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Details on Federal Direct PLUS Loans for Parents

• Eligibility

  Only the parents of dependent students are eligible to take out the Federal Direct PLUS Loan and only if the student is enrolled at least half-time (six credits) and is otherwise eligible to receive federal aid.

  The parent borrower must be a citizen or eligible non-citizen and not have an adverse credit history. The Federal Direct PLUS Loan is not a need-based loan.

  The following individuals are eligible to take out a Federal Direct PLUS loan on a student's behalf:

  • legal parent, whether biological or adoptive
  • step-parent whose information is supplied on the FAFSA
  • A combination of the above
• Credit check

  A credit check is required on all Direct PLUS Loan applicants. 

  • If you have placed a security freeze on your credit file , . Your application will not be processed if you have a security freeze on your credit file. 
  • To qualify for a Direct PLUS Loan, you must not have an adverse credit history. If the credit check shows that you have an adverse credit history, you may still be able to qualify for a Direct PLUS loan. 

  If you have an adverse credit history, you may still receive a PLUS loan through one of these two options: 

  • Obtaining an endorser (co-signer) who does not have an adverse credit history.  
  • Documenting to the satisfaction of the U.S. Department of Education that there are .

  Adverse credit history is described as a credit report shows that you are experiencing any of the following credit conditions: 

  • Accounts with a total outstanding balance greater than $2,085 that are 90 or more days delinquent as of the date of the credit report, or that have been placed in collection or charged off* during the two years preceding the date of the credit report. 
  • Default determination during the five years preceding the date of the credit report. 
  • Bankruptcy discharge during the five years preceding the date of the credit report. 
  • Repossession during the five years preceding the date of the credit report. 
  • Foreclosure during the five years preceding the date of the credit report 
  • Charge-off/write-off of a federal student aid debt during the five years preceding the date of the credit report. 
  • Wage garnishment during the five years preceding the date of the credit report. 
  • Tax lien during the five years preceding the date of the credit report 

  
  

  * "Charged off" means a debt that a creditor has written off as a loss, but that is still subject to collection action 

• Credit counseling

  What is PLUS Credit Counseling? 

  PLUS Credit Counseling will help students and parents understand the obligations associated with borrowing a PLUS loan and assist them in making careful decisions about taking on student loan debt. .

  PLUS Credit Counseling is required if the U.S. Department of Education has informed you that you have an adverse credit history and you have: 

  • Obtained an endorser, or 
  • Documented extenuating circumstances to the satisfaction of the U.S. Department of Education 

  PLUS Credit Counseling can be completed voluntarily at any time. If PLUS Credit Counseling is completed voluntarily and you are determined to have an adverse credit history by the U.S. Department of Education within 30 days of PLUS Credit Counseling completion, your PLUS Credit Counseling requirement will be considered to be fulfilled. 

• Loan terms

  The interest rate on Federal Direct PLUS Loan varies each year. The interest rate for a loan taken in any given year is fixed for the life of that specific loan.

  Interest accrues from the time of disbursement. Parents can make interest-only payments to keep interest accrual to a minimum.

  If a parent does not pay the interest before entering repayment, the interest will be capitalized, meaning the interest will be added to the principal. Then the parent will be paying interest on their interest.

  Academic Year	Interest Rate
  2023-24	8.05%
  2022-23	7.54%
  2021-22	6.28%
  2020-21	5.30%
  2019-20	7.08%

  Direct PLUS Loans have an original fee which is taken out of each disbursement.

  Currently, the fee is equal to 4.228% of the disbursement. So if a parent borrowed $1,000 they would receive $957, but they would owe back $1,000.

• Loan limits

  The amount of Federal Direct PLUS Loan that can be borrowed in any given year is equal to the Cost of Attendance (COA) minus other aid received.

  The amount of PLUS loan that appears on the student's award is the maximum for which they may be eligible. However, parents should only borrow what is needed to pay for expenses owed directly to UM.

• Sample loan repayment schedule

  A parent who borrows $30,000 at an average interest rate of 7 percent and uses the standard repayment schedule (120 equal payments) will have monthly payments of $348. When the loan is paid in full after 10 years they will have paid a total of $41,799.

  To receive a customized loan repayment schedule that shows multiple repayment options, a parent can access the US Department of Education's .

• Completing the annual Direct PLUS Loan request

  Each academic year that the parent wants to take out a Federal Direct PLUS Loan they must complete a .This initiates the credit approval process which is then good for 180 days.

• Completing the Master Promissory Note

  The first time a parent borrows on behalf of a specific student, they must sign a Master Promissory Note (MPN) through .

  A new MPN does not need to be completed in subsequent years unless the parent is borrowing on behalf of a second student.

  Parents who have an endorser on their loan are required to sign a new MPN each year an endorser is used.  

• Options if Loan Denied

  Parent borrowers may attempt to override the credit decision by either obtaining an endorser (co-signor), or choosing to document extenuating circumstances relating to the reason they were declined. Once either action is taken, .

  If one parent is denied due to an adverse credit evaluation and he/she does not request a second review, it is not required that any other parent apply. However, that also does not prevent a different parent from applying.

  If a parent is denied the Federal Direct PLUS Loan, the student may be eligible to receive additional unsubsidized loan funds by submitting UM's Parent PLUS Denied/Unsubsidized Request Form.

• Disbursement

  Generally, a Federal Direct PLUS Loan will be for the full academic year, the money being disbursed in two payments, half each term.

  When the funds are disbursed they are used to pay the balance owed to the school first. If there are excess funds they will be paid as a refund, to help cover educational expenses not charged by UM.

  When completing the , the parent indicates whether they want a refund sent to them or the student.

• Deferment/repayment

  Repayment of a Federal Direct PLUS Loan is the parent borrower's responsibility. They have the option of beginning repayment immediately (60 days after the loan is fully disbursed) or waiting until the child ceases to be enrolled at least half-time (six credits). The repayment option is chosen during the Direct PLUS Request.

  The standard repayment plan requires that the parent pay a minimum of $50 a month and have the loan paid off in 10 years.

  Parents who are having difficulty making payments should contact their loan servicer, as there are many options available to prevent them from going into default on their loans. Parents can find the contact information for their loan servicer by logging into using their FSA ID.

  If a parent is having difficulty getting cooperation from their loan servicer, they can contact the .

• National Student Loan Data System (NSLDS)

  Information about a student's loan is submitted to the . Schools, lenders, servicers and guarantors authorized by the U.S. Department of Education have access to the information in NSLDS.

  Students and parent borrowers can also access their loan information by using their FSA ID.