When To Apply For A PLUS Loan?

Answer 1

Paying for higher education gets more and more costly each day. Many of the programs that used to be very helpful for funding college such as the Pell Grant and other state funded grants have been reduced drastically due to budget cuts. While students can qualify for their own student loans, this sometimes may not be enough to cover the total costs. In these situations, parents have the ability to apply for a Parent PLUS loan. Parents can borrow up to the total outstanding balance for their child's education costs through a program that is much the same as the Federal Stafford Student Loans.

Unlike many financial assistance programs, PLUS loans are not based on need. When the parent applies for a PLUS loan, they undergo a credit check as if they were applying for a regular personal loan. If the parent's credit does not qualify for them to receive a PLUS loan, the student then has the ability to borrow a slightly higher amount to cover educational expenses including tuition, room and board and other expenses such as books and class supplies.

One advantage to obtaining a Parent PLUS loan rather than a regular personal loan is that the PLUS loans are financed at a fixed interest rate. While the rate has the ability to vary over time, it is a fixed rate that you apply for, which means during the term of your loan it will not change. The noticeable difference between a PLUS loan and a student loan is the repayment period. PLUS loans begin requiring repayment as soon as the payment to the school is issued whereas student loans do not come due until six months after the student has either graduated, left school or has dropped below half time enrollment.

It is important to remember that while the parent is borrowing on behalf of the student and based upon the total tuition and expenses of the student, the loan is the parent's responsibility to repay, not the students. With a student loan, the responsibility rests with the student however.