The U.S. Department of Education administers the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan Program (Direct Loan or DL). Both the FFEL and Direct Loan programs consist of what are generally known as Stafford Loans (for students) and PLUS Loans (for parents).

Parents can apply for a PLUS Loan to help pay your education expenses if you are a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. To apply, they must have an acceptable credit history.

How do my parents get a loan?
For a Direct PLUS Loan, your parents must complete a Direct PLUS Loan application and promissory note, contained in a single form available from your school’s financial aid office.

For a FFEL PLUS Loan, your parents must complete and submit a PLUS Loan application, available from your school, lender, or your state guaranty agency. After the school completes its portion of the application, it must be sent to a lender for evaluation.

Also, your parents generally will be required to pass a credit check. If your parents 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. An endorser promises to repay the loan if your parents fail to do so. Your parents might also qualify for a loan without passing the credit check if they can demonstrate that extenuating circumstances exist. You and your parents must also meet other general eligibility requirements for federal student financial aid.

How much can my parents borrow?
The yearly limit on a PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. If your cost of attendance is $6,000, for example, and you receive $4,000 in other financial aid, your parents can borrow up to $2,000.

Who gets my parents' loan money?
Either the U.S. Department of Education (for a Direct PLUS Loan) or your parents’ lender (for a FFEL PLUS Loan) will send the loan funds to your school. Your school might require your parents to endorse a disbursement check and send it back to the school. In most cases, the loan will be disbursed in at least two installments, and no installment will be greater than half the loan amount. The funds will first be applied to your tuition, fees, room and board, and other school charges. If any loan funds remain, your parents will receive the amount as a check or in cash, unless they authorize the amount to be released to you or to be put into your school account. Any remaining loan funds must be used for your education expenses.

What's the interest rate?
The interest rate is variable (adjusted annually on July 1), but it does not exceed 9 percent. For 2003-04, the interest rate for loans made on or after July 1, 1998 is 4.22 percent. Your parents will be notified of interest rate changes throughout the life of their loan. Interest is charged on the loan from the date of the first disbursement until the loan is paid.

Other than interest, is there a charge to get a PLUS Loan?
Your parents will pay a fee of up to 4 percent of the loan, deducted proportionately each time a loan disbursement is made. For a FFEL PLUS Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the PLUS Loan Program in your state) to help reduce the cost of the loans. For a Direct PLUS Loan, the entire fee goes to the government to help reduce the cost of the loans.

When do my parents begin repaying the loan?
Generally, the first payment is due within 60 days after the loan is fully disbursed. There is no grace period for these loans. 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.

How do my parents pay back these loans?
They’ll repay a FFEL PLUS Loan to a private lender or loan servicer. They’ll repay their Direct PLUS Loan to the U.S. Department of Education’s Direct Loan Servicing Center. To read more about repayment options under both programs, read the PLUS Loans section in the Student Guide, published by the Department of Education.

Is it ever possible to postpone repayment of a PLUS Loan?
Yes, under certain circumstances, your parents can receive a deferment on their loans.

If they temporarily can’t meet the repayment schedule, they can also receive forbearance on their loan, as long as it isn’t in default. During forbearance, their payments are postponed or reduced.

Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance apply to both Stafford Loans and PLUS Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance. If they don’t pay the interest as it accrues, it will be capitalized (that is, added to the principal amount of the loan, and additional interest will be based on that higher amount).

Can a PLUS Loan be discharged (canceled)?
Yes, under certain conditions. A discharge (cancellation) releases your parents from all obligation to repay the loan.

Your parents’ PLUS Loan can’t be canceled for these reasons: You didn’t complete your program of study at your school (unless you couldn’t complete the program for a valid reason—because the school closed, for example), you didn’t like the school or the program of study, or you didn’t obtain employment after completing the program of study.

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