PLUS
Loan Information:
Can my parents get both a Direct PLUS
Loan and a FFEL PLUS Loan for me?
They can apply for either a Direct PLUS Loan or
a FFEL PLUS Loan, but not for both for you during
the same enrollment period. Your parents could,
however, apply for a Direct PLUS Loan for you
and a FFEL PLUS Loan for one of your siblings,
for example.
How do my parents apply?
For a Direct PLUS Loan, your parents must complete
a Direct PLUS Loan application and promissory
note, contained in a single form that you get
from your school’s financial aid office.
For a FFEL PLUS Loan, your parents must complete
and submit a PLUS Loan application, available
from your school, lender, or yourstate guaranty
agency. After the school completes its portion
of the application, it must be sent to a lender
for evaluation.
Although it’s not a requirement, parents
are encouraged to have their dependent children
file a FAFSA, so their children can receive the
maximum student aid they’re eligible for.
Are there any borrowing requirements
my parents have to meet?
Yes, generally they have to pass a credit check.
If they don’t pass, they might still be
able to receive a loan if someone, such as a relative
or friend who can pass the credit check, agrees
to endorse the loan and promises to repay it if
your parents don’t. Your parents might also
qualify for a loan if they don’t pass the
credit check if they can demonstrate that extenuating
circumstances exist. For them to borrow for you,
you must meet the general eligibility requirements
for federal student aid, and your parents must
also meet some of these general requirements.
For example, they must meet citizenship requirements
or be eligible noncitizens and may not be in
default or owe a refund to any FSA program.
Do they need to find a lender?
Not if they borrow under the Direct Loan Program,
because their lender will be the U.S. Department
of Education. Your school assists the federal
government in administering the Direct Loan Program
by distributing the loan application, processing
the loan, and disbursing the loan funds.
Under the FFEL Program, your parents will need
to find a participating lender. For help, they
should contact your school or the guaranty agency
that serves your state. For your state agency’s
address and telephone number, and for more information
about borrowing, your parents can contact the
Federal Student Aid Information Center at the
address or toll-free number listed on the web
page.
NOTE: Your school can refuse to certify your parents’
loan application, or can certify a loan for an
amount less than they would otherwise be eligible
for, if the school documents the reason for its
action and explains the reason to your parents
in writing. The school’s decision is final
and cannot be appealed to the U.S. Department
of Education.
How much can my parents borrow?
The yearly limit on a PLUS Loan is equal to your
cost of attendance minus any other financial
aid you receive. For example, if your cost of
attendance is $6,000 and you receive $4,000 in
other financial aid, your parents could borrow
up to—but no more than—$2,000.
Do they get the money or do I?
Either the U.S. Department of Education (for a
Direct PLUS Loan) or your parents’ lender
(for a FFEL PLUS Loan) will send the loan funds
to your school. Your school might require your
parents to endorse a disbursement check and send
it back to the school. In most cases, the loan
will be disbursed in at least two installments,
and no installment will be greater than half the
loan amount. The funds will first be applied to
your tuition, fees, room and board, and other
school charges. If any loan funds remain, your
parents will receive the amount as a check or
in cash, unless they authorize the amount to be
released to you or to be put into your school
account. Any remaining loan funds must be used
for your education expenses.
Can my parents cancel the loan if they
change their minds, even if they’ve signed
the promissory note agreeing to the loan’s
terms?
Yes. Your school must notify your parents in writing
whenever it credits your account with PLUS Loan
funds. This notification must be sent to your
parents no earlier than 30 days before, and no
later than 30 days after, the school credits your
account. Your parents may cancel all or a portion
of their loan if they inform your school within
14 days after the date your school sends this
notice, or by the first day of the payment period,
whichever is later. (Your school can tell you
the first day of your payment period.) If your
parents receive PLUS Loan funds directly by check,
they may refuse the funds by not endorsing the
check.
What’s the interest rate on PLUS
Loans?
The interest rate could change each year of repayment
but does not exceed 9 percent. For July 1, 2002
to June 30, 2003, the interest rate for PLUS Loans
in repayment was 4.86 percent. Interest rates
are adjusted each year on July 1. Your parents
will be notified of interest rate changes throughout
the life of their loan. Interest is charged on
the loan from the date the first disbursement
is made until the loan is paid in full.
Congress changed the interest rate calculation
for PLUS loans made on or after July 1, 1998.
If your parents had PLUS loans first disbursed
before that date, the interest rate might be different.
For interest rates on a FFEL Stafford Loan, your
parents should check with their lender. For interest
rates on a Direct Stafford Loan, they should check
with the Direct Loan Servicing Center.
Other than interest, is there a charge
to get a PLUS Loan?
Your parents will pay a fee of up to 4 percent
of the loan, deducted proportionately each time
a loan disbursement is made. For a FFEL PLUS Loan,
a portion of this fee goes to the federal government,
and a portion goes to the guaranty agency to
help reduce the cost of the loans. For a Direct
PLUS Loan, the entire fee goes to the government
to help reduce the cost of the loans. Also, if
your parents don’t make their loan payments
when scheduled, your parents may be charged collection
costs and late fees.
When do my parents begin repaying a PLUS
Loan?
Generally, repayment must begin within 60 days
after the final loan disbursement for the period
of enrollment for which you borrowed. There is
no grace period for these loans. This means interest
begins to accumulate at the time the first disbursement
is made. Your parents must begin repaying both
principal and interest while you’re in school.
How do my parents pay back the loan?
For Direct PLUS Loans, your parents can choose
the Standard, Extended, or Graduated Repayment
Plan (see web page). The Income Contingent Repayment
Plan is not an option for Direct PLUS borrowers.
A Direct PLUS Loan can also be consolidated. (See
below for more information on loan consolidation.)
For FFEL PLUS Loans, parents can usually choose
the Standard, Extended, Graduated, or Income Sensitive
Plan (see web page). FFEL PLUS Loans can also
be consolidated.
Are there any tax credits available for
paying back these loans?
Yes, there are tax incentives for certain higher
education expenses, including a deduction for
student loan interest for certain borrowers. This
benefit applies to federal and nonfederal loans
taken out to pay for postsecondary education costs.
The maximum deduction is $2,500 a year. IRS Publication
970, Tax Benefits for Higher Education, explains
these credits and other tax benefits. You can
find out more by calling the IRS at 1-800-829-1040.
TTY callers can call 1-800-829-4059.
Is it ever possible to postpone repayment
of a PLUS Loan?
Yes, under certain circumstances, your parents
can receive a deferment or forbearance on their
loan, as long as the loan isn’t in default.
Deferment and forbearance are explained, by clicking
here. Generally, the conditions for eligibility
and procedures for requesting a deferment or forbearance
that apply to Stafford Loans also apply to PLUS
Loans. However, since all PLUS Loans are unsubsidized,
your parents will be charged interest during periods
of deferment or forbearance. If they don’t
pay the interest as it accrues, it will be capitalized.
Can a PLUS Loan be discharged (canceled)?
Yes, under certain conditions. A discharge releases
your parents from all obligation to repay the
loan. (Click here for a complete listing of cancellation
provisions.)
Your parents’ PLUS Loan can’t be
canceled because you didn’t complete your
program of study at your school (unless you couldn’t
complete the program for a valid reason—because
the school closed, for example), you didn’t
like the school or the program of study, or you
didn’t obtain employment after completing
the program of study.
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