Repaying PLUS Loans
For PLUS loans, repayment can begin 60 days after the loan is fully disbursed or 6 months after the student for whom the loan was borrowed drops below half-time enrollment. However, PLUS loans are unsubsidized, which means that the loan’s interest begins to accrue as soon as the funds are disbursed. Keeping the repayment terms in mind will help you plan the best way to manage loan payment.
Loan Terms
As of July 1, 2006, the federal interest rate on all PLUS loans is 8.5%. This is a fixed rate that will not change for the life of the loan. There is a 4% fee that is extracted from the loan at the time of disbursement. Interest will be capitalized no more than quarterly, and standard repayment can be for a 10-year period. Some lenders may offer a reduction in the interest rate if the parent borrower signs up for certain payment options (such as automatic account debiting). Your lender can give you details about repayment incentives.
Rights and Responsibilities
When you sign your PLUS Master Promissory Note (pdf, 133 KB), you’ve entered a contract to repay your student loan lender. With this contract come certain rights and responsibilities. Understanding the terms of a PLUS loan will help you to better manage your repayment. As long as you make a good-faith effort to repay your loans, your lender will most likely be able to help you find a repayment situation that will work for you. You have a choice of repayment schedules, and you are entitled to suspend your payment temporarily if you meet certain criteria, such as unemployment or economic hardship. You also have the right to request a discharge of the loan if you are considered permanently disabled.
Repayment Options
Under Standard Repayment, the regular repayment schedule (unless you choose another one), the regular repayment schedule (unless you choose another one), your repayment period for each loan lasts between 5 and 10 years, depending on how much you owe. Monthly repayment typically begins soon after the loan funds are disbursed. Your payments will be at least $50 a month and may be more in order to repay the loan within the standard time period.
Repayment Challenges
If you have missed one or more monthly payments on your PLUS loan(s), contact your student loan lender immediately. Falling seriously behind can lead to default, which can have many negative consequences. But don’t despair—there are many ways to turn your situation around! The most important thing to do is contact your student loan holder and ask for help. They can work with you to find a repayment solution that fits your situation. If your student loans have been guaranteed by American Student Assistance, you can contact one of our student loan specialists, Monday – Thursday, 8 a.m. to 10 p.m.; Friday 8 a.m. to 5 p.m.; and Saturday 8 a.m. to 12 p.m. Eastern Time, at 800.343.8883 or wellnesscounselor@amsa.com.
Your student lender may suggest you change your repayment schedule to make your monthly payments more affordable. Flexible repayment options include: Consolidation, Income-Sensitive, Extended, or Graduated Repayment , or temporarily postponing payment with a deferment or forbearance. In rare circumstances, your PLUS loan may be discharged.
Extended Repayment
If you owe more than $30,000 in federal student loans, Extended Repayment will stretch your repayment period to 25 years. This option is available to borrowers whose oldest loan was originated on or after October 7, 1998. Extended Repayment will increase the total amount of interest you repay over the life of your loan.
Graduated Repayment
This schedule will reduce your monthly payments by giving you smaller payments, as low as interest-only, upfront for up to 4 years. Your payments will then increase gradually so that the loan is repaid in the same amount of time as under Standard Repayment. Graduated Repayment will increase the total amount of interest you repay over the life of your loan.
Income-Sensitive Repayment
If your income is low, you may want to choose Income-Sensitive Repayment, which allows you to pick a monthly payment equal to any amount between 4% and 25% of your gross monthly income. You may be able to use this option for up to 5 years, and it may extend your repayment term to up to 15 years. Income-Sensitive Repayment will increase the total amount of interest you repay over the life of your loan. You can change your repayment schedule once a year by contacting your servicer.
Consolidation
If you, the parent, have previous Stafford loans of your own, or multiple PLUS loans, you may want to explore consolidation. Depending on when you consolidate, you may end up with a better interest rate.
Temporary Suspension of Payments—Deferments and Forbearances
Deferment
A deferment allows you to temporarily adjust your monthly repayment schedule by suspending your student loan payments. View our forms page for a complete listing of deferment types and criteria. In order to get a deferment for your loans, you must complete an application and submit it to your PLUS lender. Borrowers must request deferments, as they cannot automatically be granted by lender. The lender can grant a deferment if you are already being deferred for the same reason and time period with another lender. FFELP lenders can use information obtained from another FFELP loan lender, the Secretary of Education (for Direct Loans), or an authoritative electronic database maintained or authorized by the Secretary of Education.
Please do not submit deferment applications to American Student Assistance. Some deferments require you to submit supporting documentation with your application. Your lender will review the application, and if you meet the criteria for the deferment and have not exhausted the time available for it, your lender is required to grant you the deferment. You should continue to make your monthly loan payments until your lender notifies you that your deferment has been granted.
