Paying for their children’s education is a concern that keeps parents awake at night. Sometimes savings programs can not keep up with the rising costs of a college education. In an attempt to assist parents coping with college costs the federal government has come up with the PLUS Loan programs. PLUS Loans are federal loans available to the parents of dependent undergraduate college students. In order for a dependent student to qualify for certain loans, their parents must be unable to obtain a PLUS loan. A PLUS loan differs somewhat from other federal loans in that the maximum loan amount can be up to the actual “cost of attending”. Most federal loans may max out far below this actual cost. While federal PLUS loans have no income or asset requirements for parents of eligible students, they do require that the parents can pass a credit check, show extenuating circumstances or be able to provide a cosigner who will repay the loan if the parents are unable. PLUS loans are not subsidized by the government.

Direct PLUS and FFEL PLUS

Direct PLUS Loans are made by the federal government; the federal government is the lender. The school assists the federal government in administering the program by providing the application, processing the application and distributing the funds. FFEL (Federal Family Education Loan) PLUS loans are made by private lenders. A list of private lenders that participate in the FFEL loan program can be obtained from the school or by contacting the state guaranty agency. The Federal Student Aid Information Center is the best source of information and applications for all federal student loans and may be contacted by calling 1-800-433-3243. They can also provide the address and phone number of a states guaranty agency.

Interest Rates

All PLUS loans have a low variable interest rate which may not exceed 9% during the life of the loan. Parents may take up to ten years to repay these loans. And as previously stated there are no minimum income requirements and no collateral is required. Even if parents are able to obtain funding for their child’s education from a source such as a home equity loan, it would be wise to investigate these loans first. PLUS loans may also be used to “make up the difference” between actual costs and funds the student receives from other financial aid sources. Lenders do charge certain fees for processing these loans, as much as 4% of the actual loan, but there are tax incentives and it is sometimes possible to postpone repayment. For more information about PLUS loans visit Student Aid on the Web or contact the schools financial aid office.