Federal PLUS Loans R-A-F: Requirements, Application, and Follow-Through
Written by Dongmiao Cui   

This article is ideal for parents who need to finance their children’s education and for graduate students.
 
Federal PLUS Loans are a type of federal loan offered to the parents of students to fund their post-secondary education. Since July 1, 2006 graduate and professional students are also eligible for PLUS loans. 
 
 
Requirements & Eligibility

A parent must apply and pass a credit check. If unqualified, they may still be able to receive a loan if a relative or friend who passes the credit check and agree to endorse the loan. 

Graduate students can apply on their own and their eligibility will be based on the credit score. 
 
Interest Rate
The interest rate for the 2009-2010 academic year is fixed at 8.5%. The interest rate may change every July but it will never be more than 9%.
 
In addition to interest, parents must pay a 3% origination fee and a 1% federal default fee. 

Borrowing limits
The limit of the PLUS loan equals the total cost of attendance minus other financial aid your child receives.  For example, if it costs $5,000 for your child to attend school and your child receives $ 2,000 financial aid, you would be able to borrow PLUS loan for up to $ 3,000.
 
 
Applying for a Federal PLUS Loan

The parent or graduate student needs to fill out PLUS Application and submit to the financial aid office at school. You do not need to fill out the FAFSA.


Following Through - Repayment Options

Unlike Stafford Loans, your Federal PLUS Loans repayments can begin while you are still a student.  A quick summary list for your repayment:
  • The lender will set repayment schedules. 
  • You can repay for up to 10 years. 
  • The minimum monthly payment is $50. 
  • Repayment of principal and interest begins 60 days after the loan is fully disbursed. 
  • Graduate students can defer payment during enrollment at least for half time in school. 
Consolidation
Federal PLUS Loans qualify for consolidation.  You should always consider consolidating PLUS loan as it can reduce monthly payments and lock in low interest rates. 

Cancellation
All or part of your PLUS loan may be cancelled if you qualify any of the following (source: ParentPlusLoan.com):
  • The school closed within 90 days of your child's enrollment and they were unable to finish their program of study.
  • The school did not properly qualify your child's status before they began studies.
  • Your signature was forged.
  • The school did not properly evaluate your child's ability to benefit from the coursework before beginning studies.
  • You become totally and permanently disabled.
  • If you or the dependent for whom the loan was borrowed, dies.
  • Your loan is discharged due to bankruptcy. (Typically, student loans cannot be discharged in a bankruptcy.) Consult your legal counsel regarding your particular situation.
Invalid Reasons
Your loan cannot be discharged solely because you believe that the school your child attended did at least one of the following:
  • Provided poor training, had unqualified instructors, or inadequate equipment
  • Did not provide job placement or other services that it promised; or
  • Engaged in fraudulent activities (other than falsely certifying the loan).
If you believe you are eligible for loan forgiveness, contact the holder of your loan.
 
Additionally, if you work full-time in certain child care facilities that serve low-income families, you may qualify for the Childcare Provider Forgiveness Program that allows up to 100% of the student loan forgiven.
 
Tips: As a parent, you may try to manage your total loan payments including mortgages, cars, credit cards and education, etc, not more than 35% of your gross monthly income. Paying more than 40% of your income in some private loan programs may turn down your application.
 


 
Last Updated on Thursday, 16 December 2010 21:03