In the United States, federal PLUS loans are a type of student loan available to parents of dependent undergraduate students to help cover the cost of their child's education.
Federal PLUS loans are available to parents of undergraduate students who are enrolled at least half-time in a college or university that participates in the federal student loan program. The loan amount is determined by the cost of attendance at the student's school, minus any other financial aid the student is receiving.
In this article, we will discuss the eligibility requirements for a federal PLUS loan, how to apply for a loan, and the terms and conditions of the loan.
federal plus loans for parents
Federal PLUS loans are available to parents of undergraduate students to help cover education costs.
- Available to parents of dependent undergraduates
- Loan amount based on cost of attendance
- Fixed interest rate
- Repayment begins 60 days after disbursement
- Standard repayment term is 10 years
- Deferment and forbearance options available
To apply for a federal PLUS loan, parents must complete the Free Application for Federal Student Aid (FAFSA) and undergo a credit check.
Available to parents of dependent undergraduates
Federal PLUS loans are available to parents of dependent undergraduate students who are enrolled at least half-time in a college or university that participates in the federal student loan program. A dependent undergraduate student is one who is:
- Under the age of 24
- Not married
- Not a legal guardian of a child or other dependent
- Enrolled in an undergraduate program at least half-time
To be eligible for a PLUS loan, the parent must also:
- Have a good credit history
- Not have any defaulted federal student loans
- Not have any outstanding balances on federal student grants
If the parent meets all of the eligibility requirements, they can apply for a PLUS loan by completing the Free Application for Federal Student Aid (FAFSA).
The amount of the PLUS loan is determined by the cost of attendance at the student's school, minus any other financial aid the student is receiving. The interest rate on PLUS loans is fixed and is set each year by the U.S. Department of Education.
PLUS loans must be repaid within 10 years, but parents can request deferment or forbearance if they are experiencing financial hardship.
Loan amount based on cost of attendance
The amount of a PLUS loan is determined by the cost of attendance at the student's school, minus any other financial aid the student is receiving. The cost of attendance includes:
- Tuition and fees
- Room and board
- Books and supplies
- Transportation
- Other expenses related to attending school
To determine the cost of attendance, the school will take into account the student's living situation, whether they are living on or off campus, and whether they are a resident or non-resident of the state where the school is located.
Once the cost of attendance has been determined, the school will subtract any other financial aid the student is receiving, such as scholarships, grants, and work-study, to determine the amount of the PLUS loan.
The maximum amount that a parent can borrow in a PLUS loan is the cost of attendance, minus any other financial aid the student is receiving. However, the parent may choose to borrow less than the maximum amount.
It is important to note that PLUS loans are not subsidized loans, which means that interest begins to accrue on the loan as soon as it is disbursed. Parents are responsible for paying the interest on the loan while the student is in school and during any periods of deferment or forbearance.
Parents who are considering taking out a PLUS loan should carefully consider the amount of debt they are taking on and their ability to repay the loan.
Fixed interest rate
Federal PLUS loans have a fixed interest rate, which means that the interest rate will not change over the life of the loan.
- Interest rate set each year by U.S. Department of Education
The interest rate on PLUS loans is set each year by the U.S. Department of Education. The interest rate for the 2023-2024 academic year is 7.54%.
- Interest begins to accrue as soon as loan is disbursed
Interest on a PLUS loan begins to accrue as soon as the loan is disbursed, which is when the money is sent to the school. Parents are responsible for paying the interest on the loan while the student is in school and during any periods of deferment or forbearance.
- Interest rate does not change over the life of the loan
The interest rate on a PLUS loan will not change over the life of the loan. This means that parents know exactly how much they will be paying in interest each month.
- Fixed interest rate can be a benefit or a disadvantage
A fixed interest rate can be a benefit or a disadvantage, depending on how interest rates change over time. If interest rates rise, a fixed interest rate loan will be a good deal. However, if interest rates fall, a fixed interest rate loan will be a bad deal.
Parents who are considering taking out a PLUS loan should carefully consider the interest rate and how it may affect their monthly payments.
Repayment begins 60 days after disbursement
Repayment of a PLUS loan begins 60 days after the loan is disbursed, which is when the money is sent to the school. Parents have a six-month grace period after the student graduates, leaves school, or drops below half-time enrollment before they are required to begin making payments.
Parents can choose to repay their PLUS loan in full or in monthly installments. The minimum monthly payment is $50, but parents can choose to pay more if they want to pay off the loan faster.
There are a number of different repayment plans available for PLUS loans, including:
- Standard repayment plan: This is the most common repayment plan. Under this plan, parents make fixed monthly payments for 10 years.
- Graduated repayment plan: Under this plan, parents make smaller monthly payments at first, and the payments gradually increase over time. This plan can be a good option for parents who have a limited budget.
- Extended repayment plan: This plan allows parents to extend the repayment period to up to 25 years. This can be a good option for parents who have a high amount of debt and need more time to repay the loan.
Parents who are having difficulty making their PLUS loan payments may be eligible for deferment or forbearance. Deferment allows parents to temporarily postpone making payments on their loan, while forbearance allows parents to temporarily reduce their monthly payments.
It is important for parents to carefully consider their repayment options before taking out a PLUS loan. Parents should make sure that they can afford the monthly payments and that they have a plan for repaying the loan in full.
Standard repayment term is 10 years
The standard repayment term for a PLUS loan is 10 years. This means that parents who choose the standard repayment plan will make 120 monthly payments.
- Fixed monthly payments: Under the standard repayment plan, parents make fixed monthly payments for the entire 10-year repayment period.
- Payments calculated based on loan amount and interest rate: The amount of the monthly payments is calculated based on the amount of the loan and the interest rate. The higher the loan amount and the higher the interest rate, the higher the monthly payments will be.
