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| Parent PLUS Loan Program | PLUS loans are low-interest federally insured loans made to parents of undergraduate students to help pay a student's college expenses. Parents do not have to demonstrate financial need to borrow PLUS loans, but do need to have a good credit history.
For a Direct PLUS Loan, your must complete a Direct PLUS Loan application and promissory note (The binding legal document you sign when you get a student loan. It lists the conditions under which you’re borrowing and the terms under which you agree to pay back the loan. It will include information on how interest is calculated and what the deferment and cancellation provisions are. It’s very important to read and save this document because you’ll need to refer to it later when you begin repaying your loan.), contained in a single form that you will get from your school’s financial aid office.
Generally parents have to pass a credit check. If they don’t pass, they might still be able to receive a loan if they can demonstrate that extenuating circumstances exist, or if someone they know—who can pass—agrees to endorse the loan and promises to repay it if they don’t.
The yearly limit on a PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. For example, if your cost of attendance is $6,000 and you receive $4,000 in other financial aid, your parents could borrow up to—but no more than—$2,000.
Your school first receives the loan funds and might require your parents to endorse a disbursement check and send it back to the school. In most cases, the loan will be disbursed in at least two installments, and no installment will be greater than half the loan amount. The funds will first be applied to your tuition, fees, room and board, and other school charges. If any loan funds remain, your parents will receive the amount as a check or in cash, unless they authorize the amount to be released to you or to be put into your school account. Any remaining loan funds must be used for your education expenses.
The interest rate could change each year of repayment but does not exceed 9 percent. For July 1, 2003 to June 30, 2004, the interest rate for PLUS Loans in repayment was 4.22 percent. Interest rates are adjusted each year on July 1. Your parents will be notified of interest rate changes throughout the life of their loan. Interest is charged on the loan from the date the first disbursement is made until the loan is paid in full.
Repayment must begin within 60 days after the loan is fully disbursed. There is no grace period for these loans. This means interest begins to accumulate at the time the first disbursement is made. Parents must begin repaying both principal and interest while you’re in school.
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