Federal PLUS Loans
Federal Parent Loans for Undergraduate Students (PLUS) are borrowed in the name of the parent. The interest rate is fixed at 8.5%. Finding a lender for the PLUS loan shouldn’t be a chore. I know it’s confusing and sometimes downright frustrating. Why not get some guidance on your choice of lender? I suggest eStudentLoan. Let them take the guesswork out of finding a lender.Repayment of PLUS loans begins immediately after the second disbursement of the loan. The standard repayment period is 10 years. You may borrow up to the cost of attendance minus other financial aid including loans. Selecting a lender for a PLUS is the same as for the Stafford loan. If your school participates in Direct Lending, your lender will be the federal government. If you borrow through FFELP you will need to select a lender.
Why borrow using a PLUS? Well, one of the biggest advantages is spreading your costs over time. Some schools offer payment programs that vary in duration from 2 to 12 months. Usually you make 2 payments, one in the summer and another in the fall. Many times, it is financially difficult to come up with that kind of funding in two large sums. That’s where the PLUS can make life easier for you. While the PLUS is a credit-based loan, the requirements are not as stringent as they are for any other type of consumer credit. If you do not qualify, you have a few other options.
If you are denied a PLUS loan based on adverse credit reporting, your student may ask the financial aid office to consider him/her for additional Unsubsidized Stafford loan eligibility — up to $4,000 for Freshman and Sophomores and $5,000 for Juniors or Seniors. The student will need to write a letter to the financial aid office, request Unsubsidized consideration and enclose a copy of the denial letter you received from the lender.
If the additional Unsubsidized Stafford is not enough, you can ask the lender if obtaining a credit-worthy co-signer (called an endorser) would get you approved. If so, and you can find someone to co-sign, you can then obtain a PLUS.