PLUS loans are federal student loans offered to graduate students and parents who have dependent children in college. Dependent children are considered students under the age of 24 years old. The loans help pay the cost of tuition. However, unlike other student loans, PLUS loans are based on credit. If an individual has an adverse credit history, he or she will be turned down for the student loan. The loans are offered via the U.S. Department of Education’s Direct PLUS loan program. There are two basic requirements for a PLUS loan.
Loan Requirements
A professional or graduate student must be enrolled in a college or university at least part-time. The program must lead to a certificate or degree. If the parent is requesting the loan, he or she must be the biological or adoptive parent. In some situations, a stepparent may apply for the loan. All general eligibility requirements for receiving federal student aid must be met. These requirements include having a high school diploma or GED, being 18 years old or older, and having a valid social security number. Both graduate students and dependent students receiving the loan from a parent must meet these requirements.
Applying for PLUS loans
The student must complete the Free Application for Federal Student Aid, or FAFSA, to receive the student loan. The parent doesn’t have to complete the FAFSA, but his or her child does. The amount of the loan students or their parents can borrow varies. It is based on the cost of attendance, not including any other financial aid the student receives. The parent or graduate student must complete a Master Promissory Note (MPN) and entrance counseling to obtain the loan. The note outlines all the requirements to receive the loan. As of December 2013, there a fee charged for disbursing the loan in the form of a percentage of the loan origination fee.
If approved, the student loan is sent directly to the school to pay for tuition and other school fees. If there is any money remaining, the school sends the money to the student. If the loan application is denied because of credit problems, the individual has the option of obtaining an endorser. This co-signer should not have any adverse credit problems. Also, the borrower (parent or student) can provide documents describing extenuating circumstances related to adverse credit to receive the PLUS loan.
Repaying PLUS loans
A parent must start repaying a PLUS loan after it is completely disbursed or paid out. However, he or she can contact the loan servicer to request a deferment in two circumstances if...
- the student is enrolled at least part-time
- it has been less than six months since graduation.
If the borrower is a professional or graduate student, the student loan automatically goes into deferment. It stays in deferment while enrolled in school or for six months after the student leaves school without graduating.
