College Loans - Federal PLUS Loans

(Parents' Loans for Undergraduate Students)

By: K.W. Abbott

Federal PLUS Loans are not need-based.  The borrower pays the interest and repayment begins six months after the student leaves college.  However, if the parent is enrolled in college on at least a half-time basis, the repayment may be deferred while the parent is in college.

The interest rate on Federal PLUS Loans is fixed with an upper limit of 7.9%.  If a parent is not ceredit worthy and cannot obtain a PLUS Loan, the student can borow an additional $4,000 per year in Unsubsidized Stafford Loans for the first year of college and $5,000 for the second, third, fourth and fifth years of college (the limit for an indepemdent student).  The amount of a PLUS Loan that a parent can borrow is limited to the Cost of Attendance minus the financial aid award offered to the student.  The amount of financial aid offered to the student does not include Federal Perkins Loan or college work-study funds that the college determines the student has declined.  In other words, the amount of declined Perkins Loan or work-study does not count as part of the student's finanical aid offer when determing eligibility for the PLUS Loan.

These are signature loans in the parent's name.  If the signatory parent (only one parent must sign for the loan) dies or becomes disabled before the loan is repaid, the remaining loan principle balance is forgiven.  PLUS Loans may be consolidated into one loan and repaid over a period of up to 30 years. 

                                                          National Institute of Certified College Planners, LLC