Parent PLUS Loan Q&A

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     Parent PLUS Loan Basics                           Parent PLUS Loan Eligibility

     Applying for a Parent PLUS Loan               Parent PLUS Loan Repayment

     Parent PLUS Loan Terms

Parent PLUS Loan Basics

What is a Parent PLUS Loan?
A Parent Loan for Undergraduate Students (PLUS) is an education loan sponsored by the federal government. Parent PLUS Loans can be borrowed by parents to help fund the cost of education for their dependent, undergraduate students. The federally sponsored Grad PLUS loan will allow graduate students to take out PLUS loans for themselves. Learn more about Grad PLUS Loans.

What is the Interest Rate on a Parent PLUS Loan?
The interest rate for Parent PLUS Loans disbursed before July 1, 2006 is variable based on the 91-day T-bill rate. The current interest rate for those Parent PLUS Loans is 5.01%. The interest rate for Parent PLUS Loans disbursed after July 1, 2006 will be fixed at 8.5%.

Can I Get a Lower PLUS Loan Interest Rate If I Apply Before Rates Go Up in July?
No. The interest rate on your new Parent PLUS loan is based on the academic year for which the loan is borrowed. However, if you have already borrowed college PLUS loans, you might consider consolidating your Parent PLUS Loan if your rates are anticipated to increase in July.

How Much Can I Borrow with a Parent PLUS Loan?
You can borrow up to 100% of the estimated cost of your dependent, undergraduate student’s attendance with Parent PLUS Loans. The estimated cost of attendance includes tuition, room and board, books, transportation and other expenses, minus any financial aid awarded to your student.

Parent PLUS Loan Eligibility

Am I Eligible for a Parent PLUS Loan?
To be eligible for Parent PLUS Loans you must:

• Be a natural, step, or adoptive parent of a dependent student.
• Be a U.S. citizen or eligible non-citizen with a valid Social Security number.
• Meet the requirements of a credit evaluation.

To be eligible for a Parent PLUS loan your student must:

• Be enrolled in school at least half-time
• Be classified as a dependent student.

Applying for a Parent PLUS Loan

How Do I apply for a Parent PLUS Loan?
At Student Lending Works, we have simplified the application process to make funding your student’s education quicker and easier. All you need to do is complete our Parent PLUS Loan Online Application. Once you submit the application, we will verify your information and credit history. When your loan is approved and certified by the school, we will send the funds to your student’s school.

What Is a Master Promissory Note (MPN)?
The Master Promissory Note is your loan application and contract. By signing the MPN, you agree to repay the lender the money you borrow. You may be able to use your initial PLUS Loan MPN to obtain Parent PLUS Loans in subsequent academic years. If your student attends a school that supports this process, you can take out additional loans during all the years your student attends the school without completing another MPN. You will only need to submit your request for the new loan amount. However, if you choose a different lender for a new loan, then you must complete a new MPN.

Is There a Credit Check to Get a Parent PLUS Loan?
Yes. In order to obtain a Parent PLUS loan, you will need to pass a credit evaluation, but there are no income or employment requirements.

When Do I Get the Parent PLUS Loan Money?
Once you apply for your Parent PLUS loan, your school will tell us when the loan should be disbursed. The loan is not disbursed in a lump sum; instead it is divided into equal disbursements throughout the loan period, usually before each quarter or semester. Generally, a disbursement may not be made prior to 30 days before the beginning of the academic term.

Where Do You Send the Loan Money?
The loan money goes directly to your student’s school. The school will apply any funds needed to pay tuition and other school bills. The school will then give any remaining funds to you unless they are authorized to release the funds to the student.

Are There Any Fees for Getting a Parent PLUS Loan?
The federal government charges borrowers a 3% origination fee and a 1% default fee.

What is the difference between FFEL Program and Direct Loan Program?
These are two competing programs doing the same thing: originating education loans (Stafford, PLUS and Consolidation Loans.) Both of the programs have the same basic rules; however, there are a few primary differences:

• The identity of the lender of your loan. The lender in the FFEL Program is a private lender (like Student Lending Works); whereas, the exclusive lender for the Direct Loan Program is the federal government.
• The loan discounts offered. FFEL Program lenders may offer different discounts than the Direct Loan Program.

