Federal PLUS Loans

federal-loans-decisions-tree-853x500Federal PLUS Loans (Parent Loan for Undergraduate Students) are available to parents that are providing financial assistance for their children’s education. In order to qualify for a Federal PLUS Loan, the student must be a dependent and be enrolled in an eligible program more than half of the time. As with most Federal Student Loans, there are two programs which support Federal PLUS Loans; The Federal Family Education Loan (FFEL) Program and the Federal Direct Loan (Direct Loan) Program.

Do you want to apply for Federal PLUS Loans?
Listed below, are two of the key benefits for parents to review regarding Federal PLUS Loans:

No Loan Limit – There are no annual / lifetime loan limits for PLUS loans; the amount which may be borrowed is the total cost of attendance, less the costs of any current financial aid.
Competitive Interest Rates – Federal PLUS Loans interest rates are currently fixed at 8.5% for the Federal Family Education Loan Program (FFELP), and 7.9% for the Direct Loan Program (Direct).

An important fact regarding traditional Federal PLUS Loans, is that the loan is made to the parents and is not financially associated with the student. The eligibility requirements on Federal PLUS Loans are not based on need or income. However, in order for the parents of a student to obtain Federal PLUS Loans, they must pass a credit check. If the parents are not able to receive the loan due to an unacceptable credit rating, they may still be able to obtain the loan, if they are able to secure an endorsement (cosigner) from someone that has acceptable credit.

Since July 1, 2008, Grad PLUS Loans are available to graduate or professional students. Grad PLUS Loans are similar to standard Federal PLUS Loans, except that the borrower is the student and not the parent.

Another matter which merits mention is that there is a 4% fee associated with traditional and Grad PLUS Loans. The fee is assessed each time there is a disbursement made on the funds. The fee is distributed based on the type of loan program which the Federal PLUS originated. The fee for FFEL PLUS Loans is distributed between the Federal Government and the guaranty agency in your state which provided the loan; The fee for Direct PLUS Loans, goes entirely to the Federal Government.

Repay Student Loans with the Income-Based Repayment Plan

The nation’s total student loan debt has broken the $1 trillion ceiling. The total outstanding student loan balance is $1.08 trillion, and a whopping 11.5% of it is 90+ days delinquent or in default. That’s the highest delinquency rate among all forms of debt and the only one that’s been on the rise consistently since 2003 (source: Forbes). surpassing even the total national credit card debt.

Students are graduating from their universities and study programs with tens of thousands of dollars to repay, but they’re unable to find work. Websites are hosting heartbreaking student loan stories, while some debt-ridden youths are equipping themselves with picketing signs and taking to the streets. Students borrowed $117 billion in just federal student loans last year (2015).

And students continue to borrow private student loans, which lack the income-based repayment and deferment options of federal student loans. If current trends continue, there will be consequences not just for young people, but for all of us.

Our country has never seen such a financial disaster target our nation’s youths as specifically as the student loan crisis is. Some blame the borrowers themselves, while others say it’s corporate America’s greed that has trapped our graduates in a seemingly unending quicksand of student loan debt.

Regardless of where fault lies, our student borrowers and graduates need help.

Fortunately, the government recognizes this and they’re offering a program called the Income-Based Repayment (IBR) Plan.

The IBR plan is meant to give borrowers riddled with student loan debt a manageable repayment plan that they can afford on whatever amount of income they’re earning. If borrowers don’t make enough to adequately support themselves while repaying their student loans, the IBR plan will allow them to stop payments until they find a job that grants them an acceptable income.

Furthermore, the IBR plan allows borrowers to work towards total forgiveness of the college-related debt.

How do I Qualify for the Income-Based Repayment Plan?

In order to qualify for the IBR plan, borrowers must hold eligible student loans. Eligible types include:

  • Stafford Loans
  • PLUS Loans
  • Consolidation Loans that are made under either the Direct or FFEL programs.

Financing being paid for by parents, such as parent PLUS loans or consolidation’s being paid for by a borrower’s parents, are not eligible.

How are Payments Determined?

The IBR plan’s payments are determined by a formula that takes two factors into consideration: income and family size.

A borrower’s income compared to his or her family size is what the IBR plan used to produce a maximum monthly payment. If a borrower’s income is too low when compared to his or her family size, then that borrower can cease payments until his or her income increases.

Borrowers can refer to the chart found on the Federal Student Aid’s Income-Based Repayment Plan page to determine how the IBR plan can benefit them and their personal situation.

How does the Student Loan Forgiveness work?

The IBR plan’s forgiveness perk grants borrowers total student loan forgiveness after either 20 or 25 years of on-time payments.

The 10-year forgiveness opportunity is given to those who are public service employees. The borrower must maintain a job in the public service sector for the full 10 years of consistent repayment under the IBR plan.

The 25-year forgiveness opportunity is available to everybody else with employment in other sectors.

This program is a wonderful tool for borrowers who have found themselves weighed down by their college financing. Take advantage of this government-sponsored opportunity designed to help our college educated borrowers manage their student loan payments.