Parent Loan for Undergraduate Students (PLUS): A Complete Guide
Let's dive in to know about Parent Loan for Undergraduate Students
The Federal Direct Parent Loan for Undergraduate Students, also referred to as PLUS, allows parents to borrow for their minor undergrad students. These loans are based not on need but on credit. However, the maximum amount of lending does not exceed the difference between the cost of attendance calculated by the school and the assistance earned, including scholarships and other financial aid. This federal student loan option is available to parents whose children are enrolled in an eligible program for at least half-time. Although this form of loan is a beneficial financial instrument for many parents, it is not necessarily the best choice for everyone.
To be acceptable for a parent plus loan, one should—
Be the biological or adoptive parent (or stepparent in some cases) of a dependent undergraduate student who is enrolled in a qualifying school for at least half the time;
Do not have an unfavorable credit history; and
Comply with the general federal student assistance eligibility criteria.
The Current Rate of Interest
The interest rate is 5.30% for Direct PLUS loans first disbursed on or after July 1, 2020, and before July 1, 2021. This is a fixed interest rate for the loan’s duration.
Permissible Amount to Borrow
The maximum PLUS loan sum that can be borrowed is the cost of attending the school that the child will attend, minus any other financial aid that the child gets. The school determines the cost of attendance.
The parent borrower must file an electronic application for the loan and electronically sign a master promissory note. The borrower may have options to delay repayment during the application process when the student is attending school, decide if the loan funds will cover non-tuition fees, determine whether any credit balance is refunded, and specify the loan amount to be lent.
Relevant information is given regarding the application process.
The borrower would need to return to the Direct Loans website to borrow more than what was approved on the original application and complete a new application listing the total amount of the loan requested.
When completing the electronic application and master promissory note, a credit check is performed. If the credit check is refused, options will be given to complete the Parent Loan process.
The PLUS loan repayment starts 60 days after completely disbursing the full sum lent for the school year. However, when the student is attending at least half-time and up to 6 months after they cease to be enrolled on at least a half-time basis, the parent may request that the payment be deferred. Please heed that interest continues to accrue during periods of deferral. Instead of capitalizing interest, it is best to make quarterly interest payments to keep the total loan debt down.
Loans lent from the Federal Direct Loan Programs are directly borrowed from the federal government. The Direct Loan Servicer processes repayment arrangements (a servicer contracted by the federal government)
Parent PLUS borrowers are qualified for the following repayment plans:
Standard Repayment Plan
Graduated Repayment Plan
Extended Repayment Plan
The borrower can cancel all or part of the loan at any time before the loan money is disbursed by notifying the child’s school. If the loan is paid within specific time frames, parents can cancel all or part of the loan.
The borrower may be entitled to have all or part of the loan forgiven (canceled) or discharged under certain circumstances.