Federal PLUS/Parent Loans
Under new regulations, the ability of parents to borrow through the Parent or PLUS Program to help meet the educational costs of their student has improved.
The rules governing the definition of adverse credit history have been changed by:
- Reducing the period of time that the U.S. Department of Education considers for prospective borrowers from five years to two years for adverse credit events.
- It will also exempt up to $2,085 against an applicant.
Borrowers who were initially denied, but subsequently approved by meeting the "extenuating circumstances or obtaining an endorser, must complete PLUS Loan counseling provided by the U.S. Department of Education at wwww.studentloans.gov.
Meeting the cost of attending college can involve many resources: parent and student savings, diverting current income to make payments and financial aid. For some dependent undergraduate students, the amount of financial aid, savings and income may not be sufficient to pay for all college expenses. Parents are eligible to help their children meet college costs through the Federal PLUS Loan Program.
Two additional options are available on the UM-Dearborn PLUS Loan Application for Parents:
- Parents can authorize to have any excess funds beyond tuition to be released to the student directly
- Students can affirm that they wish to borrow additional Federal Direct Unsubsidized Loan if the PLUS Loan is declined
What are PLUS Loans?
PLUS Loans allow your parents to borrow funds for your educational expenses if you are a dependent undergraduate enrolled at least half-time (6 credits minimum.) Interest on PLUS Loans accrue from the date of disbursement.
How do my parents apply?
To start the process at UM-Dearborn, you and one of your parents must complete the Federal Direct Parent Loan application at the top of this page and submit it to the Office of Financial Aid for processing. The loan will be originated and a promissory note will be available for the parent borrower to sign online at the studentloans.gov website.
The parent borrower is also required to complete the FAFSA (Free Application for Federal Student Aid) with the student to be eligible to borrow.
Are there borrowing requirements that my parents must meet?
A Direct Parent Loanís approval will be based on the credit worthiness of the parent borrower. Parents can obtain a co-signer for this loan. Parents must be U.S. citizens or eligible non-citizens and cannot be in default or owe a refund to any Federal student aid program.
Students must be enrolled at least half-time (6 credits) and meet the general eligibility requirements for Federal financial aid.
How much can my parents borrow?
The yearly limit on a Parent/PLUS Loan is equal to your Cost of Attendance as established by the university, minus any financial aid or resources.
Do my parents get the money or do I?
The proceeds of a Direct Parent/PLUS Loan will be applied to your tuition account electronically. On the Federal Direct PLUS application, your parent borrower can authorize the release of an excess loan funds to the student. Students who have enrolled in the direct deposit program with the Cashiers/Student Accounts Office will receive their refund as a deposit to their checking or savings account. Parents who do not authorize the release of funds to the student will receive a refund check mailed from the university. Like all educational loans, all funds must be used for educationally-related expenses.
Can my parents cancel the loan if they change their minds?
Yes. When the disbursement of the loan funds has been made, a Notice of Disbursement/Right to Cancel form detailing this transaction will be sent to your home. Your parents may cancel all or a portion of their loan if they inform the Office of Financial Aid within 14 days of disbursement.
Whatís the interest rate on PLUS Loans?
The PLUS Program has a variable fixed rate of 6.89% for loans in 2015-2016.
Are there any loan fees?
There is a nominal fee deducted from the proceeds of the loan when it is disbursed. If your parents do not make their loan payments when scheduled, they could be charged late fees or collection costs.
Are there repayment options?
In the Direct Loan Program, parents may select to repay from the Standard, Extended, or Graduated Repayment Plan.
In addition, parents may elect to defer payment until the dependent student ceases to be enrolled at least half-time. Interest will continue to accrue during the deferment period if it is not paid by the parent. Unpaid interest will be capitalized (become new loan principal).
Can they get any tax credits for using a PLUS Loan to help me with my college expenses?
There are tax incentives for certain higher education expenses. Parents may wish to consult with their tax advisor or review IRS Publication 970 at the IRS website at www.irs.gov for additional information.
Can the loan repayments be postponed?
Under certain circumstances, your parents can receive a deferment or a forbearance on their loan. Generally, the conditions for eligibility and procedures for requesting a deferment or a forbearance that apply to the Direct Stafford Loans also apply to PLUS Loans. The most common options used are for a student enrolled in college on a half-time basis, economic hardship or general forbearance. Your parents, however, will be charged interest during periods of deferment or forbearance. If they donít pay the interest as it accrues, it will be capitalized.
Can a PLUS Loan be discharged?
There are certain conditions that allow for loan discharge. Your parentsí loan cannot be canceled because you didnít complete your program of study at UM-Dearborn or because you didnít obtain employment after completing your studies.
Most questions can be answered by the staff at the Direct Loan Servicing Center's toll-free telephone number at 800-848-0979.
My parents are willing to borrow, but what happens if they donít meet the credit qualifications?
If a parent is denied for a Parent/PLUS Loan and is unable to obtain a co-signer, there is an alternative for the student. If the student wishes to borrow, he/she will be allowed to borrow additional funds in the Federal Direct Unsubsidized Loan Program. Studentsí eligibility is limited by grade level, cost of attendance and the amount of financial aid and resources. The student is not required to demonstrate credit-worthiness and the loan is subject to the terms and conditions of existing loans.
Students may indicate their willingness to borrow additional funds through the Federal Direct Unsubsidized Loan Program on the Direct Loan PLUS Form.
If a student has not completed a FAFSA (Free Application for Federal Student Aid) with his/her parents, this option will not be available to him/her until the FAFSA has been filed and a financial aid application has been completed in the Office of Financial Aid.