Federal Parent PLUS Loans

The Federal Parent PLUS loan program is a common financing option for parents of dependent undergraduate students. The Parent PLUS loan is borrowed in the parent's own name.

Federal Direct Parent PLUS Loans are federal loans that parents of undergraduate students can borrow to help pay education expenses. The U.S. Department of Education (ED) is the lender and offers fixed, low-interest loans to eligible parents of students. Any of the student's parents (mother, father, step-mother, step-father) may apply, even if it is a non-custodial parent that was not included on the FAFSA. Dominican University of California and the Office of Financial Aid urge parents to carefully consider the need for the loan and the amount and to borrow responsibly. Loans from the government must be repaid and Parent PLUS Loans can quickly add up. We recommend that parents borrow the minimum amount necessary.

Important Note: Only parents of dependent undergraduate students are eligible to apply for the Parent PLUS Loans. Parents of independent students are not eligible to apply for the loan. For more information about a student's dependency status, please visit Federal Student Aid.

Parent PLUS Loans require a secondary application which can be completed at studentloans.gov. The loan is solely in the parent borrower's name and the debt cannot be transferred to the student. Parents may borrow up to the student's total estimated cost of attendance (minus any other financial aid received). However, students and their families are strongly encouraged to maximize Stafford Loan usage before taking a PLUS Loan due to more a lower interest rate and deferment provisions. Parent borrowers must reapply each year if they plan on making use of PLUS Loans each academic year.

Payment begins on the loan immediately following disbursement; however, borrowers have the option to defer payment on the principle while the student is enrolled at least half-time and for an additional six months after the student ceases half-time enrollment (e.g. due to graduating, taking less classes, taking a leave of absence/withdrawing from school). During this time, interest will accrue, but the parent is not required to make repayment on the principle.

2016 - 2017 Step-by-Step Instructions for Applying for the Parent PLUS Loan

APR

Interest rates for Parent PLUS Loans are fixed for the life of the loan, which means the interest rate is locked and will not change for the life of the loan. The Federal Government will set and publish the APR each year for the loans disbursed for that academic year. See the chart below for the current and previous year’s rates.

Loans Disbursed Between...

APR 


7/1/17 - 6/30/18

7.00%


7/1/16 - 6/30/17

6.31%

Interest accrues on the Parent PLUS Loan immediately following disbursement. If the borrower has opted-in to deferment and the six month grace period, the Office of Financial Aid strongly recommends that borrowers make payment on the interest as it accrues. Any unpaid interest remaining on the loan will capitalize and get added as part of the principle balance once the grace period ends. This will cost the borrower more in the long-term as the interest the new balance creates will be greater than what would have accrued on the original principle.

Amount

Borrowers have the option of either applying for a specific amount as specified by the applicant or the maximum amount available. The maximum amount available will be determined by the Office of Financial Aid after reviewing the aid the student currently is awarded. For example, if a student's Cost of Attendance is $60,000 and the student was awarded $20,000 in aid before the PLUS Loan, the maximum amount of the PLUS Loan would be $40,000 (60,000 - 20,000 = 40,000).

If applicants are unsure about what amount to select, the Office of Financial Aid suggests selecting the maximum amount as the applicant can always lower the amount of the loan any time before the loan disburses and for up to 30 days after it disburses. For example, if the maximum amount of the loan is $20,000 and the borrower only wants $10,000, the borrower can notify the Office of Financial Aid in writing and we will reduce the amount of the loan from $20,000 to $10,000.

If selecting a specific amount, parent borrowers need to be aware that the amount will be split evenly among the semesters in the specified loan period. For example, if a borrower only wants to borrow for the Fall semester and pay Spring out of pocket, then the loan period must be August - December. Otherwise, If the loan period designated for August - May, then the loan will be split in half to cover both Fall and Spring.

Borrowers also need to be aware that the amount of the loan selected will not be the amount the student receives as the government assesses loan origination fees. See the Loan Origination Fees section below for additional information.

Loan Origination Fees

The U.S. Department of Education asses a loan origination fee for all PLUS Loans, which reduces the total awarded amount listed on the student's award letter. See the table below for the fees assessed on a PLUS Loan throughout the 2016 - 2017 Academic Year.

Loan Originated Between...

Awarded Amount

Fee Amount

Net Amount Received

10/1/16 – 9/30/17

$10,000

4.276% ($427.60)

$9572

10/1/15 – 9/30/16

$10,000

4.272 ($427.20)

$9573

For parents who will borrow a specified amount, be sure to request more than the exact amount amount that you want the student to receive in order to account for the fee and avoid a shortfall in aid. Borrowers can calculate the exact amount (if being assessed the 4.276% fee) by dividing the amount the borrower wants by .95724 (1 - .04276). For example, if a borrower wants the student to receive $15,000 exactly, then the amount on the application would need to be $15,670 ($15000 / .95724).

Repayment

While the U.S. Department of Education (ED) is the lender for the PLUS Loans, the ED will assign the loan to a financial institution to be the servicer of the loan. The loan servicer will handle the billing and other customer service related functions such as consolidation and changing repayment plans. The servicer will contact the borrower with introductory information and how to start making payments.

