Parent PLUS loan (Parent Loan for Undergraduate Students) is a loan basically designed for the parents of dependent undergraduate students to help them bear the cost of a student’s education after high schooling. The U.S. department of education administers the PLUS loan. This is an unsubsidized loan with a fixed interest of 7.9%, though the payment is deferred while student is still in school. Here, the parents will be held responsible, if the payments are not met regularly. The tax is also deductible through interest, for most students.
PLUS Loan Application Procedure
The schools generally help out with the plus loan progression. The financial aid office provides you with the instructions needed and also assist you in PLUS application. First of all a direct PLUS loan application and a legal document need to be filled out, where the parent has to promise to repay the loan, which is known as the Master Promissory Note (MPN). If an MPN has been signed to acknowledge an FFEL PLUS loan, then the parent has to take up a new MPN for the direct PLUS loan. The MPN holds good for up to a period of 10 years only. The maximum amount one can borrow on a Parent PLUS loan is equal to the student’s cost of attendance excluding other financial aid.
The loan amount will be directly sent to the student’s school, typically in installments, with not more than half the amount requested in each installment. With the money received as part of the PLUS loan, the school will first take care of the student’s fees, then the accommodation and other charges. If any funds remains, the parents will receive it and it should be used for the student’s educational purpose only.
Parent PLUS loan Eligibility
There are a number of eligibility criteria that must be satisfied for approval of a Parent PLUS loan. It is mandatory for the applicant to be the student’s biological parent, adoptive parent or the stepparent at the time of application. The child must be dependent during the time of enrollment, administering the direct loan. The child is considered dependent only if he/she is under the age of 24 and unmarried. It is essential for the parents as well as the child to have citizenship or an acceptable non- citizenship for being eligible for the loan.
PLUS Loan limits and charges
There is no specific limit as such, but it is important to see to it that the cost does not go beyond the education minus other financial aid. Here, the school will decide the amount to be borrowed. The interest for a PLUS loan is 7.9% at the time of writing this article. It is imposed during the whole period. There are many direct loan-servicing centers to assist you regarding all the information on interest rates. The parents who are unable to meet the payments on time have another option i.e. to receive an additional direct unsubsidized loan fund. Incase your credit is not sufficient you might need a co-signer.
PLUS Loan Repayment and Cancellation
Repayment begins only 60 days after the funds are disbursed, with the repayment period being 10 years.
The loan can be cancelled by notifying the authorities well in advance. Cancellation can be done either partially or completely, though that is possible only if the school is informed at least a fortnight before the first payment.
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