Federal PLUS Student Loans
PLUS loans have no dollar limit, no lifetime cap and is determined by subtracting the existing financial aid package (other loans, grants, scholarship) from the total education cost in that year. For example, if your total education cost is $15,000 and your financial aid package is $10,000, you will be eligible for a $5,000 PLUS loan.
PLUS loans are not subsidized by the federal government, have higher interest rates than Stafford Loans and repayment starts while the student is still enrolled in college.
PLUS loans for undergraduate students are made to the parents and not to the students and unlike Stafford loans where the student is responsible to pay back the loan, are paid back by the parents. However, for graduate students, PLUS loans must be paid back by students.
There are two primary lending channels available for parents and students seeking Federal PLUS loans. They include:
- The William D. Ford Direct Loan Program makes Federal loans money via certain schools.
- The Federal Family Education Loan program (FFEL) loans money via private lenders.
- The man difference between these two lending channels is the interest rate. The Direct Program charges slightly less than the FFEL program, which are still noticeably higher than Stafford Loans.
- Even payments over 10 years
- Increasing payments over 10 years
- Even or increasing payments over 25 years (loans over $30,000)
- Income-sensitive payments
Currently (as off January 2011), the Federal PLUS interest rate is 7.9%.
Are they any fees associated with a Federal PLUS loan?
The Federal Direct Loan Program (FDLP) charges a 4% origination fee for all new Federal PLUS loans created after 7/1/ 2010. The fee is added to the loan repayment amount and is not required immediately upon signing a Master Promissory Note (MPN).
To qualify for a Federal PLUS loan, your parent must apply and pass a credit check. However, if your parent is unable to qualify, they may be able to receive a loan if a friend or relative who passes the credit check cosigns for the loan. This means the friend or relative agrees to repay the loan if the parent is unable or fails to do so. Graduate students may apply on their own with approval passed on a satisfactory credit score.
How do I apply for the Federal PLUS loan?
A parent or graduate student must submit a completed PLUS application to the school’s financial aid office. It is required that you have at least an average credit score and a non-delinquent history.
The FAFSA (Free Application for Federal Student Aid) form is not required to apply for the Federal PLUS student loan, however, many schools will require you to complete the FAFSA to process your other financial aid options, to determine the Federal PLUS loan amount.
Too apply for the loan, check with your school's financial aid off. You maybe able to complete the application online at www.studentloans.gov.