Federal Parent PLUS Loans Can Solve Bad or No Credit Dilemma for Undergraduates

About the Loan

The Parent PLUS Loan is a student loan that is sponsored by the federal government. Parent PLUS loans were created to allow parents to borrow money to fund their child's higher education. It is primarily for the parents of undergraduates who are their dependents.

Parent PLUS loans are given to parents with good credit histories. Interest rates are fixed and you don't have to repay it until after the 2nd disbursement.

Eligibility and Requirements

-Good Credit History: Parents taking out this loan must have good credit.

-Half-Time Enrollment: You are required to be attending a college or university no less than half time. This generally means you're enrolled in at least 6 credit hours each semester.

-Submit a FAFSA: Normally, you are required to submit a Free Application for Federal Student Aid. Most schools will require this but some will not. Check with your school's financial aid office to see if yours does.

-US citizen: You must be a US citizen, permanent resident, or citizen of American Samoa or Swain's Island.

What's so Good About a Parent PLUS Loan?:

-The best benefit of the Parent PLUS loan is that parents can borrow money to help pay for their child's education.

-Parent PLUS loans have have a maximum interest rate that is set by the Federal Government. The current interest rate (as of July 1, 2006) is 8.5%.

-No collateral necessary.

-It's not based on income but on your credit history. This means you won't be turned down because your income is too high.

-You can borrow funds to cover such things as tuition, housing, meals, books and supplies.

-Interest could be tax deductible.

How Much Can I Borrow?

The amount of money you can borrow depends on what it costs you to go to school and how much other financial aid you are receiving. For example, if you will be paying $8,000 per year to attend school and you have $2,000 in financial aid, your parents can borrow no more than $6,000.

Once you have been approved the money is sent to your school. It is then disbursed in no less than two installments and used for tuition, fees, and room and board. Any extra money is sent to your parents and it must be used for your education.

Repayment:

Parent PLUS loans must be repaid in less than ten years. If you must extend your repayment terms, consolidation is your only option.

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To learn more about other low interest loans visit our Low Interest Student Loans page. A college student herself, Elise Fisher enjoys writing articles to help college students learn more About-Student-Loans.com.