Federal Direct PLUS Loans for Parents
As the parent of a dependent undergraduate student, you may be eligible for the Federal Direct Parent PLUS Loan if you meet the requirements set forth by the Department of Education, including
- Your student qualifies as your dependent
- You and your student are U.S. citizens, national permanent resident aliens or eligible non-citizens of another type
- Your student is accepted or enrolled (at least half-time) in an undergraduate program leading to a degree, certificate or diploma
- Your student maintains satisfactory academic progress
A Direct PLUS Loan is guaranteed by the federal government. Eligible parents may borrow an amount equal to the cost of education less other aid. This includes tuition, fees, room, board, standard allowances for books, transportation, living expenses and the 4 percent origination fee. Thus, the combination of aid received and the Direct PLUS Loan can cover the full cost of attendance at Point Park.
Federal Direct PLUS Loans for Graduate Students
Full-time graduate student are eligible to borrow additional living allowance funds if needed from the Federal Direct PLUS loan program. The application process is the same as for parents of dependent students. Graduate students are required to complete PLUS entrance counseling in addition to the Master Promissory Note.
When to Apply for a Direct PLUS Loan
Parents and graduate students should complete the credit check and Master Promissory Note of the Federal Plus Loan approximately 30 - 60 days before the start of the semester. The credit check for the Plus Loan does expire after 90 days and a new credit check may result in a loan denial when funds are requested.
How to Apply for a Direct PLUS Loan
Log onto www.studentloans.gov and complete a request for a Direct PLUS Loan. This application will initiate a credit check. If the loan is approved, you will complete an electronic Master Promissory Note, also at www.studentloans.gov.You will need your Federal Student Aid PIN to sign the promissory note. If you have forgotten your Federal Student Aid PIN, you can go to www.pin.ed.gov to retrieve it.
If a Federal Direct PLUS loan is denied, the borrower has the opportunity to work with the Department of Education to resolve credit issues or reapply with an endorser. The parent also can choose for the student to receive additional Federal Direct unsubsidized loan funds.
A typical Direct PLUS Loan is disbursed in two installments, usually in September and late January. Parents need to authorize a separate credit check each academic year. The first payment typically starts in March, 60 days after the January disbursement. The Direct PLUS Loan is generally repaid over a 10-year term.
The Department of Education offers a forbearance option, which allows you to temporarily stop making a payment, make smaller payments, or extend the time for making payments on your loan due to temporary financial hardship. Forbearance can be granted for no more than 12 months at a time. Therefore, if you wish to extend the forbearance, you must submit a new request each year for a maximum of three academic years. While you are on forbearance your interest accrues and you are responsible for repaying it. If you do not pay the interest as it accrues, it will be capitalized, increasing the amount you will have to repay. You can get more information by reviewing your copy of the Borrower's Rights and Responsibilities Statement or contacting your loan servicer.
Federal Direct Parent PLUS Loans vs. Alternative or Private Loans
Many families are considering financing their children's education with either Federal Parent PLUS Loans or private student loans. The comparison chart below will help you understand the features and benefits of each type of loan.
|PLUS Loan for Parents||School-Certified Private Student Loan|
|Whose name is on the loan?||Parent||Student and cosigner|
|Cosigner requirement||No. If parent has adverse credit history an endorser may be required.||No, but if you're a student with little or no credit history, it may be difficult for you to qualify for a loan without a credit-worthy cosigner. Having a cosigner may also help a borrower qualify and obtain a better rate.|
|Cosigner/parent release option||No. The parent, and any endorser, is making a commitment to repay the loan for the life of the loan.||Yes. Many lenders provide a cosigner release option where the student can apply to release the cosigner after he or she graduates, makes a specified number of on-time payments and meets underwriting requirements.|
7.21% for academic year 2014-15 loans.
Note: AY 2015-16 rates will be announced on or after June 1, 2015.
|Many lenders offer both variable and fixed interest rates. Rates range from 2.25% to 10.42% for variable and 4.75% to 12.99% for fixed. Rates are typically based on the borrower and cosigner's credit history so those with good credit may qualify for a lower rate.|
|Origination/disbursement fees||4.292%||Varies by lender — most offer 0%.|
|Borrower benefits||0.25 percentage point interest rate reduction for automatic debit enrollment.||Most lenders offer a 0.25 percentage point interest rate reduction for automatic debit enrollment. Additional benefits vary by lender (e.g., graduation rewards).|
|Repayment period||10-25 years||Varies by lender; typically 5-15 year terms are offered.|
|Loan limits||Up to 100% of the cost of attendance minus other financial aid received.||Generally, up to 100% of the cost of attendance minus financial aid received. Lenders may impose limits based on various factors, and can have different loan limits for different loan programs.|
|Credit check required||Yes. Applicant or endorser cannot have an adverse credit history.||Yes. Loan approval and pricing is generally based on creditworthiness.|
|Minimum enrollment status||At least half time.||Varies by lender. Some offer loans to borrowers who are attending school less than half time.|
|Application process||Online through the Department of Education.||Online with a lender.|
|Free Application for Federal Student Aid (FAFSA) required||Yes. In addition to the FAFSA, some states/colleges require additional forms or applications for aid.||No. Families are not required to complete the FAFSA unless it is the policy of the school.|
|Minimum payment amount while the student is enrolled in school||PLUS loan payments can be deferred while the student is in school and for six months after graduation (interest continues to accrue and is added to the loan's principal).||Varies by lender. Many lenders allow private loan payments to be deferred while in school (interest accrues during this time). Many lenders offer options to make interest payments while in school.|
|Death and disability loan forgiveness||Yes. If the primary borrower or student beneficiary dies, or if the primary borrower becomes permanently and totally disabled, then the payments on the loan will be waived if certain conditions are met.||Varies by lender. Some lenders waive the remaining balance in the event of the primary borrower's death or permanent and total disability.|
|Ability to consolidate through the Department of Education||Yes. Parents can consolidate with other federal loans in their name (not the student's).||No. Cannot be included with federal student loans.|
|Options for denied loans||If parent applies and is denied, the student is eligible for additional unsubsidized Stafford loans.||Student could re-apply with a different cosigner if the cosigner was denied, or apply with another private lender.|
|Repayment plans||PLUS loans are eligible for graduated and extended repayment options.||Most lenders have programs available to assist troubled borrowers, but they are discretionary and not part of the loan agreement.|
|Interest tax deductible||The parent may be able to use the interest paid on the loan for a tax deduction, subject to IRS guidelines.||The student may be able to use the interest paid on the loan for a tax deduction, subject to IRS guidelines. Restrictions apply to loans for less-than-half-time enrollment.|