|
PLUS Loan
Deciding to Apply
Applying for a PLUS loan
Repaying Your PLUS Loan
PLUS In-School Forbearance
What type of loan is a PLUS Loan?
The PLUS loan is a credit-based loan that parents of undergraduate students and
graduate professional students can use to help pay for a child's educational
expenses. PLUS borrowers may use this loan to cover educational costs which
aren't covered by other financial aid (including grants, scholarships, and
other student loans). Depending on school policy, parents and
graduate/professional students can borrow PLUS loans through either a private
lender or through the federal government's Direct Loan Program.
What are the eligibility requirements?
To determine whether you are eligible for PLUS loans, in most cases the school
will require that the parent or the graduate professional student fill out a
Free Application for Federal Student Aid, or FAFSA. The FAFSA is available
through your financial aid office or on the web at
www.fafsa.ed.gov. Since the PLUS loan is a credit-based loan, the
borrower's credit report will be reviewed. However, even if you feel you will not
qualify, you may want to go through the approval process in order to be
eligible for substitute forms of aid. If you want to check ahead of time
whether you would be able to qualify for a PLUS loan,
click here to complete the eligibility form online, or call
1.877.804.3603
for an instant decision.
Other eligibility requirements for parents and graduate/professional students:
-
Must be the biological or adoptive parent for a dependent undergraduate student
or a graduate /professional student who is eligible for federal financial aid;
step parents are eligible if their assets were taken into account in
calculating the financial awardents
-
U.S. citizenship or permanent resident status of the U.S. or an eligible trust
territory
-
Must pass a credit check
Eligibility requirements for the student:
-
Must be enrolled at least ½ time in a degree or certificate program
-
Is a US Citizen or eligible
non-citizen
-
Is not currently in default on a Federal education loan or owe a refund on any
Title IV loan or grant
-
Has a high school diploma or equivalency
-
Makes satisfactory academic progress
-
Meets selective service requirements
What happens if I am denied a PLUS loan?
If you've applied for a PLUS loan and have been denied, wait until you receive
the denial letter from the lender. Once you have the denial letter, go to your
financial aid office to advise them that you've been denied a PLUS loan. The
school may be allowed to award additional unsubsidized loans for which you or
your family didn't previously qualify.
Many lenders, including Chela and Nelnet, will work with you to
determine the best course of action for qualifying for a PLUS loan. Obtaining a
co-signer and improving inaccurate credit reports are some good strategies.
If you'd like to find out whether you are eligible for a PLUS,
click here to complete the eligibility form online and get an instant
decision, or call
1.877.804.3603
.
How much can I borrow?
The yearly limit on a PLUS Loan is equal to the school's cost of education
minus any other financial aid that you or the student may receive. For
instance, if the school's cost of education is $40,000, and you or your family
are eligible for $16,000 in other financial aid, you may borrow up to $24,000
in Federal PLUS loans:
| Cost of education |
$40,000 |
| Other Financial Aid |
-$16,000 |
| Maximum PLUS Loan Amount |
=$24,000 |
Note:
Your school must certify your PLUS loan amount and eligibility
Can I use the money for items other than tuition?
Your loan money must first be applied to pay for tuition and fees, room and
board, and other school charges. If loan money remains after these payments are
made, you'll receive the funds by check or in cash. Some schools, if you ask
them to, will hold the funds for you so that you can use them to pay for costs
later in your enrollment period.
Are there any fees associated with a PLUS loan?
There is an origination fee of up to 3% of the total loan amount on PLUS loans.
There is also a federal default fee of up to 1% of the total loan amount. Both
of these are charged when the loan is disbursed and are deducted evenly from
each disbursement of your loan.
How do I get the money from a Federal PLUS Loan?
Your financial aid office disburses PLUS loan funds in scheduled payments over
the course of the academic year. If you take out a PLUS loan through Chela, we
will fund your loan through your school's financial aid office. Funds usually
become available early on in the school term, depending on factors such as when
the application was completed. Some schools will deposit these funds directly
into your bank account while others may mail you or ask you to retrieve a
check.
The loan funds will be sent to you in most cases in at least two installments.
No installment will be greater than half the amount of your loan. Your loan
money must first be used to pay for your tuition, fees, and room and board. If
loan money remains, you'll receive the remaining amount through your financial
aid office.
How much interest will I pay on a PLUS loan?
