PLUS Loans- College Loans for Parents

PLUS loans are student loans that parents of college students can get in order to pay for education expenses for dependent undergraduate level students.  The students must be enrolled in college at least half-time.  One of the common questions parents and students have is what constitutes a student's dependency status.  A common misconception is the belief that if a student is not living at home, he or she is not a dependent student- but this is not the case.

Dependency status is determined by specific criteria, including date of birth, whether or not you are married or have a dependent child whom you provide more than half of his or her support,  whether or not you've been an orphan or ward of the court, and veteran status with the US Military.  Unfortunately, a college student cannot claim dependency status just because he or she has been living on their own for quite some time, or because the parents are not planning to assist the student in paying for college expenses.

Types of PLUS Loans

There are two types of PLUS loans, a Direct PLUS Loan and a FFEL PLUS Loan.  The Direct PLUS Loan requires that parents fill out the application and a promissory note from the college financial aid office. The FFEL PLUS Loan requires parents submit the PLUS loan application to the college and after the college completes a portion of the application it's then forwarded to a lender for evaluation.

While student loans typically do not take credit history into consideration, both the Direct PLUS and FFEL Plus loans for parents require a credit check.  If the parents are unable to pass the credit check, they can choose to get a co-signer to endorse the loan.

Parents can only apply for one of the parent college loans in each enrollment period per student.  So if the parents have two students in college, then they can apply for the Direct PLUS loan for one cihld and the FFEL Plus loan for the next child- but never both at the same time for the same student.

PLUS Loan Lenders

For parents applying for the Direct PLUS Loan, they do not need to find a lender as the lender will automatically be the United States Department of Education.  For parents applying for the FFEL program for their child's student loans however, they will need to find a participating lender of the program.  A list of agencies and participating lenders is available on the U.S Department of Education web site: www.ed.gov/programs/bastmp/sga.htm

Advantages of PLUS Loans

The primary advantage of parents obtaining PLUS loans to assist in financing their child's education is that it reduces the amount the student must borrow.  Additionally, the interest rates on PLUS loans are typically lower than interest rates that people can get from a personal loan they may consider obtaining to help a child finance their education.  Saving money on interest is a great reason to apply for one of the PLUS loans instead of using a traditional bank loan.

The Direct PLUS Loans disbursed after July 1, 2006 have fixed interest rates of 7.9%, while the FFEL Plus loans have fixed interest of 8.5%.