obama student loans forgiveness medical consolidate privet student loans

Direct PLUS Loans for Parents

An Introduction to Direct PLUS Loans for Parents

Direct PLUS Loans for parents are federal student loans designed to help out parents to pay for their child’s academic expenses. In order to qualify it is important that some eligibility requirements are satisfied. To be eligible for the direct PLUS Loan, parent and student must meet certain criteria:

  • Parent must be the biological or adoptive parent of the depending student;
  • Student and parent must be a U.S. citizens or eligible non-citizens;
  • Parent need to be in good standing with previous loans;
  • The student (depending child) must meet eligibility requirements: must be dependent child under 24 years of age and not married; must be enrolled at least half-time at educational institution participating in the Direct Loan Program.

How to Apply for Direct PLUS loan

First step in the application process is completing a Direct PLUS Loan Application and Master Promissory Note by a parent. Master Promissory Note or MPN is an official document that explains terms and conditions of the loan. It is also a document in which parent (borrower) promises to pay off the loan and interest to the Department of Education. Ask your child school’s financial aid office to get information and instructions on applying for the Direct PLUS Loan.

How Does a Parent Gets the Loan and How Much Can Borrow

After accepting your application, the Department of Education will send the loan money to your child’s school. Usually, the loan will be given out in at least two payments, no more than half of the loan per installment. The school than will use the loan to pay for student’s school expenses like lectures, accommodation, book, food and other costs. Unless parent authorizes the rest amount to be transferred to student’s account, any remaining loan money will be sent to a parent as a check of other means and must be used for the child’s schooling expenses.

The yearly limit on a Direct PLUS Loan is equivalent to the student’s expenses of attendance minus any other financial support students obtains. For example, if the price of attending school is $5,000 and the student gets $2,000 in other financial aid, his or her parent will receive up to $3,000 annually.

PLUS Loan Interest Rate

This loan has fixed interest rate at 7.9% which bring it to somewhat higher rate than rates of other federal loans provided. Parents who are military members qualify for the lower interest rate of 6%. They need to contact their loan servicer to acquire that benefit.

The PLUS Loan Repayment

The repayment period begins after the Direct PLUS Loan is fully paid off. The first payment is due in sixty days after the final disbursement.

Tailored to meet the diverse needs of the borrowers, the Direct PLUS Loan Plan for parents offers three repayment options: standard, extended and graduated.  In most cases, you will have from 10 to 25 years to repay the loan, depending on which repayment program you decide to take.

  – Standard Repayment Plan

Under this repayment plan you’re going to pay monthly fixed amounts until your PLUS loan isn’t fully repaid. Under standard plan monthly payments can be higher than under repayment options, since your loan will be paid off in shorter period of time.

  – Extended Repayment Plan

With Extended Repayment Plan you will pay off a fixed annual or graduated reimbursement amount over a period not to go over 25 years. This plan is good for parents who need to make smaller monthly payments. Because repayment period is 25 years they are going to pay more interest.

  – Graduated Repayment Plan

Under this repayment plan your payments will begin low and rise every two years during 10 years repayment period.

Additional Information

The Direct PLUS Loan paid to a parent cannot be transferred to the student. Repaying the PLUS Loan is parent’s responsibility. Besides parents, graduate students and professional degree students can also apply for the Direct PLUS Loan for their own expenses.

The Direct PLUS Loan can be consolidated throughout the federal student loan consolidation plan. The PLUS loan can also been canceled under specific conditions.

Additional student loan plans provided under Direct Loan Program include Direct Perkins Loans, Direct Stafford Loans, Direct Federal Student Loans and Direct Consolidation Loans.

Tagged with:

Speak Your Mind

*