What are Parent PLUS Loans?

 

The Federal Parent Loan for Undergraduate Students (PLUS) is available through the Federal Family Education Loan Program (FFELP) to help you pay for the education of dependent children.

 

A dependent child is defined as one who:

• was born on or after January 1, 1986;

• will not be working on a degree beyond a bachelor's degree during the school year;

• is not married;

• does not have children or dependents who receive more than half of their support from him/her, now and through June 30, 2009;

• is not an orphan or ward of the court or was not a ward of the court until age 18;

• is not a veteran of the U.S. Armed Forces

Advantages are:

• Option to defer payment until student graduates or drops below half time.

• A cost-effective alternative to depleting savings or retirement accounts, using current income or borrowing against home equity.

• The fixed interest rate is 8.5%.

• There is no prepayment penalty.

• The credit criteria are generally more lenient than for private loans.

• In cases of economic hardship, repayment may be deferred for up to three years.

• In the event of permanent disability or death of the borrower or student, your loan will be forgiven.

Eligibility

 

Only one credit worthy parent is able to apply for a loan each academic year for their dependent undergraduate student.  Credit worthy parent is defined as natural, adoptive or step-parent.  The student must be enrolled in school at least half-time and must maintain Satisfactory Academic Progress. The Office of Financial Aid determines the amount of PLUS Loan eligibility in accordance with federal requirements.

 

Eligibility for the PLUS loan depends on a modest credit check that determines if the parent has what is termed an “adverse credit history.” An “adverse credit history” is defined as being more than 90 days late on any debt or having any Title IV debt within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off.

 

As ofJuly 1, 2008, new federal legislation allows parents to choose to defer payments on a PLUS loan until six months after the date the student ceases to be enrolled at least half time. Accruing interest could either be paid by the parent borrower monthly or quarterly, or be capitalized quarterly. In addition Special Provision for Parents Delinquent on Mortgage Payments have been made that will allow lenders to consider parents eligible for PLUS loans even if, during the period January 1, 2007, through December 31, 2009, the parents are or were:

• No more than 180 days delinquent on a mortgage payment on primary residence

• No more than 180 days delinquent on any medical bill payments

• No more than 89 days delinquency on the repayment of "any other debt"

 

How Much Can Be Borrowed?

 

Parents may borrow up to their student's total cost of attendance less other financial aid received such as grants and scholarships. On the student’s financial aid award package this is listed as an “estimated PLUS Loan,” which will show you how much could potentially be applied for to be borrowed. The total cost of attendance is determined by the Office of Financial Aid based on an average cost for tuition, books, room and board, travel, and miscellaneous expenses for the academic year. It is important that each family fully understand how a PLUS Loan will impact them financially. Most financial experts advise that one should not incur debt (excluding mortgage debt) that results in total monthly payments (debt-to-income ratio) exceeding 20% of your monthly gross income.

 

Interest Rates

 

The interest rate is fixed at 8.5%. 

 

Loan Fees

 

Parents are required to pay fees of up to 4% of the principal of the loan. These include an origination fee of 3%, charged by the federal government, plus a federal default fee of up to 1%, charged by the guarantee agencies. These fees are deducted from the principal at each disbursement. 

Example:

Currently, the federal default fee of 1% is being paid on behalf of the borrower by some lender partners.  Please refer to our lender partner comparison chart for this information. 

 

How do my parents process a PLUS application?

 

1. If eligible, a student will be awarded an Estimated PLUS amount on their Financial Aid Award Notification. A FAFSA must be filed to establish eligibility.  

2. Parent borrowers who wish to utilize the PLUS program should have their student accept the estimated PLUS Loan on the Award Notification indicating the amount desired.  

3. The lender with whom the parent applies will conduct a pre-approval credit investigation and notify the parent as to approval or denial. If the loan is denied, the Office of Financial Aid will contact the parent about other borrowing options.

4. If approved by a lender for a PLUS Loan, the lender will send the parent a school-certified PLUS Loan master promissory note. (This contract can be valid for up to 10 years as long as the parent borrows every 12 months). Parents should review the master promissory note for accuracy, sign it, and return it to the lender.  

5. Loan proceeds will be sent directly to the University. The disbursement will reflect the amount of the loan less origination fees (3 %) and guarantee fee (up to 1%), if applicable to the lender selected. The proceeds will be applied to the students account to clear any balances. Remaining funds will be direct deposited or mailed directly to the parent borrower in the form of a paper check.

Click here for online Parent PLUS Application