Direct PLUS Loans for Parents
Parents of dependent students may apply for a Direct PLUS Loan to help pay their child's education expenses as long as certain eligibility requirements are met.
To be eligible for a Direct PLUS Loan for Parents:
- The parent borrower must be the student's biological or adoptive parent. In some cases, the student's stepparent may be eligible.
- The student must be a dependent student who is enrolled at least half-time at a school that participates in the Direct Loan Programs. Generally, a student is considered dependent if he or she is under 24 years of age, has no dependents, and is not married, a veteran, a graduate or professional degree student, or a ward of the court.
- The parent borrower must not have an adverse credit history (a credit check will be run). If the parent is not approved, the parent may still receive a loan if someone (such as a relative or friend) agrees to endorse the loan. The endorser promises to repay the loan if the parent fails to do so. The parent may also still receive a loan if he or she can demonstrate extenuating circumstances.
- The student and parent must be U.S. citizens or eligible non-citizens, must not be in default on any federal education loans or owe an overpayment on a federal education grant, and must meet other general eligibility requirements for the federal student aid programs.
How does a parent get a loan?
For a Direct PLUS loan, the parent must apply by completing a Direct PLUS loan application online at www.studentloans.gov and must complete the Master Promissory Note (MPN). The MPN is a legal document in which the borrower promises to repay the loan and any accrued interest and fees to the lender who is the Department of Education. It also explains the terms and conditions of the loan. In most cases, one MPN can be used for loans that a parent receives over multiple academic years although a new application must be completed for each school year. The school's financial aid office can provide instructions on applying for a PLUS Loan and may offer the option of completing the PLUS application and MPN online at www.studentloans.gov.
How much can a parent borrow?
The annual limit on a PLUS Loan is equal to the student's cost of attendance minus any other financial aid the student receives. For example, if the cost of attendance is $6,000 and the student receives $4,000 in other financial aid, the student's parent can request up to $2,000.
How does the parent get the loan money?
Department of Education will send the loan funds to the student's school. In most cases, the loan will be disbursed in at least two installments (one in the fall semester and one in the the spring semester), and no installment will be more than half the loan amount. The school will use the loan money first to pay the student's tuition, fees, room and board, and other school charges. If any loan funds remain, the parent will receive the amount as a check or other means, unless he or she authorizes the amount to be released to the student or transferred into the student's account at the school. Any remaining loan funds must be used for the student's education expenses.
What's the interest rate?
The interest rate is fixed at 6.89%. Interest is charged from the date of the first disbursement until the loan is paid in full. Students and parents may check the interest rate, servicer information, and other financial aid history at the National Student Loan Data System. If a parent qualifies under the Service Members Civil Relief Act, the interest rate on loans obtained before entering military service may be capped at 6% during the parent's military service. Parents must contact their loan servicer to request this benefit. In addition, interest is not charged (for a period of no more than 60 months) on Direct Loans first disbursed on or after October 1, 2008, while a borrower is serving on active duty or performing qualifying National Guard duty during a war or other military operation or other emergency, and serving in an area of hostilities qualifying for special pay.
Other than interest, is there a charge to get a PLUS Loan?
The parent will pay a fee of 4.272% of the loan amount, deducted proportionately each time a loan disbursement is made.
When does the parent begin repaying the loan?
The repayment period for a Direct PLUS Loan begins at the time the PLUS loan is fully disbursed, and the first payment is due within 60 days after the final disbursement. However, for Direct PLUS Loans with a first disbursement date on or after July 1, 2008, the parent may defer repayment, while the student on whose behalf the parent borrowed the loan is enrolled on at least a half-time basis, and for an additional six months after the student ceases to be enrolled at least half-time.
How does the parent pay back the loan?
The parent will repay the servicer listed on the disclosure statement provided when he or she received the loan. The loan servicer will provide regular updates on the status of the PLUS Loan, and any additional PLUS Loans that a parent receives. The loan servicer also will be listed in the parent's account at www.nslds.ed.gov.
Repayment Plans—The Direct PLUS Loan Program for parents offers three repayment plans (standard, extended, and graduated) that are designed to meet the different needs of individual borrowers. The terms differ between the repayment programs, but generally borrowers will have 10 to 25 years to repay a loan.
What if a parent has trouble repaying the loan?
Under certain circumstances, a borrower can receive a deferment or forbearance to temporarily stop or lower the payments on a loan.
Can the parent's PLUS Loan be transferred to the student so that it becomes the student's responsibility to repay?
No. A PLUS Loan made to the parent cannot be transferred to the student. The parent is responsible for repaying the PLUS Loan.
Can a PLUS Loan be cancelled (discharged)?
Yes, under certain conditions. A cancellation (discharge) releases the parent from all obligations to repay the loan. Under the Loan Forgiveness for Public Service Employees Program, borrowers may have the balance of their loans forgiven if they are employed full-time in a public service job and make 120 payments on their loans during that period. For additional details, go to the Loan Forgiveness for Public Service Employees page on www.studentaid.ed.gov.