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How To Apply For Federal PLUS Loans

filed: September 08, 2008

When it comes to taking on debt to pay for college, the assumption from some people is that the student will shoulder this burden. After all, if he or she is going to get a degree leading to a good job, then eventually they'll be in the financial position to pay down their debt obligations.

Not every family sees it that way with some families choosing to free their offspring from this burden by having the parents cover all of the costs related to college. For families who have the financial wherewithal to cover college expenses, taking on debt isn't an issue. For the vast majority of families, getting some assistance is a must and one avenue is through the Federal PLUS Loans program.

About the Federal PLUS Loan

Federal PLUS Loans are low-interest student loans for undergraduate, dependent students. Students must be enrolled at least half time at an eligible school. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Parents must have good credit and can apply for either loan, but not both during the same enrollment period.

Parents can borrow the full cost of the student's college expenses (tuition, fees, room and board, and other school charges) minus any financial aid. This means that if college expenses run $10,000 annually and the aid package comes to $2500, parents can borrow $7500. At present, those monies would be charged a fixed interest rate of 8.5%. A loan origination fee of 3% is also assessed by the federal government.

PLUS loan monies are sent directly to the college, usually in two installments – one for the fall semester, the second one for the spring semester. Unused funds are returned to parents who can choose to authorize payment to the student or placed in their college account.

PLUS Repayment Plans

Parents must begin making payments on PLUS loans within sixty days after the funds have been completely disbursed or they can wait as long as six months after the student is no longer attending school whether they have quit or graduated. Funds are sent to a loan servicer or to a private lender as stipulated through the loan agreement.

A PLUS loan can be advantageous for the family who doesn't want their child to go into debt or is looking for an alternative to tapping their home's equity to fund their children's education. Under a few circumstances a PLUS loan could be deferred or even canceled, otherwise the obligation to pay the loan back rests firmly with the parents.

For More Information:

• see our detail sheet on the parent PLUS loan
• view the financial aid chart for parents