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As
parents explore ways to finance their children’s higher education, many
consider borrowing through the Federal PLUS-loan program. As they decide whether
to pursue a PLUS loan, parents of dependent undergraduate students should be
advised to consider the following questions:
Have I exhausted other sources of financial aid? Before applying for a PLUS
loan, parents should thoroughly research all forms of financial aid — especially
grants and scholarships — and turn to the financial-aid office for
information about sources of financial assistance.
What if I don’t pass the credit check? Parents who fail the PLUS-loan
credit check should be advised that they still have options, including the
following:
- A parent still may obtain a PLUS loan if a friend or family member
who can pass the credit check agrees to endorse the loan application
and assume the debt if the parent fails to repay the loan.
- A lender still may approve a PLUS loan if parents can demonstrate extenuating
circumstances, such as updated credit information showing that they have
brought their accounts up to date or have made satisfactory arrangements
to repay their debts.
- The student may qualify to borrow additional sums under the unsubsidized
Federal Stafford-loan program.
Parent or child — who pays? While many children agree to pay their
parents’ PLUS loans, parents should be advised that if the child fails
to make the loan payments, the parent who signed for the PLUS loan is legally
obligated to repay the debt.
How can I make the loan payments and pay tuition at the same time? With
PLUS-loan repayment beginning within 60 days after the loan is disbursed,
some parents may face cash-flow difficulties as they make PLUS-loan payments.
Financial Aid Administrators should encourage parents facing this problem
to consider the following repayment strategies:
- Forbearance. Lenders may grant forbearance to PLUS borrowers
while their children are still attending college. Forbearance allows a
borrower
to postpone or reduce their monthly loan payments temporarily; however,
interest continues to accumulate during the period of forbearance.
- Graduated repayment. The graduated-repayment option provides lower monthly
payments initially.
More information for families considering PLUS loans is available in USA
Funds®’ brochure “PLUS-Loan Pointers — Parent loans
for undergraduate students.” The free brochure is available for order
at www.usafunds.org/forms/order_pubs.asp on the USA
Funds Web site.
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