The low-interest federal Direct PLUS Loan helps parents pay their child's college expenses. Getting it is based on their good credit and a completed FAFSA. So don't overlook the PLUS Loan. It's financial aid for parents!
How Families Use PLUS Loans
Many families use the Direct PLUS Loan to cover at least part of the cost of college. The student's parents can borrow an amount up to the college's cost of attendance, less any other financial aid the student receives. (Direct PLUS loans are also available to students pursuing graduate and professional post-bachelor's degrees.)
The loan money is sent directly to the school in at least two installments. Once the college's tuition, fees, room and board, and other charges are paid, any money left over is sent to the student's parents or, if they authorize it, to the student.
How to Apply
Parents apply for Direct PLUS loans by filling out and submitting an application and promissory note unique to the Direct PLUS Loan Program. This application is available from college financial aid offices and the Department of Education's student aid website.
The student must be a dependent of the parents, have a FAFSA on file, and meet the same eligibility requirements for all federal financial aid. The student's parents must also meet some of these requirements. For example, the student's parents must be U.S. citizens or eligible noncitizens, and they must certify that the loan will be used only for educational purposes.
Parents must also be creditworthy to qualify for a Direct PLUS loan. The college may refuse the loan application or approve it for less than the cost of attendance. In these cases, the college must document and explain the reason for the refusal to the student's parents in writing. If the student's parents are turned down, the student may be eligible for higher Stafford loan limits.
PLUS Loan Terms
The federal government offers Direct PLUS loans through its Direct Loan Program. Direct PLUS loans have fixed interest rates, currently 7.9 percent. Loans first disbursed after March 1, 2013 have a loan fee of 4.2 percent, which is subtracted from the loan amount. Payments may be postponed until six months after the student ceases to be enrolled in college at least half-time. Borrowers have from ten to twenty-five years to repay the loan.
The menu of federal loans offers something for everyone, and a Direct PLUS loan may be just what you need to make a college education a reality. Go to studentaid.gov for more information.
Note: Financial information provided on this site is of a general nature and may not apply to the student's situation. Contact a financial or tax advisor before acting on such information.