Forbearance
It’s very important to make timely payments on your loan. Falling behind will place your account in delinquency, and have adverse affects on your credit rating.
If you are having trouble making your student loan payments, you don’t meet the criteria for a deferment, and you have fully explored changing your repayment schedule to reduce your payments, you may qualify for a forbearance. Like a deferment, a forbearance is a temporary adjustment to your monthly repayment schedule. During a forbearance interest will accrue on your loan, and you may either pay as it accrues or have it added onto your principal loan balance (capitalized). It is strongly recommended that you attempt to qualify for a deferment and explore changing your repayment schedule to lower your monthly payments prior to applying for a forbearance.
Forbearance is usually reserved for cases of financial hardship or illness. While you must be granted a deferment if you meet the criteria, lenders are generally not required to grant you a forbearance, and they may require you to provide reasons and documentation for the request. To get a forbearance, you can obtain an application from your PLUS lender. Complete the application, and return it to your lender for review along with any supporting documentation the application calls for. Your lender may grant you a verbal forbearance over the phone. If you’re not sure who your lender is or how to reach them, please call American Student Assistance at 800.999.9080. You should continue to make your monthly loan payments until your lender notifies you that your forbearance has been granted.
If you have questions about whether you may qualify for a deferment or forbearance and how to apply, please contact your lender or American Student Assistance at 800.999.9080.
Loan Discharge Due to Disability or Death
Under certain extreme circumstances, your PLUS loan debt would be discharged:
- – If you or the student for whom the loan benefited were to die
- – If you become totally and permanently disabled
- – In extraordinarily rare cases when you apply for bankruptcy
In the case of permanent disability, you and your doctor will need to complete an application with information about your condition by your doctor.
Upon the death of the student, an original or certified copy of the student’s death certificate must be sent to either your loan lender or guarantor. In the case of the death of the borrower, a family member must submit an original or certified copy of the certificate for the loan to be fully discharged.
For more information, visit the “Repaying” tab of http://studentaid.ed.gov.
Default
Student loan default occurs when you fail to make your monthly payment for 270 days (9 months). Default is serious, and you must resume repaying your defaulted loans immediately. Upon default, your entire loan balance is due in full.
If you do not address your defaulted loan, many negative consequences may occur:
- – Up to 15% of your wages may be garnished to repay your debt
- – Your entire federal tax refund may be seized to repay your defaulted student loans. Some state tax refunds may be seized, as well.
- – An employer may rescind a job offer based on your poor credit report.
- – You could be declined for a mortgage, car loan, apartment lease, or other credit due to your defaulted loans.
- – You are ineligible for additional federal financial aid until you make four qualifying payments towards loan rehabilitation.
Bright Beginnings Defaulted Loan Rehabilitation Program
Rehabilitation is a federally-mandated program that gives federal student loan borrowers a way to bring their loan(s) out of default. Rehabilitation can reverse the many negative consequences of defaulting on your student loan, and participation is one of your rights as a federal education loan borrower.
American Student Assistance calls its rehabilitation program Bright Beginnings. It can put your defaulted loans back in good standing, improve your credit, and help you develop good repayment habits once again.
Benefits of Bright Beginnings rehabilitation
- – Derogatory information (as reported by ASA) will be deleted from your credit report.
- – You will once again be eligible for federal financial aid, so you can continue to pursue higher education.
- – Your ASA loan will no longer be considered in default, so you do not have to worry about wage garnishment or seizure of your tax refunds.
- – You will regain eligibility to apply for any deferment or forbearance benefits not used prior to default.
- – Your entire outstanding balance will no longer be due in full, at all times.
How does the Bright Beginnings rehabilitation program work?
- – You must make nine qualifying on-time payments to ASA.
- – You must make all 9 payments within 20 days of the due date. If you fail to make all 9 payments within that time frame, you must begin the program again.
- – Once you have made the required number of consecutive payments, ASA will send you a Rehabilitation Agreement. You must fill out completely and sign this agreement, and return it to ASA in order to complete the loan rehabilitation program.
- – Do not stop making payments to ASA until you receive notification to do so. Ceasing to make qualifying monthly payments could cause you to lose your eligibility for rehabilitation.
- – After you have returned your completed agreement, ASA will transfer your loan to a new lender and servicer. At that point, your loan will be out of default.
- – You will then make on-time monthly payments to your new servicer.
Making qualifying payments under the rehabilitation program will stop your defaulted loan from being designated for wage garnishment or tax refund seizure. If your defaulted loan(s) was guaranteed by ASA, contact an ASA Payment Advisor at 800.343.2120 (option #1) to begin the rehabilitation program.
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