Q. What is a PLUS loan?

A. The federal government offers several types of loans to assist parents and students in paying for college. Parents can borrow a PLUS Loan to help pay their child’s education expenses if the child is a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Parents can get either loan, but not both, for you during the same enrollment period. They also must have an acceptable credit history.

For a Direct PLUS Loan, the parent must complete a Direct PLUS Loan application and promissory note, contained in a single form that the student will get from her school’s financial aid office. For a FFEL PLUS Loan, the parent must complete and submit a PLUS Loan application, available from the student’s school, lender, or their state guaranty agency. After the school completes its portion of the application, it must be sent to a lender for evaluation.

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. The interest rate is variable (adjusted annually on July 1), but it does not exceed 9 percent. For 2004-05, the interest rate for loans made on or after July 1, 1998 was 4.17 percent. 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.

Return to Frequently Asked Questions about Saving for College.

Aug. 25, 2005.