A PLUS loan is a loan that a parent borrows on behalf of a student who is enrolled in school at least half time (6 hours). It is a credit worthy loan, meaning that a parent must pass a credit check to obtain the loan. If parents don't pass the credit check, they might still be able to receive a loan if someone, such as a relative or friend who is able to pass the credit check, agrees to endorse the loan. An endorser promises to repay the loan if the parents fail to do so. Parents might also qualify for a loan without passing the credit check if they can demonstrate that extenuating circumstances exist. Both the student and the parents must also meet other general eligibility requirements for federal student financial aid.
The yearly limit on a PLUS Loan is equal to the cost of attendance minus any other financial aid received. If the cost of attendance is $6,000, for example, and a student receives $4,000 in other financial aid, parents can borrow up to $2,000.
The interest rate is fixed (effective on July 1, 2006), at 8.5 percent for PLUS loans. Interest is charged on the loan from the date of the first disbursement until the loan is paid. Parents will pay a fee of up to 4 percent of the loan, deducted proportionately each time a loan disbursement is made. For a FFEL PLUS Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the PLUS Loan Program ) to help reduce the cost of the loans.
Generally, the first payment is due within 60 days after the loan is fully disbursed. There is no grace period for these loans. Interest begins to accumulate at the time the first disbursement is made. Parents must begin repaying both principal and interest while a student is in school. Also, parent borrowers may be charged collection costs and late fees if they don't make their loan payments when scheduled. Under certain conditions a payment deferment may be granted. The lender must be contacted to request a deferment. A parent borrower must continue to make payments on the loan until notified the deferment has been approved.
If the PLUS loan is rejected by the lender, the student may borrow additional student loan funds to assist in covering the cost of attendance. Be aware that additional student loan funds do not always cover the full cost of attendance. You may need to investigate other payment alternatives such as: AMS Tuition Payment Plan or the 60/40 payment plan available through the Cashier's Office, (304)-766-3141.