Federal PLUS Loans

The PLUS Loan or Parent Loan is a federally-backed, low-interest education loan for parents of undergraduate students.

For your parents to be eligible for a PLUS Loan, they must claim you as a dependent on their annual tax returns.

How much money can my parents borrow from a PLUS Loan?

With a PLUS Loan, your parents can borrow up to the entire cost of your education, minus any other financial assistance you receive (federal, state or private). There is no upper limit on the PLUS Loan.

How do I know if my parents are eligible for a PLUS Loan?

Unlike a Stafford or Perkins Loan, a PLUS Loan does not require that you (or your parents) demonstrate financial need. They may take out the loan regardless of their income level, assets and retirement savings. No collateral is required, unlike many private student loans. Your parents’ credit report will be checked before they are approved for a PLUS Loan.

Also unlike the Stafford Loans and Perkins Loans, the federal government does not require you to complete a FAFSA form in order for your parents to qualify for a PLUS Loan. Some schools, however, may require it.

What is the interest rate on a PLUS Loan?

For Direct PLUS Loans first disbursed on or after July 1, 2015, and before July 1, 2016, the interest rate is 6.84%.

What are the fees associated with the PLUS Loan?

The federal government charges a 3% origination fee and up to a 1% federal default fee, which some lenders will waive.

What are my parents’ options for repaying the PLUS Loan?

PLUS Loan lenders offer a variety of repayment options and allow parents to defer repayment for up to 60 months, as long as you are still in school at least half-time. The standard 10-year repayment plan features fixed monthly payments. Other options may include:

• Graduated Repayment Plan, which allows your parents to increase their repayment the longer you are out of school. This option makes sense if you plan to contribute to the monthly payments – as you will ostensibly earn more income the longer you are out of school.
• Income-Sensitive Repayment Plan, which considers your parents’ yearly income and adjusts their monthly payment accordingly.
• Extended Repayment Plan, which allows your parents to chose either fixed or graduated payments over a period of up to 25 years.