Federal PLUS Loans are funds that may be borrowed by graduate or professional students and parents.A federal PLUS loan is a low-interest loan program. The amount parents may borrow is the Cost of Attendance (COA) minus any other aid (grants, scholarships, loans and work-study) the student will receive for the academic year. Sixty days after the loan is disbursed, parents must begin repaying both principal and interest.
Who is eligible to borrow a Federal Direct PLUS Loan on behalf of a dependent student?
The parent must be the student’s biological or adoptive mother or father, to borrow a PLUS loan for a dependent student. Both parents may get a PLUS loan as long as the total aid package does not exceed the student’s cost of attendance. Step-parents can also apply if their information is included on the Free Application For Federal Student Aid (FAFSA). A legal guardian or grandparent is not eligible to borrow a Federal Direct PLUS Loan.
The parent borrower will undergo a credit check with the U.S. Department of Education. Parents will not be eligible if have adverse credit, a defaulted Federal student loan, or owe an overpayment on a Federal Student Aid grant. You are considered to have an adverse credit history if you have one or more debts with a total combined outstanding balance greater than $2,085 that are 90 or more days delinquent as of the date of the credit report, placed or charged off (written off) during the two years preceding the date of the credit report; or during the last five years preceding the date of the credit report, you have been subject to a default determination, discharged or debts in bankruptcy, foreclosure, repossession, tax lien, wage garnishment, or write-off of a federal student aid debt. For more information, please visit http://studentaid.gov.
Eligibility Requirements for Federal PLUS Loan:
- Student must have a Free Application for Federal Student Aid (FAFSA) for the current academic year. Also if selected, must have completed the verification process.
- Student must be enrolled at least half-time.
- Student must be maintaining Satisfactory Academic Progress (SAP.)
- Student must not be in default on any Federal Loans or owe an overpayment on Federal grants.
- Student must be registered with selective service.
- Student must be a US citizen or eligible non-citizen.
- Parent must be a US citizen or eligible non-citizen.
- Parent must have a credit check performed and approved by the US Department of Education.
- Parent must be the student’s natural parent, adoptive parent or in some cases, stepparent. Gand legal guardians are not considered parents and are not eligible to apply for a PLUS loan.
- If credit approved, first time Federal Direct PLUS Loan borrowers must complete the Master Promissory Note (MPN). This is completed on the same website: http://studentloans.gov
- Also, the MPN allows the parent to receive additional unless your previous loan was approved with an endorser or your son/daughter stopped attending school for one full year.
How much can my parent borrow?
The maximum amount your parent(s) can borrow is amount listed in your award package on the Student Administration System. It represents your Cost of Attendance minus any financial aid you have been offered. Be aware that this amount represents the maximum your parent(s) can borrow, but you and your parent(s) should always borrow the minimum amount needed to cover your costs.
Usually, families plan ahead to borrow the full amount needed for the year. On that way, they have the amount disbursed in two payments rather than reapplying each semester. This is more convenient because repayment begins 60 days after the final loan disbursement is made.
Parents credit denied for the Federal PLUS Loan?
In this case, the parent will be presented with three options at the end of the web application process:
- To continue with the PLUS Loan process and complete PLUS Credit Counseling you should apply with a credit-worthy endorser OR
- Appeal the credit decision from the Department of Education if your parent feels he/she has extenuating circumstances or incorrect information on his/her credit report and complete PLUS Credit Counseling OR
- If the options above are not good for you, so as a result of the PLUS denial, you may be eligible for an additional $4,000 or $5,000 Federal Direct Unsubsidized Stafford Loan. Also if your parent will not pursue an endorser or an appeal, you will be offered any additional Stafford Loan eligibility via the Student Administration System.
Can more than one parent borrow a Federal PLUS Loan for the same year?
Yes, but the total amount cannot exceed the student’s Cost of Attendance. Also each parent would need to complete a separate online application and MPN via the https://studentloans.gov website.
When Can I Borrow?
