined to be authorized users of the data system. Borrowers have access to view their Title IV, HEA loan records on the NSLDS.
How do my parents get a loan?
You must have a valid FAFSA on file before the PLUS loan application for either parent can be certified, and the borrowing parent must complete a Direct PLUS Loan Application and Master Promissory Note (MPN) at studentaid.gov.
The MPN is a legal document in which your parent promises to repay the loan(s) and any accrued interest and fees to the Department. It also explains the terms and conditions of the loan(s).
If your parents are borrowing Direct PLUS Loans for more than one student, they will need to complete a separate MPN for each one. In most cases, once they have submitted the MPN and it’s been accepted, they won’t have to fill out a new MPN for future loans they receive to pay for the educational expenses of the same student. Your parents can borrow additional Direct Loans on a single MPN for up to 10 years.
What are the parent eligibility requirements for a Direct PLUS Loan?
Your parent must be your biological parent, adoptive parent, or your stepparent if the biological or adoptive parent has remarried at the time of application.
Parent PLUS loan borrowers cannot have an adverse credit history (a credit check will be done). If your parents 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. An endorser promises to repay the loan if your parents fail to do so. Your parents might also qualify for a loan without passing the credit check if they can demonstrate that extenuating circumstances exist. If your parents apply for, but are unable to get a PLUS Loan, you may be eligible to receive additional Direct Unsubsidized Loan funds.
In addition, you and your parents must be U.S. citizens or eligible noncitizens, must not be in default on any federal education loans or owe an overpayment on a federal education grant, and must meet other general eligibility requirements for the Federal Student Aid programs.
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 $13,000 and you receive $7,000 in other financial aid, your parents can borrow up to $6,000. If more than one parent wishes to apply for the PLUS Loan, the combination of their loans cannot exceed this amount. The school will determine the actual amount you may borrow.
Who gets my parents’ loan money?
The U.S. Department of Education will send the loan funds to your school. In most cases, the loan will be disbursed in at least two installments, one at the beginning of each semester, and no installment will be greater than half the loan amount. The funds will first be applied to your tuition, fees, room and board, and other school charges. If any loan funds remain, your parents will receive the amount as a check. Any remaining loan funds must be used for your educational expenses. The school will notify you in writing each time they disburse part of your loan money and will provide information about how to cancel all or part of your disbursement if you find you no longer need the money. You will also receive a notice from the Department confirming the disbursement. You should read and keep all correspondence received concerning your loan.
What’s the interest rate?
The interest rate for Direct PLUS Loans is a fixed rate of 6.28%. Interest is charged on Direct PLUS Loans during all periods, beginning on the date of your loan’s first disbursement. To find out more information on interest rates for Direct PLUS Loans, contact the Direct Loan Servicing Center at 1-800-848-0979.
Other than interest, is there a charge to get a PLUS Loan?
Your parents will pay a fee of up to 4.228% of the loan, deducted proportionately each time a loan disbursement is made. For a Direct PLUS Loan, the entire fee goes to the government to help reduce the cost of the loans. Also, your parents may be charged collection costs and late fees if they don’t make their loan payments when scheduled.
When do my parents begin repaying the loan?
The borrower has the option of beginning repayment on the PLUS loan either 60 days after the loan is fully disbursed or waiting until six months after the dependent student on whose behalf the parent borrowed ceases to be enrolled on at least a half-time basis.
How do my parents pay back these loans?
They’ll repay their Direct PLUS Loan to the U.S. Department of Education’s Direct Loan Servicing Center. To read more about repayment options, visit the Federal Student Aid website.
Is it ever possible to postpone repayment of a PLUS Loan?
Yes, under certain circumstances, your parents can receive a deferment on their loans.
If they temporarily can’t meet the repayment schedule, they can also receive forbearance on their loan as long as it isn’t in default. During forbearance, their payments are postponed or reduced.
Since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance. If they don’t pay the interest as it accrues, it will be capitalized (that is, added to the principal amount of the loan, and additional interest will be based on that higher amount).
Can a PLUS Loan be discharged (canceled)?
Yes, under certain conditions. A discharge (cancellation) releases your parents from all obligation to repay the loan.
Your parents PLUS Loan can’t be canceled for these reasons: You didn’t complete your program of study at your school (unless you couldn’t complete the program for a valid reason), you didn’t like the school or the program of study, or you didn’t obtain employment after completing the program of study.
For more information about loan discharge or repayment: If your parents have a Direct PLUS Loan, they should contact the Direct Loan Servicing Center at 1-800-848-0979, or go to the Federal Student Aid website.