Federal Direct PLUS Loan
What are Direct PLUS Loans?
The Federal Direct Parent Loan for Undergraduate Students (PLUS) is available through the Direct Loan Program to help pay educational costs of their dependent undergraduate students.
A dependent child is defined as one who:
- Was born on or after January 1, 1990;
- Will not be working on a degree beyond a bachelor’s degree during the school year;
- Is not married;
- Does not have children or dependents who receive more than half of their support from him/her, now and through June 30, 2014;
- Is not determined to be any of the following: a homeless unaccompanied youth, an emancipated minor, in legal guardianship, an orphan or ward of the court, or was not a ward of the court until age 18;
- Is not a veteran of the U.S. Armed Forces
- Option to defer payment until student graduates or drops below half- time.
- A cost-effective alternative to depleting savings or retirement accounts, using current income or borrowing against home equity.
- The Fixed interest rate is 7.9%
- There is no prepayment penalty.
- The credit criteria are generally more lenient than for private loans.
- In cases of economic hardship, repayment may be deferred for up to three years.
- In the event of permanent disability or death of the borrower or student, your loan will be forgiven.
A credit worthy parent can apply for a loan each academic year for their dependent undergraduate student. Credit worthy parent is defined as natural, adoptive or step-parent. The student must be enrolled in school at least half-time and must maintain Satisfactory Academic Progress. The Financial Aid Office determines the amount of Direct PLUS loan eligibility in accordance with federal requirements.
Eligibility for the Direct PLUS loan depends on a modest credit check that determines if the parent has what is termed as “adverse credit history.” An “adverse credit history” is defined as being more than 90 days late on any debt or having any Title IV debt within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off.
As of July 1, 2008, new federal legislation allows parents to choose to defer payments on a Direct 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. In addition, Special Provision for Parents Delinquent on Mortgage Payments have been made that will allow parents eligible for the Direct PLUS loans even if, during the period January 1,2007 through December 31,2009, the parents are or were:
- No more than 180 days delinquent on a mortgage payment on primary residence
- No more than 180 days delinquent on any medical bill payments
- No more than 89 days delinquent on the repayment of “any other debt”
If a parent is denied for a Direct PLUS loan, then the dependent student may be eligible to borrow up to an additional $4,000 in Direct Unsubsidized loans if a freshman or sophomore and $5,000 if a junior or senior. Please note that if one parent is approved and another parent is denied for the same student, then the dependent student is ineligible for the additional Direct Unsubsidized Loans per federal regulations.
How Much Can Be Borrowed?
Parents may borrow up to their student’s total cost of attendance less other financial aid received such as grants and scholarships. On the student’s financial aid award letter, this is listed as a Direct PLUS loan, which will show you how much, could potentially be borrowed. The total cost of attendance is determined by the Office of Financial Aid based on an average cost for tuition, books, room and board, travel, and miscellaneous expenses for the academic year. It is important that each family fully understand how a Direct PLUS loan will impact them financially. Most financial experts advise that one should not incur debt (excluding mortgage debt) that results in total monthly payments (debt-to-income ratio) exceeding 20% of your monthly gross income.
The interest rate is fixed at 7.9%
For all Direct PLUS loans made between July 1, 2010 and June 30, 2011, the origination fee will be 4.00% of the loan amount.
What is the PLUS Process?
- A FAFSA must first be filed to establish initial PLUS loan eligibility at www.fafsa.gov
- Parents must then apply for the loan at www.studentloans.gov
- The application includes an online credit check conducted by the U.S. Department of Education, and the parent will need to e-sign the Master Promissory Note (this contract can be valid for up to 10 years as long as the parent borrows every 12 months).
- After requested by Berry College, the loan proceeds will be sent directly to the school.
- The loan disbursement will reflect the amount of the loan less origination fees (4%).
- The loan proceeds will be applied to the student's account to clear any balances. Any excess funds will be mailed to your permanent address or another address, if you have notified the Student Business Office of the other address.