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Federal Direct PLUS (PLUS) Loans are low-interest loans available to graduate and professional students (to finance their own education) and parents of dependent undergraduate students (to help finance the students' education). A PLUS loan is intended to supplement any Direct subsidized or Direct unsubsidized loan for which a student is eligible, to help cover the cost of attendance.
TG provides a brief overview of Federal Direct PLUS Loans, including:
A Federal Direct PLUS Loan is a loan made by the U.S. Department of Education (ED) to an eligible student (or an eligible parent borrowing on behalf of his or her eligible dependent student) through the school. ED and the school determine the student's eligibility (and for a parent borrower, the parent's eligibility) from data that the student provided on the Free Application for Federal Student Aid (FAFSA).
The school determines the amount of Federal Direct PLUS Loan funds that the student (or parent) may borrow, considering the student's cost of attendance (COA) and other estimated financial assistance. Each school determines the COA — an estimate of that student's educational expenses for the period in which the student is enrolled. A student's COA generally is the sum of the following:
A Federal Direct PLUS Loan is available to a graduate or professional student, or the parent of a dependent undergraduate student. A borrower must pass a credit check and be a U.S. citizen or eligible noncitizen to qualify. In the case of a parent borrower, the dependent student for whom the parent is borrowing must meet the eligibility requirements for federal student aid.
A borrower may not qualify if he or she has adverse credit, has defaulted on a federal education loan, owes an overpayment on other federal student aid, has been convicted of a drug-related offense while receiving federal student aid, or is incarcerated. A borrower also may be ineligible if, while receiving federal student aid, he or she has been convicted of or has pled nolo contendere (no contest) or guilty to a crime involving fraud in obtaining federal student aid funds and has not completed the repayment of such funds.
Full details on eligibility requirements are provided on the Federal Direct PLUS Loan Application and Master Promissory Note (MPN).
Federal law requires ED to perform a credit check before approving a Federal Direct PLUS Loan. Having no credit history is not considered adverse credit. However, a borrower will generally be unable to obtain a Federal Direct PLUS Loan if he or she:
Credit checks and endorsers are generally handled through ED's application system.
If a borrower has an adverse credit history, he or she may obtain a creditworthy endorser in order to obtain a Federal Direct PLUS Loan. Contact the school or the Direct Loan Servicing Center for more information. After ED approves a Federal Direct PLUS Loan, ED will send the borrower a disclosure statement providing details and terms of the loan. This disclosure becomes part of the MPN, so the borrower is encouraged to keep this document until the loan is paid in full. Contact the Direct Loan Servicing Center with any questions.
The interest rate on a Federal Direct PLUS Loan made on or after July 1, 2006, is fixed at 7.9%.
There are two exceptions to the interest rate charged on Federal Direct PLUS Loans.
Contact the Direct Loan Servicing Center for more information on these exceptions.
Federal law requires that an origination fee be charged for each Federal Direct PLUS Loan made. The law specifies the maximum amount of the fee and authorizes ED to deduct the fee from the loan principal. This fee is deducted from the loan proceeds when the money is sent to the student's school. For a Federal Direct PLUS Loan, the origination fee is at least 4 percent of the loan principal.
A parent applying for a Federal Direct PLUS Loan to fund his or her dependent student's higher education must complete a Federal Direct PLUS Loan Application and Master Promissory Note (MPN). A borrower can get a paper MPN from the dependent student's school or the school may ask the parent to complete an MPN online at StudentLoans.gov. In addition, the dependent student for whom the parent is seeking a Federal Direct PLUS Loan must also complete the Free Application for Federal Student Aid (FAFSA).
A graduate or professional student must complete the FAFSA and the school must determine his or her eligibility for a Direct unsubsidized loan before the student may apply for a Federal Direct PLUS Loan. The student can complete the FAFSA online at www.fafsa.ed.gov. For assistance with the FAFSA process, call TG Customer Assistance at (800) 845-6267.
After the student submits the FAFSA, ED determines his or her expected family contribution (EFC, calculated according to federal law), and the school determines the student's financial aid award package considering the student's cost of attendance, EFC, and other estimated financial assistance. This package will generally include (according to the student's eligibility) federal, state, or institutional grants or scholarships, the maximum amount of Direct unsubsidized loan funds that the student may borrow, and the amount of Federal Direct Student PLUS Loan funds that the student may borrow. The student may accept the amount offered or a lesser amount. The student then completes a Federal Direct PLUS Loan Application and Master Promissory Note (MPN). The student can get a paper MPN from his or her school or the school may ask the student to complete an MPN online at StudentLoans.gov.
