Direct PLUS Loans: an option for college parents to help pay for their student’s education

The value of a good education is immeasurable. But the cost? Now that’s a different matter – sometimes up to a six-figure matter. That’s why any resource that can help pay for your student’s education is a plus. For parents who want to help their students pay for their college education – but don’t have the resources right now – Direct PLUS Loans are an accessible, flexible option.

What are PLUS Loans?

A PLUS Loan is a student loan offered to parents through the U.S. Department of Education, not a bank or financial institution. These loans can cover up to the total cost of your student’s attendance at college, minus any other financial aid you receive.  The school determines the amount you can borrow.

Each loan covers an academic year (you can apply each year), and it’s paid in two payments through the school. Excess money -- after covering tuition, fees, room and board -- can be disbursed to you or your student to pay for other education expenses, like books, supplies, transportation or computer costs.

Eligibility requirements

Direct PLUS Loans aren’t based on financial need or income, but the following four criteria must be met to apply:

• The borrower must be the student’s biological or adoptive parent (although step parents may be eligible as well).
• The student must be a dependent as well as enrolled at least half-time in a school that participates in the Direct PLUS Loan program. To be considered dependent, your student must be under 24 years old, unmarried and have no legal dependents.
• You must have an acceptable credit history. In cases that the parent doesn’t pass the credit check, he/she must prove extenuating circumstances or have an endorser to co-sign on the loan.
• Both student and parent must be U.S. citizens or eligible noncitizens and not be in default on any federal education loans or grants.

For more detailed information on requirements for Direct PLUS Loans, check out the government web site here.

The nuts and bolts

The interest rate for Direct PLUS Loans is fixed at 7.9%, charged from the date of the first disbursement until the loan is paid in full. There is also an origination fee, which is a principal amount of each loan that you receive, taken out before you receive any loan money.

To apply, parents must complete the PLUS application as well as the master promissory note (MPN). Terms, conditions and payment documents are included in the MPN, which will only need to be filled out once, regardless of how many loans you apply for in a 10-year period. If you’re applying for loans for separate students, each student will need an MPN. To complete an MPN online, go to the Department of Education site to receive an issued PIN.

Repayment is due by the borrowing parent(s) 60 days after the final disbursement, although they may defer until six months after the student ceases to be at least a half-time student. Generally, borrowers have between 10-25 years to pay the loan.

More information

In addition to Direct Loans for parents, there are several options for students to borrow money through the U.S. Department of Education. Click here to read more.