FFEL 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 FFEL Program offers the Federal PLUS Loan (FFEL 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 FFEL 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, FFEL PLUS Loan borrowers should contact the lenders or agencies that hold their loans.

The processes of applying for a loan and paying funds to the borrower, as well as the methods of repayment, differ somewhat between the FFEL PLUS Loan and the Direct PLUS Loan.

How do my parents apply for an FFEL PLUS Loan?

The procedure is the same as for the FFEL Stafford Loan, except that your financial need does not have to be evaluated. Therefore, you do not need to file a FAFSA, 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 an FFEL PLUS Loan?

Your parents should apply as early as possible. Even if they are eligible for the funds, they may not receive them if they apply too late in the enrollment period.

How can my parents find a lender?

They should contact their state guaranty agency. It's the best source of information on the FFEL Program in your state. For the agency's address and telephone number, and for more information about borrowing, call the Federal Student Aid Information Center's toll-free number: 1-800-4-FED-AID (1-800-433-3243) . If your state does not have its own guaranty agency, ask your school or the Federal Student Aid Information Center for the name and telephone number of the guaranty agency that serves your state.

How will my parents be paid?

The lender will send the loan proceeds to your school in at least two payments. Payments will be sent either by electronic funds transfer or by check made co-payable to your school and your parents. Your parents may receive payment as often as weekly or monthly, if the lender agrees. No one payment may exceed half of the loan amount.

How do my parents pay back the loan?

The lender will arrange a repayment schedule, providing for a minimum of $600 paid annually and a maximum repayment period of 10 years (excluding periods of deferment and forbearance).

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