PLUS Loans

If you're a dependent student and your parent or guardian would like to help you pay for your undergraduate education, you should investigate the Federal PLUS Loan Program. This loan can be used in addition to Stafford and Perkins Loans. Either your parent or guardian can apply for this loan through the Federal Family Education Loan (FFEL) or the William D. Ford Federal Direct Loan (Direct Loan) program, depending on the program in which program your school participates.

Getting the PLUS Loan
Your parents must pass a credit check in order to qualify for a PLUS Loan. If they don't pass the credit check, they can still receive the loan if a friend or relative with acceptable credit agrees to endorse the loan. The endorser acts as a co-borrower and he or she must agree to repay the loan if your parents fail to do so. It is also possible for parents to receive a loan if they do not pass the credit check, but can prove that extenuating circumstances exist.

PLUS Loan Numbers
Your parents can receive a PLUS Loan in the amount of your undergraduate tuition minus other financial aid you receive. The interest rate on PLUS Loans is fixed for the life of the loan. As of July 1, 2006, this amount is 7.90% for Direct PLUS Loans and 8.50% for FFEL PLUS Loans. Repayment begins approximately sixty days after the loan disbursement and is the responsibility of the parent or guardian who took out the loan.

If your parents take out a FFEL Loan, they repay the money to a bank or other financial institution. With a Direct PLUS Loan, they repay to the U.S. Department of Education's Direct Loan Servicing Center. Failure to repay the PLUS Loan can negatively affect your parents' credit.

If it proves a temporary financial hardship for your parents to repay their PLUS loan, they could apply for a deferment or forbearance. Because the loans are unsubsidized, however, interest continues to accrue. There are very few circumstances under which your parents' can discharge their obligation to pay the loan.