- Repayment period can be extended: Parents who are having difficulty making their monthly payments may be able to extend the repayment period to up to 25 years. However, this will increase the total amount of interest that parents will pay over the life of the loan.
- Pay off loan early without penalty: Parents can pay off their PLUS loan early without penalty. This can save parents money on interest and help them to become debt-free sooner.
Parents who are considering taking out a PLUS loan should carefully consider the monthly payments and the total amount of interest that they will pay over the life of the loan.
Deferment and forbearance options available
Parents who are having difficulty making their PLUS loan payments may be eligible for deferment or forbearance.
- Deferment: Deferment allows parents to temporarily postpone making payments on their PLUS loan. Interest will continue to accrue on the loan during deferment, but parents will not be required to make any payments.
- Forbearance: Forbearance allows parents to temporarily reduce their monthly payments on their PLUS loan. Interest will continue to accrue on the loan during forbearance, but parents will be required to make smaller payments.
There are a number of different deferment and forbearance options available, including:
- In-school deferment: This deferment is available to parents who are enrolled at least half-time in a college or university.
- Graduate fellowship deferment: This deferment is available to parents who are enrolled in a graduate fellowship program.
- Rehabilitation training deferment: This deferment is available to parents who are enrolled in a rehabilitation training program.
- Economic hardship deferment: This deferment is available to parents who are experiencing economic hardship.
- Military service deferment: This deferment is available to parents who are serving in the military.
- Postponement of repayment due to a natural disaster: This forbearance is available to parents who have been affected by a natural disaster.
- Administrative forbearance: This forbearance is available to parents who are experiencing a temporary financial hardship.
Parents who are interested in deferment or forbearance should contact their loan servicer to learn more about their options.
FAQ
Here are some frequently asked questions about federal PLUS loans for parents:
Question 1: What is a PLUS loan?
Answer 1: A PLUS loan is a federal student loan available to parents of dependent undergraduate students to help cover the cost of their child's education.
Question 2: Who is eligible for a PLUS loan?
Answer 2: To be eligible for a PLUS loan, you must be the parent of a dependent undergraduate student who is enrolled at least half-time in a college or university that participates in the federal student loan program. You must also have a good credit history and not have any defaulted federal student loans or outstanding balances on federal student grants.
Question 3: How much can I borrow with a PLUS loan?
Answer 3: The maximum amount you can borrow with a PLUS loan is the cost of attendance at your child's school, minus any other financial aid your child is receiving.
Question 4: What is the interest rate on a PLUS loan?
Answer 4: The interest rate on a PLUS loan is fixed and is set each year by the U.S. Department of Education. The interest rate for the 2023-2024 academic year is 7.54%.
Question 5: When do I have to start repaying my PLUS loan?
Answer 5: Repayment of a PLUS loan begins 60 days after the loan is disbursed, which is when the money is sent to the school. You have a six-month grace period after your child graduates, leaves school, or drops below half-time enrollment before you are required to begin making payments.
Question 6: What repayment options are available for PLUS loans?
Answer 6: There are a number of different repayment plans available for PLUS loans, including the standard repayment plan, the graduated repayment plan, and the extended repayment plan. You can also request deferment or forbearance if you are experiencing financial hardship.
Question 7: What happens if I default on my PLUS loan?
Answer 7: If you default on your PLUS loan, you may be subject to a number of penalties, including wage garnishment, loss of tax refunds, and damage to your credit score.
Closing Paragraph for FAQ:
If you have any other questions about PLUS loans, you can contact your loan servicer or the U.S. Department of Education.
In addition to the information provided in the FAQ, here are some tips for parents who are considering taking out a PLUS loan:
Tips
Here are some tips for parents who are considering taking out a PLUS loan:
Tip 1: Consider the cost of attendance carefully.
Before you take out a PLUS loan, carefully consider the cost of attendance at your child's school. This includes tuition and fees, room and board, books and supplies, transportation, and other expenses. Make sure you understand how much you will need to borrow and how you will repay the loan.
Tip 2: Shop around for the best interest rate.
The interest rate on a PLUS loan is fixed, but it can vary from lender to lender. Shop around to find the best interest rate before you take out a loan.
Tip 3: Choose a repayment plan that fits your budget.
There are a number of different repayment plans available for PLUS loans. Choose a repayment plan that fits your budget and that you can afford over the long term.
Tip 4: Make extra payments when you can.
If you can afford it, make extra payments on your PLUS loan each month. This will help you to pay off the loan faster and save money on interest.
Closing Paragraph for Tips:
Taking out a PLUS loan is a big financial decision. By following these tips, you can help to make sure that you are making the best decision for your family.
If you have any questions about PLUS loans or the tips provided here, you can contact your loan servicer or the U.S. Department of Education.
Conclusion
Taking out a PLUS loan is a big financial decision. It is important for parents to carefully consider the costs and benefits of a PLUS loan before they apply for one.
If you are considering taking out a PLUS loan, here are some key points to remember:
- PLUS loans are available to parents of dependent undergraduate students.
- The amount you can borrow is determined by the cost of attendance at your child's school, minus any other financial aid your child is receiving.
- The interest rate on a PLUS loan is fixed and is set each year by the U.S. Department of Education.
- Repayment of a PLUS loan begins 60 days after the loan is disbursed.
- There are a number of different repayment plans available for PLUS loans.
If you have any questions about PLUS loans, you can contact your loan servicer or the U.S. Department of Education.
Closing Message:
Taking out a PLUS loan can be a helpful way to cover the cost of your child's education. However, it is important to make sure that you understand the terms and conditions of the loan before you apply for one.