PLUS Parent Loans

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With the rising costs of college education, government loans like PLUS Parent loans come as a favorable financing option for students. Unlike other educational loans, the PLUS Parent loans allow parents to take the loan on behalf of their children. This loan can be used to fund all the educational expenses of a post-secondary student including college tuition fees and even other study related expenses like boarding, course books etc. It funds all college costs which are not covered by other financial aids. The maximum amount which can be received through this loan covers a student’s entire study expenses excluding the amount which he receives through other financial aids. For example, if you need a total of $ 50,000 annually for your child’s college study and you are already receiving $30,000 in other financial aids, then you would qualify only for a $20,000 PLUS loan. However, you would receive the borrowed amount after a 4% deduction, which is kept as a fee on the government loan disbursement.

The biggest attraction of this loan is its extremely low interest rate. Though the interest rate varies and is fixed according to the current market rate on July 1 every year, it remains below 9%. Compared to other student loans, PLUS loans are fairly easy to obtain. The only requirement to qualify for the program is that you must have a clean credit history with no outstanding dues.

The PLUS loans can be obtained from two sources:

Direct PLUS loans: These loans are given out from the U.S Department of Education.

Federal PLUS loans: Given out through the Federal Family Education Loan Program (FFEL), the funds are sourced from private institutions like credit unions and banks. The repayment has to be made directly to the lender or to its designated agency.

Generally the terms of the loan are same for both the loans including the loan amount, interest rate and other details. You can apply for a Direct or FFEL PLUS loan through your child’s school depending on the loan program in which your child’s school takes part. Again, many schools require students to apply for a Free Application for Federal Student Aid (FAFSA) to see what other educational loans they qualify for.

As with the other aspects, the repayment procedure of government loans like the PLUS Parent loans is quite flexible too. The loan can be obtained for a maximum period of 30 years. You can select from a number of government loan repayment plans. PLUS loans require you to make the first payment within 60 days of receiving the loan. Payment is usually made in the form of monthly or quarterly installments.