The current interest rate for PLUS loans as of
July 1, 2006
is
8.50
%.
Are there any tax breaks with a PLUS Loan?
Parents of dependent student loan borrowers can claim a number of tax breaks.
Read on for more information:
Student Loan Interest Deduction: Once you leave school and begin making
payments on your loans you may be able to deduct up to $2,500 per year for
interest paid on qualified student loans like a Stafford or Perkins loan. As of
2002 you can now deduct interest payments for the life your loan. There are
some income limitations on this deduction - if your income is greater than a
certain amount, you won't be able to claim the full deduction. Talk to your tax
advisor or visit the
IRS website for details.
Hope Scholarship Credit: Parents with children in college may be able to
claim a Hope Scholarship credit of up to $1,500 for qualified tuition and
related expenses paid for each eligible student. A tax credit reduces the
amount of income tax you may have to pay. Unlike a deduction, which reduces the
amount of income subject to tax, a credit directly reduces the tax itself. You
can claim the Hope credit during the first two years of a child's education.
Afterwards, you can claim the Lifetime Learning Credit.
Lifetime Learning Credit: Families with family members in college may be
able to claim a Lifetime Learning tax credit of up to $2,000 to offset the cost
of college or of other forms of higher education. The Lifetime Learning credit
is available to offset tuition and other education costs for all students
enrolled in eligible institutions. For more information on eligibility for the
credit, including income limitations, talk to your tax advisor or visit the
IRS website for details.
| Hope Scholarship Credit |
Lifetime Learning Credit |
| Up to $1,500 per eligible student |
Up to $2,000 per eligible student
|
| Available only for the first two years of college |
Available for every year of college |
| Student must be pursuing a degree or other recognized education credential |
Student does not need to be pursuing a degree or other recognized education
credential
|
| Student must be enrolled at least half time for at least one academic period
during the year |
Available for one or more courses |
| The student must not have any felony or drug convictions. |
Felony or drug convictions do not apply. |
Child Tax Credit: Parents with children in college can claim a tax credit
of up to $500 for each of qualifying children under the age of 17. The credit
may be limited depending on the amount of your tax liability and your modified
adjusted gross income. Contact your tax advisor or check the
IRS website for more information.
How do I apply?
In most cases you must fill out a Free Application for Federal Student Aid
(FAFSA) to apply for a PLUS loan. After your FAFSA is processed, your school
will review the results and will inform you of the aid award and your expected
family contribution. They will also notify you if you are eligible for a PLUS
loan.
For help filling out your FAFSA application, visit this website:
http://www.fafsa.ed.gov/before001.htm
Once
you have been determined eligible for a PLUS loan, Chela offers three easy ways
to get pre-approved. You can apply online, by phone, or by mail. Once approved
you need to complete and sign the full application.
Click here to get started with your application!
What information do I need before I start my application?
You will need the following records to answer questions on the PLUS eligibility
form and application:
-
Your Social Security number
-
Your driver's license number
-
Your Alien Registration Receipt Card (if applicable)
-
Names and contact information for at least two references, who must have
separate U.S. addresses
-
If applicable, your child's information including:
-
Social Security number
-
Alien Registration Receipt Card (if applicable)
What do I need to send in to complete my loan application?
After completing the FAFSA and receiving notification of your eligibility for a
PLUS loan, you should complete a PLUS application.
Click here to get started with your application or download a paper
application. You can even e-Sign your PLUS application to speed processing!
What is e-Sign?
Electronic Signature (e-Sign) is the fastest method available for completing
your Federal PLUS Loan Application and Master Promissory Note (MPN). It makes
the process paperless. Even if you choose not to use the e-Sign process you can
still complete your PLUS Application online, print and mail it to Chela
directly. Let's
get started!
How do I get a FAFSA PIN?
Your 4-digit FAFSA PIN would have been sent to you by email or U.S. mail upon
your request or if you completed your FREE Application for Student Aid (FAFSA)
online. If you do not currently have a PIN you can obtain one at the FAFSA
website (http://www.pin.ed.gov/).
Please be aware it can take anywhere from 3 to 10 days for your PIN to arrive.
Already have your PIN?
Apply online today!
What are the repayment terms?
