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Parents of dependent undergraduate students can apply for Federal Parent Loans for Undergraduate Students (PLUS Loans) if they have good credit history. The student must be enrolled at least half-time in a participating institution.
There are two types of PLUS Loan: the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. FFEL funds come from a lender, bank or credit union, and the applicant chooses his or her own lender. Direct Loan funds come from the federal government. Parents can apply for either loan, but not both, per enrollment period for any given student. Parents can obtain an application form and promissory note through the school's financial aid office (for Direct PLUS Loans) or from the lender and state guaranty agency (for FFEL PLUS Loans). The money is disbursed to the school and is to be used for tuition, fees, room and board and other related charges. The remainder can be credited to the student's account or refunded to either the student or the parent.
PLUS Loans offer an advantage to parents over other kinds of loans because of their low interest rates, grace period, government subsidization and flexible payment options. Interest rates for 2005-06 were 6.10%, and are adjusted annually on July 1. They are capped at 9.00%. Interest begins accruing when the first disbursement is made; parents begin paying principal and interest 60 days after the loan is fully disbursed, even if the student is still in school. Repayment usually takes 10-30 years, depending on the plan.
The amount of the award is equal to the cost of attendance minus all other financial aid received. A fee of up to 4% of the amount of the loan is charged, deducted proportionally when each disbursement is made.
More information about PLUS Loans can be found on the Federal Student Aid web site.
Last updated: April 26, 2006.
