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What is a Federal PLUS Loan?

A PLUS Loan is a loan made to a parent of a dependent undergraduate student. A creditworthy parent may borrow up to the full cost of undergraduate schooling, less any Stafford Loans or other federal financial aid received by the student. Beginning July 1, 2006, PLUS Loans became available to graduate or professional students who reach their Stafford Loan limits.

Until 2010, the federal government provided for two types of PLUS Loans, those made directly by the government, and those that are made by institutional lenders but guaranteed by the federal government. The Direct PLUS Loan is made under a program called FDSLP. A PLUS Loan made by an institutional lender was made under a program called FFELP. As of July 1, 2010, no further loans are being made under the FFEL program, and all new loans will be Direct loans.

In order for you to be eligible for a PLUS Loan, you must either be an eligible graduate or professional student, or you must be a parent with a child who is an eligible student and is still your dependent. Your family does not need to demonstrate financial need. You must pass a credit check to obtain the loan without a co-signer. Interest on a PLUS Loan begins accruing immediately and repayments must begin within 60 days of the borrowing. For loans disbursed after June 30, 2008, parents can elect to postpone repayment until six months after their child for whom the loan was borrowed fails to carry at least one-half the normal full-time workload. Graduate students can also elect to defer repayment for this same time period.

Proceeds from a PLUS Loan are paid directly to the school school from the lender or federal government. The school will apply the funds to the student's tuition account, with any excess applied to other expenses, retained as a credit on your account, or refunded to you or the child.

The interest rate on PLUS Loans originating prior to July 1, 2006 adjusts annually on July 1 based on Treasury Bill rates and other factors. The rates on these loans may not go above 9.00% in any future year. Loans originated in periods prior to July 1, 1998 are subject to different rates and limits. PLUS Loans for which the first disbursement is made after June 30, 2006 are fixed-rate loans. Loans made under the FFELP have a fixed 8.5% interest rate, while Federal Direct PLUS Loans have a fixed 7.21% rate.

When taking out a PLUS Loan, you will be required to pay an origination fee of 4.264% the loan amount for loans taken out between October 1, 2017 and September 30, 2018, and 4.248% for loans taken out between October 1, 2018 and September 30, 2019. This fee is typically deducted from the loan disbursement.

The repayment period is 10 or more years depending on which repayment plan you qualify for.

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