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Student Loan Guide Step 5: Get Extra Funding Through Parent College Loans

    Just because you didn't receive enough student college loans, doesn't mean college is unattainable. Parents are also able to get college loans to help cover their son's or daughter's tuition costs. College loans for parents are provided by the federal government. Parent college loans are a relatively inexpensive way to help finance a student's college education and should be the first source of funding you seek if your student aid package isn't enough to cover all college expenses. To understand why, read Step 1: Learning the Basics of Education Loans.

What are Parent Loans for Undergraduate Studies?

    Known as PLUS Loans, the US Federal Government gives them to parents, helping them pay for their child's college education. The PLUS College Loan program is managed by the Education Department through the Office of Federal Student Aid ("PLUS Loans"). There are two types of PLUS Loans: Federal Family Education Loans and Direct Loans. The two types of loans are very similar. The main difference is that while Direct loans come straight from the government, the Federal Family Education Loans, also known as FFEL loans, are given by private lenders, such as banks, credit unions and savings and loans associations. Those private lenders have agreed to participate in the PLUS Loan program ("Stafford Loans"). Parents can get both types of loans, but not during the same enrollment period.

Who is Eligible for PLUS Loans?

    For parents to be eligible for a PLUS College Loan, their students must be financially dependent and enrolled at least half-time as an undergraduate student ("PLUS Loans"). Parents also must have good credit or be able to demonstrate extenuating circumstances. If parents can't pass a credit check and don't have extenuating circumstances, they can still get a loan if they have someone to endorse their loan ("PLUS Loans"). An endorser is someone who cosigns the loan, promising to pay back the money if the parents fail to do so.

How do I Apply for PLUS Loans?

    The application procedures are a little different depending on whether you are applying for a Direct PLUS loan or a FFEL PLUS Loan. For a Direct PLUS Loan, you must get a form from your school's financial office, complete it and sign its promissory note ("PLUS Loan"). In most cases, you submit the application to your schools financial aid office. For FFEL PLUS Loans you can get an application from your school, private lender or state guaranty agency. Once the application is completed, you need to have your school complete its portion of the application. Then, when all parts are filled out, you send the form to a private lender for evaluation.

How Much Money Can I Get?

    The PLUS College Loans Program allows parents to receive as much money as needed to bridge the gap between the cost of attending your college and the student aid you have already received (Opdyke). For example, imagine the cost of attending a student's college was $10,000. And suppose that college gave the student $6,000 worth of grants and college loans. The difference between the $10,000 cost of attendance and the $6,000 in student aid would be $4,000. A parent in that situation would be able to take a PLUS Loan for up to $4,000.

How Much Will it Cost?

    For PLUS Loans, you will have to repay the total amount of the loan plus interest. The interest rates for both Direct and FFEL PLUS Loans are fixed. For Direct loans disbursed after July 1, 2006 the interest rate is fixed at 7.94%, and for FFEL loans disbursed after July 1, 2006 the interest rate is fixed at 8.50% ("PLUS Loans"). In addition to paying interest, there is a 4.0% fee that is determined by the amount of money you borrow ("PLUS Loans"). That fee is distributed evenly over the life of the loan, which means you will pay a small portion of that fee every time you make a payment. For example, if you took out a $4,000 PLUS College Loan, you would have to pay a fee of $160. If you made monthly payments and your loan lasted for 4 years, you would pay about $3.33 of that $160 fee every month. The fee helps cover the government's costs for processing and managing the loan.

    If PLUS College Loans are not an option for you and you need further assistance to cover the cost of college, alternative loans are another option worth considering. To learn about alternative college loand, read the next section of our Student Loan Guide Step 6: How to Get an Alternative College Loan.

The Rest of Our Student Loan Guide:


Education Department. "PLUS Loans (Parent Loans)." (accessed August 4, 2006).

Education Department. "Stafford Loans (FFELs and Direct Loans)." (accessed August 4, 2006).

Opdyke, Jeff D. The Wall Street Journal Complete Personal Finance Guidebook. (New York: Random House, Inc, 2006), 176.