The Federal Parent PLUS Loan is a loan the parent or step-parent of a dependent student can borrow to assist in meeting educational costs. Like student loans, the parent loan has a 10-year repayment cycle and no penalties for early repayment.
Parents are encouraged to begin and make payments as soon as the loan is issued to reduce the overall cost of the loan. As of July 2008, parents can also request to defer repayment until 6 months after the student graduates or drops below half-time. However, interest will accumulate and capitalize onto principal (meaning interest-on-interest) if at least interest-only payments are not made.
Some families use PLUS funds to cover books and other non-billed expenses as well as the bill while other families are only looking to borrow for billed costs.
Accepting PLUS Loan & Choosing Amount
The PLUS Loan is accepted, along with aid offered to the student, via the UC online award offer.
The offered amount is based on a maximum eligibility. This amount is not what is required to meet billed costs nor is it the amount parents are required to borrow. When accepting the award, indicate the amount that is wished to be borrowed.
Parent loans are offered at the federal maximum, which would be the UC-budgeted estimate of educational expenses (from tuition through toothpaste) minus other aid. As the borrower, the parent may wish to borrow a lesser amount.
Most Parent PLUS borrowers are expecting to pay the billed costs and perhaps some limited, non-billed expenses. Parents can use our Money Matters publication to determine the bill in order to target the amount they wish to borrow in a PLUS Loan. Simply estimate costs as directed and then subtract other aid available to the student. If expenses beyond the bill are desired, you can estimate them as well.
Parents who later wish to raise or lower their annual PLUS Loan accepted amount can contact Student Financial Aid.
Each acceptance of the Parent PLUS Loan carries with it that year's interest rate.
PLUS Application & Credit Check
Parents who accept the PLUS Loan will need to complete the Parent PLUS Application through the Direct Loan Program Website. Completing the online PLUS application (or accepting a PLUS Loan increase or a PLUS Loan in future Parent PLUS Loan borrowing) initiates a credit check. The credit check is based primarily on past payment history rather than an income-to-debt ratio.
Adverse credit such as bankruptcy, foreclosure, tax lien, or a default determination will limit a parent from borrowing the PLUS Loan. A parent PLUS applicant also has an adverse credit history if the applicant has:
- One or more debts that are 90 or more days delinquent or that are in collection or have been charged off during the two years preceding the date of the applicant’s credit report; and
- A total combined outstanding balance of those debts greater than $2,085.
Each time a parent accepts or increases their PLUS Loan (for this year or in subsequent year borrowing), a credit check is performed.
If the parent is denied a PLUS Loan based on credit, there are options to explore. One option provides for the student receiving a limited amount of additional loan funds in the student's name. Any action on the options can be made only after UC has verified a Parent PLUS Loan credit denial.
Master Promissory Note
Parents who accept the PLUS Loan for the first time for a student will also need to complete the Parent PLUS Master Promissory Note through the Direct Loan Program Website. "Log in" and the follow the Federal Parent PLUS Master Promissory Note (MPN) options to complete the process.
The PLUS MPN is an open-ended loan note that allows borrowing for multiple years. Acceptance of a PLUS Loan with UC and a credit check combines the parent loans borrowed for that student into one loan. Future borrowing by that parent for that student will not require completion of a new MPN.
Parent borrowers who accept a PLUS Loan will need to complete their MPN either by electronically signing (using their U.S. Department of Education FSA ID) or printing and signing any necessary promissory note.
Only when the loan acceptance on the award offer, credit check and promissory note are all complete can Parent PLUS Loan funds be sent to UC for the appropriate semester.