What is a Federal Direct PLUS Loan?
The U.S. Department of Education administers a loan program for students called the Federal Direct Parent (PLUS) Loan. Parents can borrow a PLUS Loan to help pay for student educational expenses if the student is a dependent, undergraduate enrolled at least half-time in an eligible program at an eligible school. Parents must be creditworthy.
How do my parents apply for a PLUS Loan?
Step 1: Students and parents must complete the Free Application for Federal Student Aid (FAFSA).
*In order to electronically sign your form, you will need an FSA ID. If you do not have an FSA ID, you may create one here: Create an FSA ID.
Step 2: Go studentaid.gov. Have your parent sign in to their Account Dashboard using their FSA ID.
Step 3: Under the “Checklist” section select “I’m A Parent”. In the dropdown menu select “Apply for a Parent PLUS Loan”.
Step 4: After completing the Parent PLUS Loan application. Select “Complete MPN (Loan Agreement) for Parent PLUS Loan” or Master Promissory Note.
* You may find the MPN under the “Checklist” or “Complete Aid Process” sections
How much can my parent(s) borrow?
The annual limit on a Federal Direct Parent (PLUS) Loan is equal to LMU’s Estimated Cost of Attendance minus any other financial aid you receive. For example, if your cost of attendance is $10,000, and you receive $6,000 in other financial aid, your parents can borrow up to $4,000.
What is the interest rate?
The Bipartisan Student Loan Certainty Act of 2013 sets the annual interest rate on Direct PLUS Loans at the rate on high-yield 10-year Treasury notes plus 4.6%, but caps that rate at 10.5%. As a result, rates are expected to change annually. Parents that borrow the PLUS Loan over multiple years will have a set of fixed-rate loans, each with a different interest rate.
- For the 2021-2022 academic year, the PLUS Loan interest rate is 6.28% for loans disbursed after July 1, 2021.
What are the fees?
The Direct PLUS Loan program requires an origination fee to be deducted from each disbursement. The net disbursement is the gross loan amount, less origination fees.
- 4.228% for loans disbursed on or after October 1, 2020 and before October 1, 2022
Can more than one parent borrow a PLUS loan on my behalf?
Yes. One or both parents may apply and borrow a PLUS loan. If a student's parents are divorced, both the custodial and non-custodial parent may borrow a PLUS loan for their dependent, undergraduate student. A step-parent may only borrow a PLUS loan if they are married to the custodial parent and their financial information was reported on the FAFSA.
Adverse Credit History
Credit history is a major factor in being approved for this loan. To qualify for a PLUS loan, you cannot have an adverse credit history. Credit history is a summary of your financial strength, including your history of paying bills and your ability to repay future loans. Your credit history may be considered adverse if you are experiencing any of the following credit conditions:
- Bankruptcy discharge within the past five years.
- Voluntary surrender of personal property to avoid repossession within the last five years.
- Repossession of collateral within the last five years.
- Foreclosure proceedings started.
- Foreclosure within the last five years.
- Conveying your real property that is subject to a mortgage (by deed) to your lender to avoid foreclosure (deed instead of foreclosure).
- Accounts currently 90 days or more delinquent.
- Unpaid collection accounts.
- Charge-offs/write-offs of federal student loans.
- Wage garnishment within the last five years.
- Defaulting on a loan, even if the claim has been paid.
- Lease or contract terminated by default.
- County/state/federal tax lien within the past five years.
- To review your credit history, we strongly recommend that you obtain credit reports by contacting:
The Fair Credit Reporting Act (FCRA) requires each of these agencies to provide you, at your request, with a free copy of your credit report once every twelve (12) months. Please visit annualcreditreport.com or Federal Trade Commission - Consumer Information for further guidance.
When does the loan repayment begin for my parent(s)?
The borrower has several options when repayment begins. Borrowers may begin repayment on the PLUS loan either 60 days after the loan is fully disbursed, begin repayment after your student ceases to be enrolled on at least a half-time basis, or begin repayment six months after your student graduates or ceases to be enrolled on at least a half-time basis. Interest will accrue during periods of deferment. Before borrowing the PLUS loan, you should take advantage of the Department of Education's Direct Loan Repayment Plan calculator. Parent Direct PLUS Loan borrowers may only choose from the standard, extended, or graduated repayment options.
We will report information about your loan to nationwide consumer reporting agencies (credit bureaus) and the National Student Loan Data System (NSLDS) on a regular basis. This information will include the disbursement dates, amount, and repayment status of your loan (for example, whether you are current or delinquent in making payments). If you default on a loan, we will report this to nationwide consumer reporting agencies. Your loan will be identified as an education loan. Schools may access information in NSLDS for specific purposes that we authorize.
My parent borrowers' credit was not accepted. What are my options?
Endorser - The borrower can re-apply for a PLUS loan with an endorser who does not have an adverse credit history. An endorser is someone who agrees to repay the Parent PLUS Loan if the parent does not repay the loan. The PLUS Loan endorser cannot be the student. The endorser will be required to obtain a FSA ID. The endorser will then need to use a unique PLUS Endorser Code and URL provided by the borrower to complete the Endorser Addendum for the Parent PLUS Loan at studentloans.gov
Appeal - The borrower may appeal the adverse credit decision if they believe extenuating circumstances may exist. For more information, visit studentaid.gov.
Federal Direct Unsubsidized Federal Loan - Students whose parents are denied a PLUS loan may qualify to receive additional Unsubsidized Federal Loan.
Private (Alternative) Loan - Students may apply for a private (alternative) loan. We encourage private (alternative) loans to be borrowed as a last resort. Click here for more information.
What is the process of repaying unearned aid?
Once LMU has determined that a student has completely withdrawn, Return of Title IV Funds (Federal Financial Aid Policies) calculation will be performed within 30 days. LMU will notify the student in writing of their revised eligibility after the Return of Title IV Funds calculation is completed. If the student owes unpaid tuition and fees, the student will receive an updated invoice from the university.
The responsibility to repay unearned aid is shared by the institution and the student. Students might be required to return additional funds directly to the Department of Education. If this occurs, you will be notified in the written letter that is sent to you by Financial Aid.
What if there is a credit balance after the Return of Title IV Funds?
If a credit balance remains on the LMU student account after the Title IV return of funds calculation has been completed and all university charges are paid, the balance will be refunded to the student (or parent in the case of a Parent PLUS Loan). If the student would like the credit balance to be used to repay a student (or parent) educational loan, the student is responsible for using their credit to make payment to the loan servicer.