The application will take about 20 minutes to complete and must be done in a single session. Before considering a Direct PLUS Loan, you should see what other financial aid your or your child's school offers, such as grants, scholarships, work-study, direct subsidized and unsubsidized loans.
You'll often get this aid for free or at a lower cost than with a Direct PLUS Loan, so make sure you fully look over the financial aid package before taking out this loan. Private student loans may also be an option for parents, as they allow you to help pay for your kid's college without holding you solely responsible for their debt. Private student loans often require a parent to be a co-signer, and may offer lower interest rates if you have excellent credit.
But private loans are often worse options than PLUS loans, because they tend to charge high rates if you have less-than-excellent credit. While Direct PLUS Loans can be a good option to bridge the gap between what you can afford and what you need, make sure you understand what you're getting into before signing on the dotted line for you or your child.
Ryan Wangman is a reviews fellow at Personal Finance Insider reporting on mortgages, refinancing, bank accounts, bank reviews, personal loans, and student loans. In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership.
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It indicates a way to see more nav menu items inside the site menu by triggering the side menu to open and close. Credit Cards Credit card reviews. Best credit cards Best rewards credit cards. Best cash back credit cards. Best airline credit cards. Best small business credit cards. Parents should borrow no more for all their children than their annual income.
If retirement is less than 10 years away, they should borrow proportionately less money. For example, if retirement is in just 5 years, the parents should borrow half as much. See also: Complete Guide to Parent Loans. Borrowers who apply for a federal direct PLUS loan will be subject to a credit check , and they must not have an adverse credit history. Otherwise, PLUS loan borrowers are not required to have good credit , such as a high credit score, minimum income threshold or low debt-to-income ratio.
The credit criteria for a PLUS loan are backward-looking, considering whether the borrower has had financial difficulty in the past. As with Federal Stafford Loans, the student must be enrolled at least half-time during the academic year and be making satisfactory academic progress , such as maintaining at least a 2.
The student and parent must also satisfy other general eligibility requirements for federal student aid , including citizenship status, student enrollment in an eligible degree or certificate program, and neither student nor parent in default on a federal student loan or grant overpayment. The Federal PLUS Loan is disbursed through the college financial aid office , so they administer the application process and determine the maximum amount you can borrow.
You may be required to complete entrance counseling. The Master Promissory Note is good for a continuous period of enrollment at a specific college for a period of up to 10 years. Parent PLUS loans allow parents of dependent students to borrow money to cover any costs not already covered by the student's financial aid package, up to the full cost of attendance.
The program does not set a cumulative limit to how much parents may borrow. Parents must start repaying PLUS loans as soon as the loan is fully disbursed to the student or the school.
However, parents may be able to request to delay making payments while their child is in school or for an additional six months after their child graduates, leaves school, or drops below half-time enrollment by requesting a deferment. Parents should contact their loan servicer for more information about how to delay making payments.
Parents are still responsible for the interest that accrues while the payments are postponed. If a borrower consolidates their loan into a Direct Consolidation Loan, they are also qualified for the Income-Contingent Repayment Plan. To qualify, you must make on-time payments meeting the following requirements:. Searches are limited to 50 characters. Any remaining funds are disbursed directly to the parent or to the student.
PLUS loans carry a fixed interest rate for their entire term. For example, loans disbursed on or after July 1, , and before July 1, , have an interest rate of 7.
Payments and interest on federal student loans were suspended in during the economic crisis. Loan payments and interest were scheduled to resume in early The parent must also pass a standard credit check. Students who are working toward a graduate or professional degree at an eligible school can also apply for PLUS loans on their own behalf. For a parent PLUS loan, the student must be a dependent of the parent—biological or adoptive—or, in some cases, a stepparent or grandparent.
Parents and students must both meet the general eligibility requirements for student aid, such as being a U. If they do, they may still qualify if they can obtain an endorser for the loan—or indicate extenuating circumstances for their poor credit score.
When parents can't qualify for a PLUS loan, their children may be eligible for student loans with larger limits. Grad PLUS loans have the same eligibility requirements, except that they apply just to the student. There are several major benefits to taking out a PLUS loan. First, the parent can borrow the entire amount the student needs for their undergraduate education, minus any other financial aid they receive.
This includes tuition, room and board, fees, books, and other related expenses. In addition, the borrower does not have to demonstrate financial need to be eligible for the loan. In addition, PLUS loans have interest rates that are fixed.
The rate stays the same throughout the entire length of the loan until it's paid off in full. So there is no threat of higher interest charges, even when market rates go up. The rates on PLUS loans are relatively low, but not as low as those on student loans. One of the potential downsides of relying on PLUS loans is that parents are subject to a credit check. Although you won't necessarily need excellent credit to be approved, your credit file should be fairly clean if you want to qualify.
Those with poor credit may still be able to qualify if they have someone to guarantee the loan. Another drawback of PLUS loans is that the government charges a fee, which is deducted from each disbursement and reduces the amount of money you actually receive.
The fee for loans advanced on or after Oct. When it comes time to pay off the loan, you must repay the entire amount you borrowed, including those fees. Finally, parents are permanently responsible for repaying the PLUS loan.
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