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PLUS Loans

PLUS loans are meant to help parents and in some cases, step-parents, cover the costs of your undergraduate school expenses. Your parents do not have to prove financial need, but the loans are unsubsidized -- this means that the interest on the loan accumulates while you are in school.

PLUS loans are loans your parents can take out to pay for your education expenses -- you must be their financial dependent and enrolled at least half time. Also, your parents must pass a credit check or have someone who can pass a credit check endorse the loan (which means that person will pay back the loan if your parent does not).

To receive a PLUS loan, you and your parents must be U.S. citizens or eligible non-citizens and must not be in default on any federal education loans or owe an overpayment on a federal education grant. Other eligibility requirements apply.

How much can my parents borrow?

The yearly limit on a PLUS Loan is equal to your cost of attending school, 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 $2,000.

How do my parents apply?

Your parents must complete a Direct PLUS Loan application and a promissory note. A promissory note is a legal document listing the terms and conditions of the loan. The application and note are in a single form you can get from your school's financial aid office. While the Master Promissory Note can be used for loans a parent receives over multiple years, a separate Loan Request Form must be filed for each year.

Although it's not a requirement, parents are encouraged to have their dependent children file a Free Application for Federal Student Aid (FAFSA). This will ensure that you can receive the maximum student aid for which you are eligible.

Are there any borrowing requirements my parents have to meet?

Yes, generally they have to pass a credit check. This is a review of their credit history to determine if they are likely to be able to pay back the loan.

If they don't pass, they might still be able to receive a loan with the help of a relative or friend who can pass the credit check. This person must agree to endorse the loan and promise to repay it if your parents don't.

If your parents don't qualify for a loan because they didn't pass the credit check, they may qualify if they can demonstrate that extenuating (difficult and unusual) circumstances exist.

If a parent is denied a PLUS loan, there may be other loan options available to you. You should talk to the financial aid office at your college to learn more about your options.

For your parents to borrow money for you, you must meet the general eligibility requirements for federal student aid. Your parents must also meet some of these general requirements. For example, they must meet citizenship requirements or be eligible non-citizens. They may not be in default or owe a refund to any FSA program.

Can the school refuse the loan application?

Your school can refuse to certify your parents' loan application, or they can approve a loan for a smaller amount for which your parents are eligible. The school must document the reason for its decision and explain the reason to your parents in writing. The school's decision is final and cannot be appealed with the U.S. Department of Education.

Do my parents get the money or do I?

The U.S. Department of Education will send the loan funds to your school. Your school may require your parents to endorse a disbursement check and send it back to the school.

In most cases, the loan will be disbursed in at least two installments. (Disbursement is the release of loan funds to the school for delivery to the borrower.) In other words, your school will receive at least two payments. No single payment will be more 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 after these fees are paid, 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.

What's the interest rate on PLUS Loans?

The interest rate is fixed at 7.60% for loans disbursed on or after July 1, 2018 and before July 1, 2019. Interest is charged from the date of the first disbursement until the loan is paid in full. Students and parents may check the interest rate, servicer information, and other financial aid history at the National Student Loan Data SystemNew window icon.

Interest rate cap for military members - If a parent qualifies under the Service Members Civil Relief Act, the interest rate on loans obtained before entering military service may be capped at 6% during the parent's military service. Parents must contact their loan servicer to request this benefit.

In addition, parents will not be charged interest (for a period of no more than 60 months) on Direct Loans first disbursed on or after October 1, 2008, while a borrower is serving on active duty or performing qualifying National Guard duty during a war or other military operation or other emergency, and serving in an area of hostilities qualifying for special pay.

Other than interest, is there a charge to get a PLUS Loan?

Your parents will pay a fee of 4.276% of the loan for loans disbursed after October 1, 2016 or 4.272% for loans disbursed between October 1, 2015 and September 30, 2016. This fee is deducted proportionately each time a loan disbursement is made. In other words, because it is a percentage of the amount, the fee will get smaller as the loaned amount gets smaller.

If your parents don't make their loan payments when scheduled, they may be charged collection costs and late fees.

How do my parents pay back the loan?

They will repay to the U.S. Department of Education's Direct Loan Servicing Center.

There are several repayment options for both types of loans. Parents can choose the 10-year Standard, Extended, or Graduated Repayment Plan.

Loans can be consolidated. Consolidation is the combining of several loans into a single loan to reduce the monthly payment amount and/or increase the repayment period.

Are there any tax credits available for paying back these loans?

Yes, there are tax incentives for certain higher education expenses. For certain borrowers, student loan interest can be deducted. This benefit applies to federal and non-federal loans taken out to pay for post-secondary education costs. The maximum deduction is $2,500 a year.

You can find out more about these credits and other tax benefits through the Internal Revenue Service (IRS) :

IRS Publication 970 -- Tax Benefits for Education

Internet: https://www.irs.gov/pub/irs-pdf/p970.pdf

Phone: 1-800-829-1040

TTY: 1-800-829-4059

Can my parents cancel the loan if they change their minds, even if they've signed the promissory note?

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 within 30 days of the date the school credits your account.

Your parents may cancel all or a portion of their loan. They must 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.

Can the parent's PLUS Loan be transferred to the student so that the student has to pay it back?

No. A PLUS Loan made to the parent cannot be transferred to the student. The parent is responsible for repaying the PLUS Loan.

Is it ever possible to postpone repayment of a PLUS Loan?

Yes, under certain circumstances, your parents can receive a deferment or forbearance on their loan. Forbearance means the payments are postponed or reduced. Deferment is a period during which a borrower who meets certain criteria may suspend loan payments.

To qualify, the loan may not be in default.

Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance apply to both Direct Loans and PLUS Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance.

If they don't pay the interest as it accumulates, it will be capitalized. This means that the interest will be added to the principal amount of the loan, and additional interest will be based on that higher amount. In other words, the loan will get bigger!

Can a PLUS Loan be discharged (canceled)?

Yes, under certain conditions. A discharge releases your parents from all obligations to repay the loan.

However, the following reasons are not good enough to cancel your parents' PLUS Loan:

  • You didn't complete your program of study at your school (unless you couldn't complete the program for a valid reason, for example, the school closed)
  • You didn't like the school or the program of study
  • You didn't obtain employment after completing the program of study

How can I get more information?

For more information on Student Financial Assistance Programs, contact the Federal Student Aid Information Center:

Internet: http://studentaid.ed.gov/types/loans/plus

Phone: 1-800-4-FED-AID (1-800-433-3243)

TTY: 1-800-730-8913

Spanish speakers are available (se habla español).