PLUS Loans: Federal Loan for Parents Introduction
- Fixed interest rate - 7.21%
- Borrow up to the cost of education
The Federal PLUS Loan is a loan borrowed by a parent on behalf of a child to help pay for tuition and school related expenses at an eligible college or university, or by a graduate student for graduate school. The student must be enrolled at least half time, and the parent or graduate student must pass a credit check in order to receive this loan. For more information, visit Graduate PLUS Loans.
About Parent PLUS Loans
- The primary benefit of the PLUS Loan is that a parent can borrow a federally guaranteed low interest loan to help pay for their child's education.
- A Federal PLUS Loan allows a parent to borrow the total cost of undergraduate education including tuition, room and board, and any other eligible school expenses, minus any aid the child is receiving in their name. Here's a brief graphical look at where PLUS loans fit in the big picture of a cost of a college education.
Cost of College
Private student loans
- PLUS loans, along with private student loans, can help fill the gap after Stafford loans and scholarships. Learn more about the hidden costs of college.
PLUS Loans: Parent Loan Details
- PLUS Loans are non-need based student loans, which means you do not have to demonstrate financial need to qualify. Eligibility for the PLUS Loan depends on a modest credit check that determines whether the parent has adverse credit. An adverse credit history is defined as being more than 90 days late on any debt or having any Title IV debt within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off. Click here to learn more about credit.
- Your school may require the FAFSA Financial Aid Application to qualify for the PLUS Loan. Be sure to check with your school's financial aid office first.
- The interest rate on the PLUS Loan is fixed at 7.21% as of July 1, 2013.
- You may receive a 0.25% repayment interest rate credit when payments are set up for automatic debit from a bank account.
- There is a 3% origination fee, and a 1% federal default fee.
- Unlike other non-education loans (including home equity), Parent PLUS Loans require no collateral.
- Interest may be tax deductible.
For more questions and comments, please check our Frequently Asked Questions.
How much can parents borrow?
The yearly limit on PLUS Loans is equal to the cost of attendance minus any other financial aid you receive. For example, if your cost of attendance is $6,000 and you receive $4,000 in other financial aid, your parents could borrow up to, but no more than, $2,000.
Who receives the loan funds?
The U.S. Department of Education will send the loan funds directly to your school. In most cases, the loan will be disbursed in at least two installments, and no installment will be greater than half the loan amount. The funds will first be applied to your tuition, fees, room and board, and other school charges. If any loan funds remain, your parents will receive the amount as a check or in cash, unless they authorize the amount to be released to you or to be put into your school account. Any remaining loan funds must be used for your education expenses.
Can parents cancel the loan if they change their minds, even if they've signed the promissory note agreeing to the loan's terms?
Yes. Your school must notify your parents in writing whenever it credits your account with PLUS Loan funds. This notification must be sent to your parents no earlier than 30 days before, and no later than 30 days after, the school credits your account. Your parents may cancel all or a portion of their loan if they inform your school within 14 days after the date your school sends this notice, or by the first day of the payment period, whichever is later. (Your school can tell you the first day of your payment period.) If your parents receive PLUS Loan funds directly by check, they may refuse the funds by not endorsing the check.
What is the interest rate on a Parent PLUS Loan?
PLUS Loans are fixed rate loans at 7.21%.
What other options should we be looking at?
- Parents should consider PLUS Loan Consolidation as a way to lower their monthly payment.
- Also consider Stafford Loans and private student loans
- Don't forget to search for College Scholarships
What is the GradPLUS Loan?
The Grad PLUS Loan is a low interest, federally backed student loan guaranteed by the U.S. Government, specifically for students enrolled in a degree seeking graduate program. Like the Parent PLUS Loan, the Graduate PLUS Loan can be used to pay for the total cost of education less any aid already awarded. Also, like the Parent PLUS Loan, eligibility for the Graduate PLUS Loan is largely dependent on the borrower's credit rating and history, as opposed to the purely financial need-based Graduate Stafford Loan.