This loan is an alternative funding source for parents who need additional funding to meet the cost of education. Financial need is not required to be eligible to borrow a PLUS Loan.

Parents (natural, adoptive or legal guardians) may borrow up to the cost of education minus other aid for each dependent undergraduate student who is enrolled at least half-time. This loan is made by a bank, savings and loan association, credit union or other lender and is insured by a state guarantee agency.

The interest rate on PLUS loans after July 1, 2006 is fixed at 8.5%. Interest accrues from the date of disbursement. The Federal government does not pay the interest on PLUS loans while the student is enrolled in school.

Repayment of principal and interest begins within 60 days after the date of disbursement although principal payments may be deferred under certain circumstances. Interest continues to accrue and must be paid during periods of deferment or forbearance. Lenders also have options regarding repayment methods.

The PLUS loan borrower (or the cosigner if required) must be determined credit worthy by the lender.

New:  The Ensuring Continued Access to Student Loans Act of 2008 (H.R. 5715) has some special provisions for PLUS loan borrowers:

Beginning July 1, 2008, parents may choose to defer payments on a PLUS loan until six months after the date the student ceases to be enrolled at least half-time.  Accruing interest could either be paid by the parent borrower monthly or quarterly, or be capitalized quarterly.

The bill also allows lenders to consider parents for PLUS loans even if, during the period January 1, 2007 through December 31, 2009, the parents had extenuating financial circumstances.  Parents should discuss these options with their lender.

Not sure if the PLUS loan is the right option for you?