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.
The PLUS Loan is accepted, along with other aid offered to the student, via the UC online award offer. When accepting the loan, the parent provides their name, address and Social Security number in addition to indicating the desired loan amount.
Parents can use our Money Matters publication to determine the amount they wish to borrow in a PLUS Loan. Simply estimate costs as directed and subtract other aid. Some families use PLUS funds to cover books and other non-billed expenses while other families are only looking to borrow for billed costs.
Each acceptance of the Parent PLUS Loan carries with it that year's interest rate.
Parent loans are offered at the UC-budgeted estimate of educational expenses minus other aid. As a borrower, the parent may wish to borrow a lesser amount. Parents who later wish to raise or lower their annual PLUS Loan accepted amount can contact Student Financial Aid.
Each time a parent accepts or increases their PLUS Loan, a credit check is performed. The credit check is based primarily on past payment history rather than an income-to-debt ratio.
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.
The PLUS Master Promissory Note (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.
Parent borrowers who accept a PLUS Loan will need to complete their MPN either by electronically signing (using their U.S. Department of Education-issued PIN) or printing and signing any necessary promissory note.
Only when the loan acceptance, credit check and promissory note are all complete can Parent PLUS Loan funds be sent to UC for the appropriate semester.
Overall, the parent loan is a helpful way for families to address educational expenses through a low-interest loan that spreads costs over a longer period and allows for manageable, monthly payments.