PLUS Loans
PLUS loans are available for parents who are interested in acquiring additional funds to pay for their children's higher education. Two types of PLUS loans, Direct Loans and Federal Family Education Loans (FFELs), are available for parents; however, borrowers are limited to choosing one of these two types for each enrollment period.
The main difference between these two types of PLUS loans comes in examining the lenders. For Direct PLUS Loans, the federal government provides the loan directly, so the funds go from the U.S. Department of Education straight to the school and borrower. FFEL PLUS loans are slightly different in that the borrower interacts with a third-party lender, such as a bank or credit union, in order to receive approval for the funds. The federal government backs both types of loans, and both carry the same requirements, terms, and conditions.
PLUS loans are great resources provided by the government to help families with tuition expenses. While they may not offer as many benefits as student-directed loans, they do provide a few points of convenience that could make them preferable to other types of loans. For instance, although PLUS loans begin accumulating interest as soon as they're taken out, the borrower has the option of beginning repayment either 60 days after the loan has been disbursed or six months after the student has left school or dropped below half-time status.
Some of the other specific terms and conditions that exist for PLUS loans are included below:
Interest Rates
Loans taken out on or after July 1, 2006 carry a fixed interest rate of 8.5%. Loans taken out before this date have an adjustable rate that is capped at 9.0%.
Loan limits
Parents can borrow the full remaining cost of tuition after all other loans and financial aid have been applied to the balance. In other words, if a student owes $8,000 for a semester of tuition and is already receiving $3,000 in other student loans and financial aid, that student's parents can borrow up to $5,000 to cover the rest of the tuition expense.
