Federal PLUS Loan Program - (Loans to Parents)
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. What are PLUS Loans?
My parents received an application through a private lender for a PLUS Loan. Can I use it at the University of Michigan-Dearborn?
How do my parents apply?
Are there borrowing requirements that my parents must meet?
How much can my parents borrow?
Do my parents get the money or do I?
Can my parents cancel the loan if they change their minds?
What’s the interest rate on PLUS Loans?
Are there any loan fees?
Are there repayment options?
Can they get any tax credits for using a PLUS Loan to help me with my college expenses?
Can the loan repayments be postponed?
Can the PLUS Loan be discharged?
My parents are willing to borrow, but what happens if they don’t meet the credit qualifications?
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.
My parents received an application through a private lender for a PLUS Loan. Can I use it at the University of Michigan-Dearborn?
No. The University of Michigan-Dearborn participates only in the Federal Direct Loan Program and will not certify PLUS applications from private lenders. The Federal Direct Loans supports a PLUS Loan Program and it is the only PLUS Program used at UM-Dearborn.
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 (available in the Forms section of this website) and submit it to the OFA for processing. The loan will be originated and a promissory note will be sent to your parents for completion by you and the parent borrower.
It is not required that a FAFSA (Free Application for Federal Student Aid) be completed in order to process a Federal Direct Parent Loan. The Office of Financial Aid strongly recommends that the student and his/her parents complete the FAFSA at www.fafsa.ed.gov to determine eligibility in other programs.
Are there borrowing requirements that my parents must meet?
A Direct Parent Loan’s 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. If any loan funds remain, your parents will receive a refund check mailed from the university—unless they authorize in writing the release of funds directly to you or to be kept as a credit for future use on your tuition account. Like all educational loans, all funds must be used for your educational 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 OFA within 14 days of disbursement.
What’s the interest rate on PLUS Loans?
The interest rate for the PLUS Program should be a fixed 7.9% for 2007-08. Your parents will be notified of any interest rate changes throughout the life of the loan. Interest is charged from the day of first disbursement until the loan is repaid in full.
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.
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 economic hardship or general forbearance. Your parents, however, will be charged interest during periods of deferment or forbearance. If they don’t 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 parents’ loan cannot be canceled because you didn’t complete your program of study at UM-Dearborn or because you didn’t obtain employment after completing your studies.
Most questions can be answered by the staff at the Direct Loan Servicing Center at 800- 848-0979.
My parents are willing to borrow, but what happens if they don’t 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. Students’ 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.
If a student has not completed a FAFSA 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.
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