Direct PLUS loans are meant to help your parents cover the costs of your
undergraduate school expenses. Your parents do not have to prove financial
need, but the loans are unsubsidized - this means that the interest accumulates
while you are in school.
They are loans your parents can take out to pay for your education expenses
- you must be their financial dependent and enrolled at least half time. Also,
your parents must pass a credit check. PLUS loans come directly from the
U.S. Department of Education under the Direct Loan Program.
How much can my parents borrow?
The yearly limit on a PLUS Loan is equal to your cost of attending school,
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 $2,000.
How do my parents apply?
For a Direct PLUS Loan, your parents must complete a Direct PLUS Loan application
and a promissory note. A promissory note is a legal document listing the terms
and conditions of the loan. The application and note are in a single form
you can get from your school's financial aid office.
Although it's not a requirement, parents are encouraged to have their dependent
children file a Free Application for Federal Student Aid (FAFSA). This will
ensure that you can receive the maximum student aid you're eligible for.
Are there any borrowing requirements my parents have to meet?
Yes, generally they have to pass a credit check. This is a review of their
credit history to determine if they are likely to be able to pay back the
If they don't pass, they might still be able to receive a loan with the
help of a relative or friend who can pass the credit check. This person must
agree to endorse the loan and promise to repay it if your parents don't.
If your parents don't qualify for a loan because they didn't pass the credit
check, they may qualify if they can demonstrate that extenuating (difficult
and unusual) circumstances exist.
For your parents to borrow money for you, you must meet the general eligibility
requirements for federal student aid. Your parents must also meet some of
these general requirements. For example, they must meet citizenship requirements
or be eligible non-citizens. They may not be in default or owe a refund to
any FSA program.
Do they need to find a lender?
No. Their lender will be the U.S. Department of Education.
Can the school refuse the loan application?
Your school can refuse to certify your parents' loan application, or they
can approve a loan for a smaller amount than your parents are eligible for.
The school must document the reason for its decision and explain the reason
to your parents in writing. The school's decision is final and cannot be appealed
with the U.S. Department of Education.
Do my parents get the money or do I?
The U.S. Department of Education will send the loan funds to your school.
The school will use the loan money first to pay your tuition, fees, room
and board, and any other schools charges. If any loan funds remain, your school
will give them to you for other education expenses.
In most cases, the loan will be disbursed in at least two installments.
(Disbursement is the release of loan funds to the school for delivery to the
In other words, your school will receive at least two payments. No single
payment will be more than half the loan amount.
What's the interest rate on PLUS Loans?
The interest rate is 6.84 percent for Direct PLUS Loans first dispursed
between July 1, 2015 and before July 1, 2016. These are fixed interest rates
for the life of the loan.
Other than interest, is there a charge to get a PLUS Loan?
For Direct PLUS Loans first disbursed on or after October 1, 2014 and before
October 1, 2015, the loan fee is 4.292%. For Direct PLUS Loans first disbursed
on or after October 1, 2015 and before October 1, 2016, the loan fee is 4.272%.
How do my parents pay back the loan?
When your parents first receive the loan, there will be a loan servicer
listed on the disclosure statement. They will make their payments through
this loan servicer.
The Federal Student Aid website has a Repayment Estimator which can help
you and your parents make plans for repayment: https://studentaid.ed.gov/repay-loans/understand/plans.
Are there any tax credits available for paying back these loans?
Yes, there are tax incentives for certain higher education expenses. For
certain borrowers, student loan interest can be deducted. This benefit applies
to federal and non-federal loans taken out to pay for post-secondary education
costs. The maximum deduction is $2,500 a year.
You can find out more about these credits and other tax benefits through
the Internal Revenue Service (IRS) :
IRS Publication 970
-- Tax Benefits for Education