Short On Cash For College? - Check Out Federal Plus Loans

Eligible parents of college students can borrow from the Federal Plus Loans (otherwise called Parents Loan) for their their children's education expenses. As of July 1, 2006, this loan scheme has been extended to graduate and professional degree students.

This loan is particularly useful when students have borrowed all that they could from other Federal programs and are looking for another source of financial aid.

* How To Apply

The online university that the student is planning to attend must be a participant in the Federal Plus loan program.

Federal Plus Loans can be obtained through the William D. Ford Direct Loan (Direct Loan) Program or the Federal Family Education Loan (FFEL) Program.

Applications for Direct Loans can be obtained from the online school's financial office or from the lender, bank, credit union or participating school, for the FFEL program.

Parents can borrow from either type of Federal Plus loans but not both in a given enrollment period.

* Eligibility

Federal Plus loans are available to the parents of dependent undergraduate students and as of July 1, 2006, graduates and professional degree students are eligible.

Both the Plus loan applicant and student must satisfy the basic eligibility requirements for Federal Loans. The loan applicant should ideally not have an adverse credit history or have defaulted on a Federal student loan.

*Loan summary

Since July 1, 2006, interest is fixed; 7.90% for Direct PLUS Loans and 8.50% for FFEL PLUS Loans. Repayments start 60 days after the loan is given. There is a fee of up to 4% of the loan amount.

Plus loans are advantageous in that they offer competitive interest rates. In some cases, they offer flexible repayment options and in rare cases, offer a total release of obligation to fully repay the loan. These loans are available to applicants regardless of financial need or income level.

*The maximum loan amount

Applicants can borrow the cost of education minus any other Federal loans received. There is no minimum amount.

* Repaying the Plus Loan

Many parents fund the loan repayments by dipping into their retirement savings. However, this may not be the best option since replacing that lost income could be difficult. Instead, some experts recommend taking out a home equity loan. When factoring in the tax benefits of that, the resultant interest rate is comparable to that of Plus loans.

Though not required, dependent graduates should apply for other Federal student aid, which will reduce the amount their parents would have to borrow. Graduates and professional degree students are required to apply for other Federal student aid if they are to get Plus loans.

To find out more about Federal Plus loans and other student aids check out FAFSA

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