Repaying PLUS Loans

The Federal PLUS Loan allows parents to borrow money to pay for their children's education. If your family obtained a Federal PLUS loan for your education, it's important to understand how loan repayment fits into your family's financial plan.

Information for Parents
Unlike some other student loans, the Federal PLUS Loan doesn't include a grace period, and parents are expected to start making payments on the principle and interest within 60 days of loan disbursal. Since there is no grace period, the enrollment status of the student doesn't affect loan repayment. The loan must be repaid even if the student does not complete their educational program. If the Federal PLUS Loan papers were signed after July 1, 2006, the interest rate is fixed at 7.94%. The interest rate for loans taken out before that date cannot exceed 9%, and variable interest rates are adjusted annually.

The Federal PLUS Loan comes with several repayment options for parents. In addition to the standard repayment plan, parents can choose from graduated payments, which increase steadily over time, and extended plans, which allow up to thirty years to repay the loan. Federal PLUS Loans do not have an option for income-based repayment plans. Forbearance and deferment plans may be available, but the Federal PLUS Loan is unsubsidized, and interest payments must be made even if a deferment or forbearance request is granted.

Failure to make payments on the Federal PLUS Loan will affect the parent's credit. To avoid monetary disputes, students and their parents should talk about who will be repaying the Federal PLUS Loan.

For Students
If your parents have taken out a Federal PLUS loan for your education, you might consider helping them with a repayment plan. When you graduate, you should create a reasonable budget, and if applicable, include monthly payments on the principle and interest of the Federal PLUS Loan. By working together on a repayment schedule, you can help take over some of the costs of your educational loans.

Your family likely has other debts in addition to the Federal PLUS Loan. When considering repayment, parents should focus on paying off high interest debts first, prioritizing the mortgage, car, credit card, and personal loan payments accordingly. It may be possible to consolidate debt through mortgage refinancing if your family owns their own home.