You (the parent) must begin payment on PLUS loans almost immediately. The first
payment is due within 60 days after the final loan disbursement. There is no
grace period for these loans. Interest begins to accrue at the time the first
disbursement is made, and you will begin repaying both the principal and
interest while the student is in school. When you enter repayment you may
choose from one of the following plans:
Standard Payment Plan
- Sets equal monthly payments throughout your repayment term, each covering the
principal and interest due that month. Your final payment may be slightly more
or less than your other payments. Of all the options available, this plan is
most likely to result in the lowest aggregated interest costs over the life of
your loan.
Graduated Payment Plan
- Reduces the amount of your monthly payments during the first years of
repayment. If you select this option, during the first 2 years your monthly
payments will be interest-only payments or higher depending on your loan
balance. After the first 2 years of reduced payments you may have the option to
renew the graduated payment plan for an additional 2 years. Although your
initial monthly payments are reduced, the aggregated interest repaid over the
life of your loan and your later monthly payments will increase. This plan will
not extend your repayment term. Minimum loan amounts and other eligibility
restrictions may apply.
Income-Sensitive Payment Plan
- This repayment option allows you to pay between 4-25% of your gross monthly
income (not to drop below the monthly accrued interest on your loan(s)). The
income-sensitive payment is offered for a year at a time, up to a total of five
years over the life of your loan. The remaining terms follow a standard payment
plan. Eligibility and income documentation (i.e. pay stubs for the past 2
months) must be verified annually. Additional documentation may be required.
Extended Payment Plan
- If you received your first Stafford Loan, Supplemental Loan for Students
(SLS), or PLUS Loan on or after October 7, 1998 and the outstanding balance of
these loans totals more than $30,000, you can opt to repay your loan over a
25-year term instead of a 10-year term.
Can I have payments deducted automatically from my bank account?
Yes. Once you begin repayment, contact your loan servicer and ask to be signed
up for automatic payments from a checking or savings account. Chela PLUS
borrowers receive an additional 2 waived payments when they elect to have their
payments made automatically.
When is my first payment due?
Parents must begin repayment of their PLUS loan within 60 days of the last
disbursement of the year and continue paying, even while the student is in
school. Graduate/professional students can elect to defer their loan payments
until graduation.
Are there any pre-payment penalties?
There are no pre-payment penalties on your student loans or PLUS loan. If you
want to pay off your loans before your final payment is due, you are encouraged
to do so.
How long will it take to repay my PLUS loan?
The standard repayment period for the PLUS loan is ten years. Extended
repayment options are available under certain circumstances. You should contact
your loan servicer for more information. Of course, you can always pay off the
loan early at no penalty and save yourself interest costs.
What happens if I don't repay my PLUS loan?
When you sign a promissory note, you're agreeing to repay the loan according to
the terms of the note. The note is a binding legal document and states that you
must repay the loan - even if you don't complete your education, aren't able to
get a job after you complete the program, or are dissatisfied with, or don't
receive, the education you paid for. (One exception: if your child is unable to
complete their education because their school shuts down, you may not be
responsible for your full loan amount.) Think about what this obligation means
before you take out a loan. If you consistently fail to repay your loan on time
or according to the terms in your promissory note, you may go into default,
which has very serious consequences. Your debt will likely be turned over to a
collection agency, which could take you to court, and in the meantime, your
credit rating will likely be ruined.
What are the eligibility requirements for a PLUS In-School Forbearance?
Parents must have a current PLUS loan and your dependent child must be enrolled
on at least a half-time basis. Graduate/professional students must be enrolled
at least half-time.
What is the length of the PLUS In-School Forbearance?
Parents may forbear their loan(s) in 12-month increments up to 48 months if you
have a current PLUS loan and your dependent child is enrolled on at least a
half-time basis. Graduate/professional students can elect to defer payments
until graduation.
What documentation is required for a PLUS In-School Forbearance?
Parents must complete and sign the FFELP Forbearance Request Form. You are not
required to provide documentation that your child is enrolled. Please contact
customer service to have a form mailed to you. Graduate/professional students
do not have to complete a form to defer payments while in school.
Do I need to apply for a PLUS In-School Forbearance each year?
Parents must complete a new FFELP Forbearance Request Form every 12 months.
Do I need to make interest payments while in a PLUS In-School Forbearance?
Interest payments are not required. However, you may pay the outstanding
accrued interest at any time.
When will interest be capitalized while I am in a PLUS In-School Forbearance?
Interest will be capitalized at the end of each forbearance period.
| 