Parent borrowers will begin repaying PLUS Loans immediately unless the parent opted to defer payment when completing the loan application. If the parent opted to defer payments while the student is enrolled and for the six month grace period, the Office of Financial Aid recommends that, at minimum, payments on the interest are paid monthly as unpaid interest will capitalize (get added to the principle balance) once the grace period ends.

For information regarding repayment plans, please visit Federal Student Aid.
Parent Borrowers can estimate their loan payments with Federal Student Aid's Repayment Estimator.
Parent Borrowers can check to see who their loan servicer is by logging in to NSLDS.
For general information about managing debt, please visit our Debt and Default Management page.

Credit History

A credit-check will be performed during the loan application process to determine if the parent borrower is approved or denied for a PLUS Loan. However, the government does not look at credit score or debt-to-income ratios like a private lender would. The government is only looking at adverse credit history. If the borrower does not have any adverse credit history, then the borrower would be approved. If a borrower has adverse credit history, then the borrower may be denied. Adverse credit history consists of the following:

  • Bankruptcy discharge within the past five years.
  • Voluntary surrender of personal property to avoid repossession within the last five years.
  • Repossession of collateral within the last five years.
  • Foreclosure proceedings started.
  • Foreclosure within the last five years.
  • Conveying real property that is subject to a mortgage (by deed) to your lender to avoid foreclosure (deed in lieu of foreclosure).
  • Accounts currently 90 days or more delinquent.
  • Unpaid collection accounts.
  • Charge-offs/write-offs of federal student loans.
  • Wage garnishment within the last five years.
  • Defaulting on a loan, even if the claim has been paid.
  • Lease or contract terminated by default.
  • County/state/federal tax lien within the past five years.

If the borrower is approved, a Master Promissory Note will need to be completed. If the applicant is denied for the loan, there are other options as the loan can be pursued with an endorser, an appeal, or may choose not to pursue. The applicant will be presented with these three options as well an option that they are unsure of which decision to make. If that option is selected, the Office of Financial Aid will be in contact with additional information about the other options.

Master Promissory Note

The U.S. Department of Education requires parent borrowers to complete a Master Promissory Note (MPN) in order for the PLUS Loan to disburse. The MPN is a legal agreement between the borrower and the Federal Government in which the borrower promises to repay the loans and any accrued interest and fees. It also explains the terms and conditions of the loans, such as how interest is calculated and what deferment and cancellation provisions are available.

The borrower must complete the MPN at studentloans.gov. Borrowers must be careful to select the PLUS MPN for parent borrowers as there is a separate PLUS MPN for graduate students. The Office of Financial Aid automatically receives notification when a MPN is completed. PLUS Loans will not disburse or appear on the billing statement if the MPN has not been signed. MPNs expire after 10 years; thus, a parent would only complete the MPN prior to the very first disbursement of the Parent PLUS Loan and would not complete a new MPN for Parent PLUS Loans in future years until the MPN expires. If a different parent applies for the Parent PLUS Loan, that parent would need to complete their own MPN.

Endorser

If a parent is denied for the Parent PLUS Loan, the parent has the option to pursue the loan again with an endorser who does not have adverse credit history. An endorser is a cosigner for the loan who would be equally responsible for the payment of the loan. Note: the endorser cannot be the child on whose behalf you are borrowing. Endorsers must create their own FSA IDs in order to access studentloans.gov and complete the application process to endorse the loan. If approved, the endorser must specify an amount for the loan as they are unable to opt for the maximum amount available.

Additionally, if approved with an endorser, the parent borrower must complete PLUS Counseling.

Appealing the Denial Decision

Another option for parent borrowers who are denied for the PLUS Loan is to appeal the decision with documentation that the adverse credit decision is incorrect or there are extenuating circumstances related to the adverse credit history. (This appeal would be submitted to the U.S. Department of Education (ED) rather than the Office of Financial Aid.) If the documentation is to the satisfaction of ED, the loan may be approved.

If approved with the appeal, the parent borrower must complete PLUS Counseling.

PLUS Counseling

If a parent borrower is approved with either an endorser or by appealing to ED, the borrower must complete PLUS Counseling. PLUS Counseling is the government's online training regarding the impact of loans and the parent's rights and responsibilities regarding repayment. PLUS Counseling is completed online at FSA IDs in order to access studentloans.gov. PLUS Counseling must be completed in order for the loan to disburse or appear on the student's billing statement. Note: Endorsers are not required to complete PLUS Counseling.

Choosing to Not Pursue the Loan

The final option for those who were denied the Parent PLUS Loan is to accept the decision and choose not to pursue the loan. If the applicant no longer pursues the loan, the student would be eligible to receive additional Unsubsidized Stafford Loans. Students who are at a Freshmen or Sophomores level standing would be eligible for up to $4000 in additional Unsubsidized Loans. Students at a Junior or Senior level standing would be eligible for up to $5000 in additional Unsubsidized Loans. These loans would be in the student's name rather than the parent's name. These additional Unsubsidized Stafford Loans are only awarded if the student's parent is denied. Only one parent needs to apply and be denied in order for the student to be eligible. But if both parents apply and one is approved while the other is denied, the student would not be eligible for the additional Unsubsidized Loan. If the student wants the additional loans in the following years, the parent would need to apply and be denied each year as the additional amount is not automatically awarded each year.