Federal parent PLUS loan

Federal Parent PLUS Loans enable parents with good credit histories to borrow money with which to pay the education expenses of their children. Each child must be a dependent undergraduate student enrolled at least half time in an approved college or university.

About the parent PLUS loan

The primary benefit of the PLUS Loan is that parents can borrow federally guaranteed low interest loans to help pay for their child's education.

A Federal PLUS Loan allows parents to borrow the total cost of undergraduate education including tuition, room and board, supplies, lab expenses, travel less any other aid.

These parent loans are non-need based. Eligibility for the PLUS Loan depends on a modest credit check that determines whether the parent as an adverse credit. An adverse credit history is defined as being more than 90 days late on any debt or having any Title IV debt (including a debt due to grant overpayment) within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off.

Your school may require the FAFSA Financial Aid Application to qualify for the PLUS Loan. Be sure to check with your school's financial aid office first.

The interest rate on the PLUS Loan is fixed at 8.5% as of July 1, 2006.

Unlike other type of loans, including home equity, Parent PLUS Loans require no collateral.

Interest may be tax deductible.

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.

Do they get the money or do I?

Either the U.S. Department of Education (for a Direct PLUS Loan) or your parents' lender (for a FFEL PLUS Loan) will send the loan funds to your school. Your school might require your parents 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 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 or in cash, unless they authorize the amount to be released to you or to be put into your school account. Any remaining loan funds must be used for your education expenses.

Can my parents cancel the loan if they change their minds, even if they've signed the promissory note agreeing to the loan's terms?

Yes. Your school must notify your parents in writing whenever it credits your account with 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 within 14 days after the date 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.

What's the interest rate on PLUS loans?

PLUS Loans are fixed rate loans at 8.5% as of July 1, 2006.