The Parent PLUS Loan is a student loan that is sponsored by the federal government. Parent PLUS Loans enable parents to borrow money to pay the education expenses of their child who is a dependent undergraduate student.
Parent PLUS loans are given out based on the parent's credit. The interest rates are fixed and repayment begins after the second disbursement.
What are the Requirements?
-Good Credit: Parents taking out this loan must have good credit.
-Half-Time Enrollment: You are required to be enrolled in a college or university at least half time. This usually means you are enrolled in at least 6 credit hours each semester.
-FAFSA: Normally, you are required to complete the Free Application for Federal Student Aid. Most schools will require this but some will not. Check with your school's financial aid office to see if yours does.
-US citizen: You must be a US citizen, permanent resident, or citizen of American Samoa or Swain's Island.
What are the Benefits?
-The greatest benefit is that parents are able to borrow money to assist their child in financing their higher education.
-Parent PLUS loans have have a maximum interest rate that is set by the Federal Government. The interest rate on the PLUS loan is fixed at 8.5% as of July 1, 2006.
-No collateral necessary.
-It's not based on income but on your credit history. You can't be turned down for making too much money.
-You can borrow funds to cover such things as tuition, housing, meals, books and supplies.
-Interest could be tax deductible.
Exactly How Big can my Loan Be?
You can borrow the amount of your educational costs minus any other financial aid. For instance, if it costs you $8,000 a year to attend school and you have been given $2,000 in financial aid, your parents can borrow up to $6,000.
Once you have been approved the money is sent to your school. It is disbursed in at least two installments and used for tuition, fees, and room and board. If there is any money left over sent to your parents to be used for your other educational needs.