Note: If your school participates in the Direct Loan Program, you must borrow your loans from this lender. If your school participates in the FFEL Program you may choose any lender to borrow your federal student loans – including any lender that is not listed on your schools “preferred lender list”.

Parent PLUS Loan Repayment

When Do I Have to Start Repaying My Parent PLUS Loan?
Your first loan payment is usually due within 60 days after the loan has been fully disbursed. You may choose to postpone payments while your student is enrolled in school at least half-time. If you choose to postpone your Parent PLUS loan payments, interest will still accrue and be added to your loan balance. Therefore, you also have the option to pay interest only during periods of postponed payments. New! For Parent PLUS loans first disbursed on or after July 1, 2008, you may postpone payments for an additional six months after your student graduates or is no longer enrolled at least half-time. This is similar to the six month "grace period" offered to students who borrow the Federal Stafford Loan.


How Long Do I have to Repay My Parent PLUS Loan?
The regular repayment term for Parent PLUS Loans is not to exceed 10 years with a $50 minimum payment. If you have at least $30,000 in federal student loans you may extend your repayment term up to 25 years.

Is There A Penalty For Paying My Parent PLUS Loan Off Early?
No. There are never any fees for paying off a Parent PLUS Loan early.

Is It Possible to Postpone My Parent PLUS Loan Payments?
Yes. If you are eligible, you may be able to postpone or reduce your monthly payments with deferment or forbearance benefits.

What is the Difference Between Deferment and Forbearance?

Deferment
A deferment is a way to postpone your loan payments. If you apply for a deferment, your loan principal will be deferred and will not accrue any interest during the deferment period. You must meet specific criteria as set by the federal government to qualify for a deferment. For deferment criteria visit the Federal Student Aid website.

Forbearance
Forbearance is also a way to postpone your loan payments. If you apply for forbearance, only your loan principal will be deferred. The interest on your loans will still accrue during the forbearance period and can be paid monthly or deferred and added to the loan balance when the forbearance period expires. If you do not qualify for a deferment, you may be able to receive forbearance, which has less specific qualifications. For forbearance criteria visit the Federal Student Aid website.

Can My Parent PLUS Loan Be Transferred to My Student’s Name?
Parent PLUS Loans are borrowed under your name as the parent. The loan is based on your information and credit, not your student’s. Therefore, the loan must always remain under your name and ownership. However, many parents privately arrange to have the student make payments on their behalf.

Parent PLUS Loan Terms

Parent PLUS Loan Limits

You can borrow up to 100% of the estimated cost of your student’s attendance with Parent PLUS Loans. The estimated cost of attendance includes tuition, room and board, books, transportation and other expenses, minus any financial aid awarded to your student.

Parent PLUS Loan Interest rate

The interest rate for Parent PLUS loans disbursed before July 1, 2006 is variable based on the 91-day T-bill rate. The current interest rate for those college PLUS loans is 5.01%. The interest rate for Parent PLUS loans disbursed after July 1, 2006 is fixed at 8.5%.

Parent PLUS Loan Fees

Parent PLUS Loan Repayment

Your first Parent PLUS loan payment is usually due within 60 days after the loan has been fully disbursed. The regular repayment term for federal Parent PLUS loans is not to exceed 10 years. The following repayment options are available:

• Standard Repayment: Your monthly payments include both principal and interest and are fixed over the life of the loan (a maximum of 10 years). This plan has the lowest total interest cost to you.


• Graduated Repayment Plan: This repayment option will allow you to have a lower monthly payment for the first few years and then an increased monthly payment thereafter.

  In example:

  • For the first 2 years your monthly payments will be interest-only.
  • For the next 3 years, you will continue to pay the interest and you will also pay off some of the principal.
  • For the remaining life of your loan, you will be put on a standard repayment plan.
  
  
• Income-Sensitive Repayment: Your monthly payment amount will vary each year (up to 5 years) based upon a percentage of your annual income. You must reapply every year and payments are adjusted annually to reflect changes in your income.
  
  
• Extended Repayment: If you have an outstanding balance of principal and interest in FFELP loans totaling more than $30,000, then you may qualify to extend your repayment term up to 25 years.