Going to college is not only expensive for college students, it can also become expensive for parents. College loans are usually in the student’s name, but many parents are starting to help prevent their child from having many loans in their name by applying for parent PLUS loans.
What is a PLUS loan?
Definition A PLUS loan is a loan that a parent has borrowed for their college child to help them pay for school related expenses such as tuition, books, or room and board. A PLUS loan is also referred to as a parent PLUS loan, and in order for a college student and their parents to be eligible for it, the student has to at least be enrolled as a part-time student. Facts about PLUS loans · Parent PLUS loans are growing in popularity, because unlike other student loans, this loan is not based on financial need. Therefore students and parents who are not facing financial hardship can be eligible to receive a PLUS loan. · All PLUS loans have a fixed interest rate of 7.9%, and the fees consists of a 3% origination fee and a 1% federal default fee.
How to apply for a plus loan
To apply for a PLUS loan, the student must have completed a FAFSA application to have on file. Since the PLUS loan is a federal student loan which must be accepted by a college or university’s financial aid office, anyone applying for any federal student loans must have a completed FAFSA on file at their schools financial aid office. The PLUS loan must be taken out in the parent’s name or the name of a legal guardian since the parent or legal guardian is technically the borrower. Therefore, at no time can a parent PLUS loan be transferred into the student’s name.
To be eligible for a PLUS loan, the borrower must be a parent or legal guardian. If you are trying to obtain a PLUS loan for someone who is not your child or dependent, the loan will be denied. Moreover, PLUS loans are based on a person’s credit. Therefore, a credit check will be done to check and see if the parent has a negative credit history. A negative credit history is considered when a person is more than 90 days late on debt, or have a bankruptcy discharge, foreclosure, repossession, tax lien or wage garnishment reporting on their credit report . A bad credit history will disqualify a parent or legal guardian from being approved for a parent PLUS loan.