A Parent PLUS loan is a federal loan program where funds are provided by a lender to a credit worthy parent for the benefit of an undergraduate dependent student. This means in turn that the parent borrower is considered the primary borrower of the loan and is the one who is legally responsible for the loan and its repayment. While the parent is the legal party held accountable, some parents pass the responsibility of paying the loan back onto the respective student after College. Be advised if you are a parent and decide to do this, it is an informal arrangement and has no legal precedent. You are still the liable party and should monitor the student to ensure they are making their monthly payments to protect your credit.
A Non-Need Based Option
A Federal Parent PLUS loan is a non need-based option that can be used toward all or part of your college education. Non need-based means loan amounts are not limited based on your financial need, so you can borrow up to the cost of education minus any other financial aid you have received. For example, if you are a student attending a college whose yearly cost of education is $21,500, and you are receiving a total of $12,500 in aid in the form of other loans, grants, or scholarships, you would be eligible for a PLUS loan in the amount of $9,000 (Cost $21,500 minus other aid $12,500 = $9,000).
Guaranteed by the Federal Government
Federal Parent PLUS loans are fully guaranteed and insured by the federal government, but can currently either be given out by independent lenders (Federal Parent PLUS) or directly by the federal government (Federal Direct PLUS). Whether or not you use an independent lender or the direct loan program depends on which program the school participates in.
Other PLUS Loan Facts
Some other specifics of the PLUS loan program are:
1.) A fixed interest rate between 7.9% and 8.5%.
2.) Origination and insurance fees are generally low and usually range from 2.5% to 4%.
3.) There is deferment and forbearance options available if payment were to need suspended.
4.) Different repayment plans are available,
5.) A credit check is required however there is no debt to income ratio requirement.
PLUS Loan Denials
One last thing to remember is that in the event the parent of a dependent student is denied a PLUS loan by the lender, the dependent student then becomes eligible for additional unsubsidized Stafford or Direct Loan funding. These amounts are $4,000 additional for freshmen and sophomores and $5,000 additional for juniors and seniors. So if a parent thinks they will not qualify for a PLUS loan, it is still in the interest of the student for the parent to still apply for the loan so they can get those additional Stafford or Direct unsubsidized funds. Contact your financial aid office for additional details on this subject.
 | With so many types of financial aid for college, finding the right financial aid package for your needs can be an intimidating process. If you're a current or prospective college student, learn about financial aid and how to seek out financial aid for college before you settle on using government and private loans to fund your education. |
 | If you're a college student looking for financial aid, your first stop is filling out a financial aid application. Financial aid applications gather information to determine whether you're eligible for need-based financial aid. |
Going to college is a major financial commitment. Luckily, financial aid can help you cover the cost of getting your degree. Read on for tips on how to read your financial aid award letter so that you can make the best decision for your financial and educational future. |
If you need to get more student financial aid from your school, consider these options. |
When you apply for federal financial aid, it's important to make sure you fill out your financial aid forms completely and accurately. Even the smallest mistake could result in the financial aid staff dismissing a college student's request for aid or reducing the amount of money to which you are entitled. |
