OhioMentor - Financial Aid

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Four Steps to Financial Aid
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Federal PLUS Loan

PLUS Loans enable parents with good credit histories to borrow to pay the education expenses of each child who is a dependent undergraduate student enrolled at least half time. PLUS Loans are available through both the Direct Loan and Federal programs.

Are there any borrowing requirements that parents have to meet?

To be eligible to receive a PLUS Loan, your parents generally will be required to pass a credit check. Most lenders offer a PLUS prescreen option which allows you to determine your eligibility before applying for the loan.
If they don't pass the credit check, they might still be able to receive a loan if someone, such as a relative or friend who is able to pass the credit check, agrees to endorse the loan, promising to repay it if your parents should fail to do so.
Your parents might also qualify for a loan even if they don't pass the credit check if they can demonstrate that extenuating circumstances exist.
You must meet the general eligibility requirements for federal student financial aid. Your parents must also meet some of these general requirements. For example, your parents must meet citizenship requirements and may not be in default or owe a refund to any Student Financial Aid Program.

How much can parents borrow?
The yearly limit on a PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. For example, if your cost of attendance is $6,000 and you receive $4,000 in other financial aid, your parents could borrow up to, but no more than, $2,000.

Your school can refuse to certify your parents' loan application, or can certify a loan for an amount less than they would otherwise be eligible for, if the school documents the reason for its action and explains the reason to your parents in writing. The school's decision is final and cannot be appealed to the U.S. Department of Education.

What is the interest rate on PLUS Loans?
The interest rate is variable, but it will never exceed 9%. The interest rate is adjusted each year on July 1. Your parents will be notified of interest rate changes throughout the life of their loan(s). Interest is charged on the loan from the date the first disbursement is made, until the loan is paid in full.

How will your parents be paid?
For a Direct PLUS Loan, the U.S. Department of Education will send the loan funds to your school. For a Federal PLUS Loan, the loan funds will be sent to your school by the lender. In most cases, the loan will be disbursed in at least two installments (no installment can be greater than half the loan amount). The funds will first be used to pay for your tuition and fees, room and board, and other school charges. If any loan money remains, your parents will receive the amount as a check or in cash, unless they authorize it to be released to you or to be put in your school account. Any remaining loan money must be used for your education expenses.

Is there any charge for a PLUS Loan?
Your parents will pay a fee of up to 4% of the loan. This fee is deducted proportionately each time a loan payment is made. For a Federal PLUS Loan, a portion of this fee goes to the federal government to help reduce the cost of the loans. However, some lenders may offer discounts and rebates on these fees. For a Direct PLUS Loan, all of this fee goes to the government and a portion goes to the guaranty agency to help reduce the cost of the loans. Also, if your parents don't make their loan payments when they're scheduled, they may be charged collection costs and late fees.

When do your parents begin repaying a PLUS Loan?
Generally, repayment must begin within 60 days after the final loan disbursement for the academic year. There is no grace period for these loans. This means that interest begins to accumulate at the time the first disbursement is made. Your parents must begin repaying both principal and interest while you're in school.

Is it ever possible to postpone repayment of a PLUS Loan?
Yes. Under certain circumstances, your parents can receive a deferment or forbearance on their loan. Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance that apply to Stafford Loans also apply to PLUS Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance.

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DIRECT PLUS LOANS

How do your parents apply for a Direct PLUS Loan?
Your parents must complete and submit a Direct PLUS Loan Application and Promissory Note, which are available from your school's financial aid office. Your parents should also contact the college's financial aid office for any additional procedures.

Do your parents need to find a lender?
No. Under the Direct Loan Program, their lender will be the U.S. Department of Education. Your school assists the federal government in administering the Direct Loan Program by distributing the loan application, processing the loan, and disbursing the loan funds.

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FEDERAL PLUS LOANS

How do your parents apply for a Federal PLUS Loan?
Your parents must complete and submit a PLUS Loan application (available from your school, a lender, or your state guaranty agency). Your parents should also contact the college's financial aid office for any additional procedures. After the school completes its portion of the application, it must be sent to a lender for evaluation.

Your parents should contact your school or the guaranty agency that serves your state.

How do your parents pay back the loan?
The lender will arrange a repayment schedule. Parents can usually choose the Standard, Extended, or Graduated Repayment Plan. Depending on the lender, additional repayment plans may be available. FFEL PLUS Loans can also be consolidated. Check with your lender to find out if loan consolidation is for you.

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