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PLUS Loan

Article on PLUS Loan

Many incoming college students need all the help they can to help finance their college education. The PLUS Loan is another loan option to help students attend their favorite college or university.

Step 1: What is a PLUS Loan?

There are actually two different PLUS Loans available, one for a dependent undergraduate’s parent or guardian, as well as a loan for graduate and professional degree students. These funds are to help cover education expenses such as tuition, supplies, housing and more. They have flexible repayment options and deferred payment in case of financial hardship, a 0.25% interest rate discount if enrolled in auto debit payments, the interest rate is fixed at 7.9% and interest paid may be tax deductible, unlike most other educational loans. There is a fee of 4% of the loan amount deducted upon disbursement.

Step 2: The PLUS Loan for Parents

Parents of dependent college students can apply for a PLUS Loan if they meet certain eligibility requirements. To determine eligibility, the borrower must be the student’s biological or adoptive parent; the student must be enrolled at least half-time at a participating school; must have good credit (or a co-signor with good credit); be a U.S. citizen or eligible noncitizen; must not be in default on a federal education loan or grant; and meet other eligibility requirements. Parents should complete the PLUS Loan application and Master Promissory Note (MPN) and loaned funds are sent to the school.

Step 3: The PLUS Loan for Students

Graduate and professional degree students may apply for a PLUS loan and the terms and conditions are the same as the PLUS Loan for parents. Unlike the PLUS Loan for parents, the student must complete the FAFSA and the school has to have determined the maximum eligibility for direct subsidized and unsubsidized Stafford Loans before completing the PLUS Loan application and MPN. The maximum PLUS Loan amount that can be borrowed is the cost of attendance less any other financial assistance received. A special interest rate cap is available military members.

Step 4: Repayment of the PLUS Loan(s)

The repayment period for PLUS Loans will begin when the loan is fully disbursed and the first payment is due sixty days after the last disbursement. Repayment may be deferred while the student is enrolled at least half-time. Payment may be deferred for an additional six months after the student ceases to be enrolled at least half-time. Depending on the repayment plan chosen, the borrower will have 10 to 25 years to repay. If the borrower is unsure of who the loan servicer is, go to www.nsids.ed.gov for details. Borrowers may have the balance of their loans forgiven if they are employed in a public service job.

Incoming students and parents should contact the school’s financial aid department to complete the FAFSA, the PLUS Loan application and the Master Promissory Note to determine eligibility as early in the process as possible.