Assisting your child with a PLUS Loan

A PLUS Loan (also referred to as Parent PLUS) is a federal loan that parents can apply for to help pay for their child’s higher education. The loan is available to parents of a child who is a dependent undergraduate student enrolled at least half time at an approved college or university. These loans are available through the Federal Family Education Loan Program (FFELP). These loans are not need-based, so you can use a PLUS toward your Estimated Family Contribution as determined by the school. However, the PLUS is credit-based. The PLUS offers many of the features that a regular student loan has, with certain exceptions.

Eligibility

Natural or adoptive parents or stepparents of an eligible undergraduate student enrolled at least half-time may apply for a PLUS loan. The parent must be a U.S. citizen or eligible non-citizen and have credit in good standing. In addition to having good credit with no outstanding federal debt, a borrower cannot be in default on any previous student loans. If a parent is not creditworthy, a loan can still be obtained if another individual (usually a relative) agrees to co-sign the application, and become an endorser. The endorser would be liable for repayment of the loan if the parent does not repay. Also, if a parent is found to be ineligible for a PLUS, the school may award the student an additional student loan to help cover costs. Contact the school’s financial aid office for more information.

Borrowing Limits

The amount that a parent can borrow is based upon the cost of attendance (COA) as defined by your child’s school. If the student has filled out the FAFSA application, and has been awarded a package of federal loans and grants, the remaining expenses (up to the limit of the cost of attendance), can be borrowed with a PLUS loan. When applying for a PLUS loan, the entire expected family contribution can be requested. If you have questions about PLUS loan borrowing limitations, contact the school’s financial aid office, your student loan lender, or American Student Assistance at (800) 999-9080.

Applying for your PLUS Loan

Applying for your PLUS loan is easy! To begin an application for a PLUS loan, a parent should contact the school’s financial aid office for specific instructions. You (and your endorser in certain cases) will be required to choose a lender and sign a PLUS Master Promissory Note (pdf, 133 KB) (paper or electronically). Once your PLUS loan has been approved by the school and lender, the funds will be sent directly to the school’s financial aid office. When school expenses (such as tuition) have been paid with the funds, the remaining funds are usually released by check to you, the parent, or credited to the student’s school account. Each lender and school may have different processes for PLUS disbursements. For example, some checks that are sent to the school will require your signature before the school can apply the funds to your child’s expenses. Call your child’s financial aid office or lender for details.

Effective May 7, 2008, in accordance with the Ensuring Continued Access to Student Loans Act of 2008 (HR 5715), a lender may choose to allow for the following extenuating financial circumstances in determining the credit eligibility of PLUS borrowers:

• – Up to and including 180 days of delinquency on mortgage loan payments or a medical bill payment for the period beginning January 1, 2007 and ending December 31, 2009 and
• – Other debts not more than 89 days delinquent

Borrowers who have been denied will likely have to file an appeal with the borrower’s lender citing one of the above criteria. Borrowers with previous denials may be able to reapply if the loan period has not been completed.