Federal Direct Parent PLUS Loan
Parents of Dependent undergraduate students can borrow funding in addition to their student’s financial aid awards. Parents can borrow to cover costs not already covered by their student’s financial aid awards up to the full average cost of attendance. Unlike the Stafford Loan, the Parent PLUS Loan eligibility is based on the borrower’s credit worthiness.
- Parent PLUS Loan Definition Chart
- Completion Requirements
- PLUS Loan vs. Private Loan
- Complete a PLUS Master Promissory Note
Parent PLUS Loan Definition Chart
Repayment |
Begins when the loan is fully disbursed. The first payment is generally due within 60 days of the final disbursement. |
Deferment |
Parents can choose to defer payment on a PLUS loan until six months after the date the student ceases to be enrolled at least half time. They can pay accruing interest monthly or quarterly, or allow interest to be capitalized quarterly. |
Interest Rate |
For loans disbursed after July 1, 2008, the interest rate is fixed at 7.9%. |
Interest Subsidy |
The borrower (parent) is responsible for interest that accrues from the date of disbursement. |
Fees |
Origination Fee: 4.0% The government pays 1.5% of your origination fee at disbursement. You are eligible to keep this benefit as long as you make the first twelve monthly payments of your student loan on time. |
Annual Loan Limit |
Up to the Cost of Attendance, minus other financial aid and resources. |
Parent PLUS debt |
Retrieve loan information at NSLDS Student Access. |
Credit Worthiness |
The borrower (parent) cannot be 90 days or more delinquent on the repayment of any debt. Lender standards will vary and some may be more stringent than others. |
Completion Requirements
- Parent borrower must complete the MNU Federal Parent Loan Data and Credit Balance Directive each year and for any increased amounts needed during the year. (Be sure to use the same borrower who completed the PLUS Master Promissory Note.)
- If you have borrowed a PLUS Loan through MNU previously, you will want to seek the new year pre-approval for the loan at the same time you complete the form above.
- All borrowers must complete a PLUS Master Promissory Note.
- Parent must have a promissory note for each student needing a PLUS Loan.
- Student must maintain all eligibility requirements, such as Satisfactory Academic Progress and at least half time enrollment.
PLUS Loan vs. Private Loan
Currently the Federal law sets the maximum interest rate on the Federal Direct PLUS at 7.9% for loans disbursed after July 1, 2008. Unlike the private loans this rate is a fixed rate. There is a net total of 2.5% origination fees deducted from the proceeds of the Parent PLUS loan. Private loans can appear to offer a lower rate; however, any rate you can find is temporary at best and will change according to the changes in LIBOR and PRIME published rates. MNU’s experience historically has been interest rates and origination fees on private loans track much higher than the Parent PLUS loan.
Parent PLUS loans convert to repayment 60 days after the loan is fully disbursed. The actual payment is based on the amount owed. The standard repayment term for federal student loans is 10 years. The monthly payment can be estimated at $12.00 per month per $1,000 owed. For example a $12,500 loan based on 10 years repayment at 7.9% is an estimated payment of $150 per month. The calculation is (12,500/1000) *12.00 = $150 monthly payment. The lowest minimum monthly PLUS payment is $50 a month.
The Parent PLUS loan does offer a repayment grace period and deferment as there is with Stafford and most Private loans. Parents can choose to defer their PLUS loan payments while their student is attending school and capitalizing the interest quarterly that accrues while the payment is deferred. However, delaying the start of repayment will increase your overall cost.
PLUS loans can be consolidated but not with your student’s Stafford or Perkins loans. A parent can only consolidate their own Stafford or Perkins loan debt with a Parent PLUS loan. Private loans cannot be consolidated with any federal loan consolidation programs.
Finaid.org provides a great deal of information about PLUS loans and other loan types on their website. MNU recommends that you take the time to read the information contained there. Included in their information is lender information that you can use in addition to any lender information published on our website.
