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As the parent(s) of a dependent undergraduate student, you may be able to borrow money with low interest for your student’s college education through the Federal PLUS Loan Program. Federal PLUS Loans are available through either the Federal Family Education Loan Program (FFELP) or the William D. Ford Federal Direct Loan Program (Federal Direct Loans). The college your student attends will determine which program you borrow through, and the financial aid office there can tell you what you need to do to apply, if you 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. Under this program, borrowers may defer the payment of principal under certain circumstances. For instance, a parent may be eligible for an in-school deferment based on the enrollment status of the student for whom the loan was borrowed. An additional six month deferment may also be available after the student graduates, withdraws or drops below half-time enrollment. Borrowers should contact the lender for more information on this and other available deferments.
Graduate and professional students may also borrow through the Federal PLUS Loan Program. For more information, refer to the Federal PLUS Loan Program page within the Student Zone's Advanced Degree section.
Eligibility
To be eligible, you 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
- Undergo a credit check by the lending institution (loans will be denied to parents with adverse credit, as defined by federal regulations)
- Undergo 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
Choosing a Lender
When borrowing through the Federal Family Education Loan Program for your son or daughter's college education, your loan comes from a lending institution. Borrowers are free to select whichever lender they choose, so you may want to compare the level of benefits and customer service offered by various lenders and choose based on which one best meets your individual needs. There are several factors you may wish to take into consideration, such as whether a lender discounts the federal loan fees, or if rebates or other special discounts are offered for making a series of consecutive, on-time payments.
The U.S. Department of Education (ED) and the Federal Trade Commission (FTC) offer Student Loans: Avoiding Deceptive Offers, which is a free consumer guide for college students (and their families) seeking new loans or consolidating existing loans.
How to Apply
The financial aid administrator at the college your student attends determines your 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.
A chart, which conveniently outlines FFELP loan limits, interest rates and applicable fees in one document (for loans first disbursed on or after July 1, 2008 through June 30, 2009), is available here at College Zone. Specific details regarding each of these topics are provided in the following sections.
Current Interest Rate for Federal PLUS Loans
The current Federal PLUS loan interest rate is fixed at 8.5%.
Loans disbursed prior to July 1, 2006 have a variable interest rate, adjusted annually on July 1, with a maximum of 9%. The Federal PLUS loan variable interest rate for July 1, 2009 -
June 30, 2010 is 3.28%.
Loan Limits
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 is deducted from your Federal PLUS Loan proceeds prior to disbursement. A default fee (formerly the guarantee fee) of one percent of the loan amount is also charged.
For loans guaranteed by ISAC on or after July 15, 2008, ISAC pays one-quarter (25%) of the one-percent federally-mandated default fee for Federal PLUS loan graduate students, but does not pay any portion of the default fee for Federal PLUS loan parent borrowers. The portion of the default fee not paid by ISAC must be paid by either the lender or the borrower. (Continuation of this benefit is subject to periodic review).
Disbursements
Loans are generally disbursed in at least two installments, but qualifying colleges may make single disbursements for single-term (one semester, one trimester, one quarter or 4 months) loans. Check with the financial aid office at your student's college to learn how the loan(s) will be disbursed.
The loan proceeds are payable to both you (the borrower) and the college. Proceeds will be electronically transmitted or mailed directly to the institution.
Rights and Responsibilities, Repayment, Deferments
When you borrow a Federal PLUS Loan, you should be aware of the borrowing basics.
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