PLUS Loans
Undergraduate PLUS
There are some specific requirements that must be met in order for parents to borrow using the undergraduate PLUS program:
- Students must be dependents
- Repayment typically begins 2 months after the loan disbursement is made
- No federally subsidized payments of interest
- There is a credit check of parents
- No financial need to qualify
Although a PLUS loan is not based on financial need, it does require a credit check to verify the parent's ability to repay the loan. In the case that the parents are denied for the PLUS loan program, a dependent student is then qualified for the same higher Stafford loan limits as independent students. See the Stafford loan limits page for details.
PLUS Interest Rate
The interest rate for the PLUS loan is variable, changing every July 1. The interest is based on the Bond-equivalent rate for 91-day T-bills plus 3.1% with a cap of 9%. The interest rate for new PLUS borrowers for loans disbursed from July 1, 2007 to June 30, 2008 is 8.5%.
Divorced Parents
In the event that a student's parents are divorced, either the custodial or non-custodial parent is allowed to borrow under the Federal PLUS loan program. Additionally if they wish, a step-parent may also borrow under the Federal Plus loan program.
Graduate PLUS
Graduate and professional students may also take out PLUS loans, whose requirements are very similar to the undergraduate program. There is also the added incentive of being able to apply for deferment under the agreement that the student is enrolled in school at least half-time.
Disbursements
Once a PLUS loan is approved and funded, disbursements will be made in equal installments at the start of each academic term. Loan fees are automatically deducted from the disbursement amount. It's common for a lender to first send the disbursements directly to the school's accounting office, where they verify that no outstanding charges (room and board, supplies, etc.) are due. If no monies are due then the check will be forwarded to the parents for deposit and use. If there is money outstanding, then this amount will need to be deducted from the disbursement check, the difference will then be sent to the parents for use. In some cases the disbursements are electronically deposited with the school, who then removes any tuition and fees and forwards the difference to the parents for use.
For specifics on how your disbursements will work, you will want to contact your school's financial aid/billing department and your lender.
