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Parents of dependent undergraduate students may be able to borrow money with low interest for their students’ college educations through the Federal PLUS Loan Program. Federal PLUS Loans are available through both the Federal Family Education Loan Program (FFELP) and the William D. Ford Federal Direct Loan Program (Federal Direct Loans). The college the student attends will determine through which program the parents can borrow. The financial aid office can tell the parents what they need to do to apply, if they decide to borrow.
Parents who wish to take advantage of this program do not need to demonstrate financial need. Repayment of principal and interest begins within 60 days after the funds are disbursed, with no grace period. Under the Federal PLUS Loan Program, borrowers may defer the payment of principal under certain circumstances. Borrowers should contact their lenders for more information.
Eligibility
To be eligible, parents must:
- Be a U.S. citizen or eligible non-citizen
- Be borrowing for a dependent student who meets the eligibility criteria for the Federal Stafford Loan
- Be subject to a credit check by the lending institution (loans will be denied to parents with adverse credit, as defined by federal regulations)
- Meet any further eligibility criteria required by the lender
- Not be in default on an educational loan or owe repayment on a federal or state grant
How to apply
The financial aid administrator at the college determines a parent's eligibility for the loan and can provide the proper application documents. The lending institution will also have the proper forms available and will either approve or deny each loan application.
Interest Rate
Currently, the interest rate for a Federal PLUS Loan is variable, adjusted annually on July 1, and cannot exceed nine percent over the life of the loan.
Federal PLUS Loan Interest Rate for July 1, 2005 - June 30, 2006:
Loan limit
The annual maximum amount that can be borrowed under the Federal PLUS Loan Program is equal to the Cost of Attendance minus (-) financial aid received. There is no aggregate maximum.
Fees
A federal loan origination fee of three percent of the loan amount will be deducted from Federal PLUS Loan proceeds prior to disbursement. A guarantee fee not to exceed one percent may also be deducted from the loan amount. Currently, ISAC does not charge the one-percent fee—although it is subject to reinstatement based on periodic review.
Disbursements
All loans are disbursed in at least two installments. The loan proceeds are payable to both the parent (the borrower) and the college. Proceeds will be electronically transmitted or mailed directly to the institution.
Rights and Responsibilities, Repayment, Deferments
Federal PLUS Loan borrowers should be aware of the borrowing basics.
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