Generally, one MPN will cover all of the Federal Direct PLUS Loans borrowed for the student's higher education. However, there may be circumstances under which the borrower is required to complete more than one MPN. For instance, if a parent borrower has more than one dependent in school at the same time, he or she must complete a separate MPN for each student. In any case, the school will inform a borrower of the need for more than one MPN. A borrower may also request a new MPN any time he or she borrows. If a borrower does not want to receive more than one loan under an MPN, he or she must notify the school or the Direct Loan Servicing Center in writing.
ED disburses Federal Direct PLUS Loan funds electronically directly to the student's school. In most cases, the school will deliver loan funds in two equal amounts — half at the beginning of the academic year and half midway through the academic year.
The school may deliver some or all of the loan money by crediting it to the student's account at the school, or may give it to the borrower directly by check or other means. The Direct Loan Servicing Center will notify the borrower in writing each time the school delivers part of the loan money.
A graduate or professional student who has not previously received a Federal Direct PLUS Loan or a FFELP PLUS Loan must receive entrance counseling before the school can make the first disbursement of the loan.
The maximum Federal Direct PLUS Loan amount is equal to the student's cost of attendance minus other estimated financial assistance (including Federal Direct Stafford Loans) that the student has been or will be awarded for the period of enrollment. The school determines the amount a borrower is eligible to borrow and informs the borrower of the eligible Federal Direct PLUS Loan amount through an award letter. The borrower may accept a loan amount equal to or less than this eligible amount. The school must certify the student's and borrower's (if different from the student) eligibility before ED approves a Federal Direct PLUS Loan.
The school may adjust the loan amount if the student's or borrower's financial circumstances or the student's enrollment status changes. For example, if there is a change to the student's cost of attendance or the student receives additional financial aid funds, the school may be required to adjust the amount of the Federal Direct PLUS Loan.
Before the loan money is delivered to the borrower, he or she may cancel all or part of the loan at any time by notifying the school.
After the Federal Direct PLUS Loan money is delivered to the borrower, he or she may cancel all or part of the loan within 120 days of the date the school delivered the loan money (by crediting the student's account at the school, by paying it directly to the borrower, or both) by informing the school. If the borrower informs the school within the specified timeframe that he or she wishes to cancel all or part of the loan, the school will notify ED of the cancellation or the reduced loan amount. If the borrower asks the school to cancel all or part of his or her loan outside the specified timeframe, the school may process the borrower's cancellation request, but it is not required to do so.
For a parent borrower, the first payment of a Federal Direct PLUS Loan is generally due within 60 days of the final loan disbursement. The Direct Loan Servicing Center will notify the borrower of the date the first payment is due. The borrower may prepay (pay more than his or her established monthly payment) all or part of a loan at any time without penalty.
A borrower can choose from several repayment plans that are designed to meet the needs of almost any borrower and can switch repayment plans at least annually or more frequently if ED agrees. For a graduate or professional student, repayment plans are explained in more detail during the student's exit counseling session.
More details on repaying a Federal Direct PLUS Loan are provided on the Federal Direct PLUS Loan Application and Master Promissory Note (MPN) and the Borrower's Rights and Responsibilities Statement.
For a parent borrower, payments on a Federal Direct PLUS Loan can be deferred* while the parent is enrolled in school on at least a half-time basis. In addition, for a Direct Parent PLUS Loan that is first disbursed on or after July 1, 2008, the parent borrower can request to defer payments:
See more details about Federal Direct PLUS Loans for parents at ED's Direct Loans website.
For a graduate or professional student borrower, payments on a Direct Student PLUS Loan can be deferred* while the student is enrolled in school on at least a half-time basis. In addition, the student can defer payments on a Direct Student PLUS Loan that is first disbursed on or after July 1, 2008, for the first six months after he or she drops below half-time enrollment.
If the borrower has been granted an in-school deferment for his or her FFELP loans for the same period of time for which he or she is seeking deferment for his or her FDLP loans, he or she should contact the Direct Loan Servicing Center.
* A deferment is a temporary postponement of a borrower's monthly loan payment. During deferment of an unsubsidized loan, such as the Federal Direct PLUS Loan, principal payments are postponed but interest continues to accrue, and this accrued interest will be added to the principal balance, or capitalized, at the end of the deferment period, increasing the total amount that the borrower owes.