COLLEGE COMPASS -- Direct Parents PLUS Loan
DIRECT PARENTS PLUS LOAN
PLUS Loans to meet students' education costs are available through
both the Direct Loan and FFEL programs. Many of the benefits to parent
borrowers are identical in the two programs.
What kinds of PLUS Loans are available?
For parent borrowers, the Direct Loan Program offers the Federal
Direct PLUS Loan (Direct PLUS Loan).
This loan enables parents with good credit histories to borrow to pay
the education expenses of each child who is a dependent undergraduate
student enrolled at least half time.
Are there any borrowing requirements my parents have to
meet?
Yes. To be eligible to receive a Direct 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 co-sign the loan, promising 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 and your parents
must also meet other general eligibility requirements for federal
student financial aid.
Can my parents get both a Direct PLUS Loan and an FFEL PLUS
Loan?
They can apply for either a Direct PLUS Loan or an FFEL PLUS Loan, but
not both for the same child for the same enrollment period. Your
parents could, however, apply for a Direct PLUS Loan for you and an
FFEL PLUS Loan for one of your siblings.
How much can my parents borrow?
The yearly limit on either type of PLUS Loan is equal to your cost of
attendance minus any other financial aid for which you are eligible.
For example, if your cost of attendance is $6,000 and you're eligible
for $4,000 in other financial aid, your parents could borrow up
to---but no more than---$2,000.
What's the interest rate on PLUS Loans?
The interest rate is variable, but it will never exceed 9 percent.
From July 1, 1994 through June 30, 1995, the interest rate is 8.38
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(s). Interest is charged on the loan from the date the first
disbursement is made until the loan is paid in full.
Is there a charge for a PLUS Loan?
Your parents will pay a fee of up to 4 percent of the loan, deducted
proportionately each time a loan payment is made. A portion of this
fee goes to the federal government to help reduce the cost of the
loans. Also, if your parents don't make their loan payments as
scheduled, they may be charged late fees and collection costs.
When do my parents begin repaying a PLUS Loan?
Generally, within 60 days after the final loan disbursement. There is
no grace period for these loans. Interest begins to accumulate at the
time the first disbursement is made, and your parents will 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. During a deferment, no payments are
required; during forbearance, payments are either postponed or
reduced. Your parents are responsible for the interest on a loan
during a deferment or forbearance. If they don't pay the interest as
it accrues, it will be capitalized. Your parents can't receive a
deferment or forbearance if their loan is in default.
See the Loan Deferment Summary for the list of deferments available if
your parents' PLUS loan was first disbursed on or after July 1, 1993.
If your parents' PLUS Loans were disbursed before this date, ask the
lender or agency holding those loans about the deferments that are
available.
Deferments are not automatic. If your parents have a Direct PLUS Loan,
they must contact the Direct Loan Servicing Center to request a
deferment form. If they have an FFEL PLUS Loan, they must contact the
lender or agency that holds the loan. For either program, they'll have
to provide documentation to support their request. Your parents must
continue making scheduled payments until they receive notification
that the deferment has been granted.
Forbearance isn't automatic either. Your parents may be granted
forbearance if they're willing but unable to repay as scheduled and
they're not eligible for a deferment. If your parents have a Direct
PLUS Loan, they should contact the Direct Loan Servicing Center to
request forbearance. If they have an FFEL PLUS Loan, they should
contact the lender or the agency that holds the loan. For either
program, they'll have to provide documentation to support their
request for forbearance. Your parents must continue making scheduled
payments until they are notified that forbearance has been
granted.
Can a PLUS Loan be discharged (canceled)?
Yes, under certain circumstances. A discharge releases your parents
from all obligation to repay the loan. (See the Discharge/Cancellation
Summary for a complete listing of discharge conditions.
Your parents' loan cannot be discharged because you didn't complete
your program of study at your school, didn't like the school or the
program of study, or didn't obtain employment after completing the
program of study.
Repayment assistance (not discharge of the loan, but another way to
satisfy their obligation to repay), may be available to your parents
if you serve in the military. For more information, contact your
recruiting officer.
For more information about discharge or repayment assistance, Direct
PLUS Loan borrowers should contact the Direct Loan Servicing Center.
The process of applying for a loan and paying funds to the borrower,
as well as the methods of repayment, differ somewhat between the
Direct PLUS Loan and the FFEL PLUS Loan.
How do my parents apply for a Direct PLUS Loan?
Your parents will fill out a Direct PLUS Loan Application and
Promissory Note, which is available from your school's financial aid
office. (It is not necessary for you or your parents to fill out a
FAFSA to apply for this loan, unless your school requires it.)
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.
When should my parents apply for a Direct PLUS Loan?
Your parents should apply as early as possible, allowing for plenty of
time to complete the application process.
Do my parents need to find a lender?
No. Under the Direct Loan Program, their lender will be the U.S.
Department of Education. Your school assists the federal government in
administering the Direct Loan Program by distributing the loan
application, processing the loan, and delivering the loan funds.
How will my parents be paid?
Actually, the loan money will be sent to your school in at least two
installments (no one installment can be greater than half the loan
amount). The funds will first be applied to your school account (if
your school has an account for you) to pay for tuition and 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. Any remaining loan money must be
used for your education expenses.
How do my parents pay back the loan?
Your parents can choose the Standard, Extended, or Graduated Repayment
Plan. The Income Contingent Repayment Plan is not an option for parent
borrowers.
Where do my parents send their loan payments?
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