PLUS loan – How do they work?

Different types of Federal and private student loans are available in the market in order to help students pursue their higher education. One of the popular types of student loans is the Federal Parent PLUS loans. These cash loans no credit check are available to the parents of the undergraduate students who are pursuing undergraduate courses. The funds from these loans can be used to cover the school and education related expenses of the students. These loans are available at a fixed interest rate of 6.41%. In order to get this loan, the student must be enrolled at least half time in the college and the parents should also pass the credit check.

Facts about Parent PLUS loans

Here are some of the basic facts about Parent PLUS loans. Let’s take a look at them:

  • Parents can take out this low interest loan in order to help pay for the education of their child. Moreover, these loans are federally guaranteed.
  • These loans are a great way to fill out the gap of funds resulting after you take out Stafford loans and other scholarships.
  • These loans will help the parents borrow the total cost of undergraduate education which will include room and board, tuition, other school expenses, etc.

Applying for Parent PLUS loans

These loans are non-need based loans. Thus, in order to get this loan, the students or the parents will not have to show any kind of financial hardship. The lender will only check whether or not the parents have an adverse credit. People with adverse credit will not qualify for this loan. In order to get the personal loans for bad credit, the eligible student will have to fill out the FAFSA Financial Aid Application form. You will get this form from the financial aid office of the school. These loans require no asset as collateral but will require you to pay 3% origination fee and 1% federal default fee. Apart from this, you will be able to receive a 0.25% repayment interest rate credit if you opt for automatic debit from bank account to pay off the loans.  In some cases, the interest payments that you make on the loan will be considered as tax deductible.

Amount that can be borrowed by the parents

You cannot borrow an unlimited amount on the Federal Parent PLUS loans. There are yearly borrowing limits. Here you should note that the yearly limit on PLUS loan should be somewhere equal to the difference between the cost of attendance and the other financial aids received by the student. Let’s take an example. Let’s say that the cost of attendance of a student is $7,000 and he/she receives $3,500 in other financial aid. In that case, the parent will be able to borrow not more than $3,500 as a Parent PLUS loan. The loans funds will be directly sent to the school by the U.S. Department of Education. The funds are mainly sent in two instalments. The funds will be used to pay all your educational expenses and if there is any excess amount left, then the funds will sent to the parents through check.

Hope now you have a clear idea about what PLUS loans are and how it works.

Comments are closed.