PLUS Loans – it’s never too late to subsidize your child’s education cost
Rising. Soaring. Skyrocketing. These are the words that seem to begin every article about college tuition costs – and they are words guaranteed to make every parent cringe. According to the College Board, costs for the 2004-2005 school year at four-year private colleges are up 6%, while costs at four-year public colleges are up 10.5%. Scary? Yes. Impossible to handle? No!
The good news is that there is more financial aid available than ever before. One of the most interesting financial aid options is the Parent Loan for Undergraduate Students, or PLUS Loan.
What is a PLUS Loan?
PLUS Loans are federal loans taken out by parents to help pay their children’s college costs. PLUS Loans offer several advantages:
•Interest rates are adjusted each year, but are consistently kept low. For the 2004-2005 school year, the interest rate is 4.17%. It is capped to never exceed 9%.
•Financial need is not a determining factor in receiving a PLUS Loan.
•No collateral is required.
•There is no penalty for early repayment.
•Loans can be consolidated.
•If you are eligible, up to $2000 in interest may be tax-deductible under the Hope Education Tax Credit.
Who is eligible for a PLUS Loan?
If you are a parent with dependent students attending college at least part-time, you are eligible to receive a PLUS Loan. You do need to have a good credit history. The following credit issues will reduce your chances of getting a PLUS Loan:
•Payments overdue by 90 days or more
•High debt-to-income ratio
If you are turned down for a PLUS Loan because of poor credit history, you can find someone to co-sign the loan with you and then apply again.
How much can I borrow with a PLUS Loan?
You can borrow up to the total cost of undergraduate education expenses, minus other financial aid already received. Expenses can include tuition, room and board, supplies, lab expenses, and travel.
How do I apply for a PLUS Loan?
You can apply for a PLUS Loan through the Federal Family Education Loan (FFEL) Program or through the William D. Ford Federal Direct Loan (Direct Loan) Program. FFEL loans come from private lenders or loan servicers, such as your bank. PLUS Loan applications are available from your school or your lender. To apply for an FFEL PLUS Loan, you complete the application and then submit it to yo