Apply as soon after May 15 each year for the upcoming academic year and only after your student has received an official offer of financial aid that includes a Parent PLUS Loan.
-Be aware Summer PLUS Loans require a new application.
Also, you should be careful with application deadlines, which must be completed before:
Attending Fall-only: November 30
Attending Fall and Spring or Spring-only: March 30
Attending Summer: June 30
Are there any fees?
In addition to interest, there are fees associated with borrowing a Federal Direct PLUS Loan.
The U.S. Department of Education charges a 7% fee. This fee is deducted from the loan by the Department of Education before the proceeds are credited to your student’s account.
How to apply
To apply for a Federal PLUS Loan, the parent must complete the Federal PLUS online at studentloans.gov for summer school or for the academic year.
To apply for a PLUS Loan it’s required to:
1) Student completes the FAFSA at fafsa.ed.gov
2) Parent initiates a credit authorization at StudentLoans.gov
3) Parent signs a master promissory note at StudentLoans.gov
When and How Do I Receive the Funds/Refunds?
Fall/Spring PLUS Loans are paid in two equal disbursements. So If you apply before the year starts, or during the fall term and complete all online requirements, the fall disbursement will pay to your student account as early as 10 days before the beginning of the term. The spring disbursement will pay as early as 10 days before the beginning of the spring term.
If you apply for a fall/spring loan during the spring term, you will still receive two equal disbursements, but they will pay at about the same time.
This funds first pay outstanding charges on your student’s account. If the amount of the Parent PLUS Loan exceeds the charges on your student’s account bill, the excess funds will be refunded to either to you or your student, depending on the choice you make on your online application.
Most parents choose to allow the refunds to go directly to the student, as this is the most efficient way to get the funds to where they are needed. These funds can be credited directly to your student’s bank account as long as he or she has signed up for Electronic Funds Transfer through the Billing and Payment Services Office. This is also a great opportunity for your student to begin to learn about managing money by developing and abiding by a spending plan. For more information about this, please visit the section of our website called Money Matters 101.
Alternately, refunds can be paid directly to you. If you choose this option, please note that your refund will be issued via paper check and mailed to you at the address on your PLUS Loan application. Please note: The process to refund directly to a parent via paper check may take 7- 15 business days during peak processing which is the start of each term.
What if I’ve Borrowed Too Much – Can I Reduce or Cancel My PLUS Loan
You can cancel or reduce a paid loan up to 120 days from the original disbursement date. If you decide to reduce or cancel a PLUS Loan, you must know that that action will create a charge on your student’s account that must be paid within no more than 30 days.
If you reduce the PLUS Loan using these directions, send your payment to UC Berkeley. Don’t send the payment to your loan servicer.
Also, please note that a request to reduce the loan is a reduction of the overall amount of the loan, divided equally between the two disbursements. For example A $12,000 PLUS Loan will be paid $6,000 per semester. If you choose to reduce that loan to $10,000, you are reducing the loan to $5,000 each semester.
To reduce or cancel a PLUS Loan, please log in at studentloans.gov. The process is very similar to your original application process:
Click on “Request a Direct PLUS Loan” and follow the instructions.
The second step is to click on “Parent PLUS” and enter any required information, then press enter.
At the top of the page for “Step 2” you can select the current academic year and the correct student. Most information will pre-populate but you will need to reaffirm some questions.
After you select the School State (“California”) and School Name, you will be asked for the reason a PLUS Request is being submitted. Click the radio button next to “Change” and then click on the radio button to borrow a specific amount and enter the lower requested amount.
Continue with the rest of the application and submit.
Once the change request is complete and you have received a confirmation email, they will receive the changed information electronically within three business days. They will process the request within five to seven business days.
When Do I Begin Repayment?
Repayment begins 60 days after the loan is paid out in full. For fall/spring loans, this typically means repayment begins in late February.
Repayment can be deferred while your student is enrolled at least half-time, however, interest will continue to accrue. To defer repayment, you must contact your loan servicer.
Here is more information about repayment from the Federal Student Aid website.