Supplemental Borrowing: The Federal Direct PLUS Loan
March 31, 2008
For families struggling to finance their children’s educational expenses, supplemental borrowing can be an important resource. Supplemental borrowing is particularly useful to those families that do not qualify for need-based financial aid or those families that qualify but whose financing needs are greater than their aid package.
One of the most reliable sources of supplemental borrowing is the Federal Direct PLUS Loan. The PLUS, which stands for Parent Loan for Undergraduate Students, is a federally-backed loan for parents paying for their dependent child’s undergraduate education.
The advantages offered by the Federal Direct PLUS Loan include:
• Federal backing, ensuring stability
• Non-need based, only based on credit rating
• Does not require collateral
• Favorable loan terms, including a fixed interest rate
• Variety of repayment plans
• No penalty for early repayment
• Reduced interest rate by 0.25% for electronic repayment
• May be consolidated with other federal loans
• Interest may be tax deductible under the Hope Education Tax Credit (check with your financial advisor)
• Quick disbursement of funds, usually within the first two weeks of the semester
Families seeking assistance from a PLUS loan must meet at least one of the following requirements:
• Have unusual costs above the standard student expense budgets
• Do not qualify for any other federal financial aid
• Demonstrate financial need beyond financial aid already awarded
• Seek to borrow all or significant part of Expected Family Contribution
Maximum Loan Amount
Families may borrow up to the total cost of undergraduate education minus any other financial aid. The cost of education is determined in accordance with tuition, fees, room and board, supplies, lab expenses and travel.
The PLUS Loan has a fixed interest rate of 8.5% for all loans taken out after July 1, 20006.
How To Apply
Apply for a PLUS loan online at parentplusloan.com.
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