(LifeWire) - Federal PLUS Loan Basics:
Federal PLUS loans, or parent loans, are for financially responsible parents to temporarily cover education expenses for their children in an undergraduate program. Parents can borrow up to the total tuition and related expenses, minus the amount of financial aid already being received. Parents can get the loan through either the Federal Family Education Loan program, which works with banks and lenders, or the William D. Ford Federal Director (Direct Loan) Program, which uses the Department of Education as the lender. Both programs charge a fee up to 4% of the total loan.
Qualifying for a Federal PLUS Loan:
Parents must have a child dependent enrolled at least half-time in an approved undergraduate institution of higher learning, and Mom and Dad must be in good graces with their financial dealings. A foreclosure, debt delinquency, tax lien, wage garnishment, bankruptcy, default or repossession within the last five years will probably result in rejection.
Applying for a Federal PLUS Loan:
For the Direct PLUS loan, parents of the student fill out a form and promissory note obtainable at the school's financial aid office. For a Federal Family Education PLUS loan, parents need to get an application from the school, a lender or a state guaranty agency and submit it to the school's financial aid office. (Availability of an online application appears to vary.)
Repaying a Federal PLUS Loan:
Parents are to begin reimbursement (plus interest) either 60 days after the entire loan amount has been given to the school, or they can wait until six months after the student graduates or is no longer attending at least half-time. Payments for the Federal Family Education PLUS loan, made at a fixed 8.5% interest, go to the private lender. Payments for the Direct PLUS loan, at 7.9%, go to the Department of Education's Direct Loan Servicing Center. Deferment is possible under certain conditions.
