Student PLUS Loans
Although often referred to as student PLUS loans (or PLUS student loans) these are in fact federal loans which are made available to parents, rather than students.
Although many students will be in receipt of educational loans (such as Stafford loans) the ever rising cost of education means that there is often a gap between the actual cost of education and the monies received by way of scholarships, grants and loans. For this reason, the government introduced the PLUS (Parent Loans for Undergraduate Students) scheme in an effort to help to close this gap.
PLUS loans may either be granted under the Federal Family Education Loan program (FFELP), in which case loan monies come from private lender and interest is charged at 8.5%, or may be granted as a DIRECT loan from the US Department of Education, in which case interest is charged at 7.9%. A fee of up to 4% will also be added to the loan and this will be deducted proportionately from each loan disbursement.
Applicants must be applying for a loan in support of a dependent undergraduate student and the amount of any loan cannot be greater than the cost of education, less any financial aid (such as a Stafford loan) which the student is already receiving. Applicants must also be US citizens or nationals (or US permanent residents or eligible non-citizens) and have a satisfactory credit rating.
Repayments on PLUS loans are normally required to begin within 60 days of the initial disbursement of the loan.
PLUS loans are normally paid directly to the school and are applied to the payment of tuition, fees, room and board and other school expenses. If there are then funds remaining these can be paid over to the student or credited to the student's school account, depending upon the wishes of the parent. Any surplus funds must however be used for educational purposes.
For Direct PLUS Loans parents must complete a Direct PLUS Loan application and promissory note (combined into a single form) which can be obtained from the school's financial aid office.
For FFELP PLUS Loans parents must complete a PLUS Loan application which is available from the school's financial aid office, lenders or the state guaranty agency. Once the school has completed its portion of the application form it is then sent to a lender for evaluation.
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