subject: What Are Federal PLUS Loans - Application Help and Information [print this page] College students as well as parents of students often need help to pay for education leading to a college degree. Federal PLUS loans are provided by the government to help parents of students who cannot afford to pay for college. A PLUS loan is an unsubsidized loan offered to parents with dependent undergraduate students enrolled at least half time in eligible degree programs at participating colleges and universities. Federal PLUS loans are also offered to graduate and professional students.
A parent can borrow from the federal government on behalf of a child to help pay for college expenses including tuition, books, room and board, and other eligible educational expenses. The biggest advantage to a PLUS loan is that parents can borrow from the federal government at a low interest, thus reducing the burden of college costs. Rates for federal loans are capped at 7.9% per annum whereas private lenders often
charge up to 8.5%. No collateral is required, and the payment for loan interest may even be tax deductible.
To qualify for a federal PLUS loan, the student must be enrolled at least half time in a participating and eligible post-secondary institution. The parent or graduate student must pass a credit check, although historically the federal government has been more lenient on parents who experienced credit problems. The government is less likely to reject PLUS loan applications than private lenders.
In the past, these types of loans were made available through the Federal Family Education Loan Program (FFEL) and the William D. Ford Federal Direct Loan Program (FDLP or Direct). Since the passage of the Health Care and Education Affordability Reconciliation Act of 2010, federal PLUS loans are no longer coursed through the now-defunct FFEL program. Parents can now borrow directly from the federal government.
To qualify, parents as well as the dependent student must be U.S. citizens or have an eligible permanent resident status. They must not be in default of any federal student loan. In addition, both parent and student must not owe any money on a federal education grant. The same requirements apply for graduate students who want to obtain a Grad PLUS loan. If the applicant has bad credit, a cosigner with good credit will be required.
The maximum loan amount that can be borrowed equals the cost of attending college. A federal PLUS loan can be repaid in 10 to 25 years, depending on the repayment plan selected. Furthermore, starting in 2014 future graduates can opt for an "income-based repayment" plan on their federal loans. This puts a cap on their monthly payments at 10% of income. This will make it easier for future college graduates to repay their student loans.
What Are Federal PLUS Loans - Application Help and Information
By: George Nowling
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