PublicationTitle: PLUS Loan Basics
What is a Federal Direct PLUS Loan?
This is one of the low-interest loans that make up
the William D. Ford Federal Direct Loan Program
(also known as "Direct Loans"). The Direct Loan
Program enables students and parents to receive
funds directly from the U.S. Department of
Education to pay for education after high school.
The Department is the lender, rather than a bank or
credit union, and delivers loan proceeds through the
student's school. Students and parents repay the
A Direct PLUS Loan enables parents of dependent
students to borrow for their children's educations. A
dependent student is one who does not meet any of
the criteria for an independent student. An
independent student is one of the following:
- at least 24 years old by December 31, 1996
- a graduate or professional student
- a veteran
- an orphan
- a ward of the court
- someone with legal dependents other than a
If your child does NOT meet any of these criteria,
you may apply for a Direct PLUS Loan for him or
How do I apply?
Complete a combined application/promissory note
you can get from your child's school. (Your child
also must complete a portion of the application.)
Send the application to the school, which completes
its part and forwards the application to be
How will I know if I'm eligible?
Generally, you're eligible
- if you don't have an adverse credit history (a credit
check will be performed on your application)
- if you're not in default on a federal student loan
(including Federal PLUS Loans)
- if you meet the other eligibility requirements
outlined on your loan application
Even if you have an adverse credit history, you're
eligible if someone with no adverse credit history
agrees to endorse your loan (thus promising to
repay it if you fail to do so), or if you can document
to the U.S. Department of Education's satisfaction
that you have extenuating circumstances. Also, if
you're in default, you may still be eligible if you've
made satisfactory repayment arrangements (defined
as six consecutive, voluntary, on-time, full monthly
payments that are reasonable and affordable based
on your total financial circumstances).
I've already borrowed a Federal PLUS Loan for my
child under the Federal Family Education Loan
(FFEL) Program. Can I still get a Direct PLUS
Yes, although usually you can't get both types of
loans for the same enrollment period. There is an
exception if your child is a transfer student. For
example, if your child attended a school that offered
only FFELs in the first semester and transferred in
the second semester to a Direct Loan school, you
could borrow a Direct PLUS Loan for your child's
How much can I borrow?
You may borrow any amount up to the cost of your
child's education minus any other financial aid he or
she may receive. There is no borrowing limit based
on a determination of your financial need. Note that
an origination fee of 4 percent of the loan principal
will be deducted proportionately from each loan
What is the interest rate?
The interest rate is variable and is adjusted each
year on July 1 but will never be higher than 9
percent. Note that interest begins to accumulate on
the date of the first loan disbursement.
How will the loan be disbursed?
The loan will be disbursed in at least two payments
and generally will be credited to the student's
account for payment of tuition and other school
charges. Any leftover funds will be paid to you by
check or, with your written permission, either left in
the student's account or paid directly to the student.
When do I begin repayment?
The repayment period begins on the day after the
loan is fully disbursed. Your first payment is due
within 60 days after the final loan disbursement.
You'll pay both principal and the interest that
accumulates. During periods of deferment and
forbearance (postponements of loan payment--see
pages 10 and 13 for a description of these terms),
you pay either no or reduced principal, but interest
will continue to accumulate. The unpaid principal
will be capitalized (that is, added to your loan
principal), unless you choose to pay the interest
quarterly during your deferment or forbearance.
How do I repay, and where do I send my payments?
You repay your loan using one of the three
repayment options explained below. Your payments
will go to the U.S. Department of Education's Direct
Loan Servicing Center--you'll be given the address.
A Center representative will always be available if
you have any questions about repaying your loan.
To contact the Center, see the inside front cover of
A choice of repayment options allows you to repay
your loans in a way that best suits your financial
circumstances. Your Servicing Center will send you
information to help you decide which plan is right
for you. You can also change repayment plans later
if your circumstances change.
These are your repayment plan options:
- The Standard Repayment Plan requires fixed
monthly payments (at least $50) over a fixed period
of time (up to 10 years). The length of the
repayment period depends on how much you've
borrowed. This plan usually results in the lowest
total interest paid because the repayment period is
shorter than under the other plans.
- The Extended Repayment Plan allows loan
repayment to be extended over a period from
generally 12 to 30 years, depending on the total
amount borrowed. You still pay a fixed amount
each month (at least $50), but the monthly
payments usually will be less than under the
Standard Repayment Plan. This may make
repayment more manageable; however, usually
you'll pay more in interest because the repayment
period is longer.
- The Graduated Repayment Plan allows payments
to start out low and increase every two years. Your
monthly payments must be at least half of what you
would pay under Standard Repayment. As in the
Extended Repayment Plan, the repayment period
will vary from generally 12 to 30 years, depending
on the total amount borrowed. Again, monthly
payments may be more manageable because they
are lower, but usually you'll pay more interest
because the repayment period is longer.
Note: You can prepay all or a portion of your loan
at any time without penalty.
You'll receive more information on repayment
options from your Direct Loan Servicing Center.
Can I ever postpone my loan payments?
Yes, in some circumstances. You must contact the
Direct Loan Servicing Center to request either a
deferment or a forbearance, which are explained
To qualify for deferment, you (not your child)
must meet one of the following conditions:
- You must be enrolled at least half time in a
program of study that meets the U.S. Department of
Education's requirements for program eligibility.
(You may not defer repayment while in a medical
internship or residency program, except a residency
program in dentistry.)
- You must be enrolled in a graduate fellowship
program approved by the U.S. Department of
- You must be enrolled in a rehabilitation training
program for persons with disabilities that meets the
U.S. Department of Education's requirements.
You may also be eligible for deferment for a period
of up to three years if you are
- unemployed and seeking, but cannot find,
- experiencing, or will experience, economic
hardship (you can talk to the Servicing Center for
more information on this deferment)
You may be eligible for additional deferments if, at
the time you obtain a Direct Loan, you have an
outstanding balance on an FFEL--that is, a Federal
Stafford Loan, Guaranteed Student Loan, Federal
Insured Student Loan, Federal PLUS Loan, Federal
Supplemental Loan for Students, Auxiliary Loan to
Assist Students, or Federal Consolidation Loan
borrowed before July 1, 1993. The same deferments
that apply to these FFELs can apply to your Direct
If you meet one of the deferment conditions, contact
the Servicing Center and ask for the appropriate
deferment form. You'll be asked for documentation
to prove you meet the requirements for the
deferment you're seeking. The deferment form will
explain what information you must provide.
As mentioned earlier, you can choose not to pay any
principal during deferment, but interest will be
charged. You may choose to pay this interest or
have it capitalized (added to your principal balance
when the deferment ends).
If you're unable to make payments on your Direct
Loan for reasons such as unexpected personal
problems or poor health, you may request
forbearance if you don't qualify for a deferment.
During forbearance you don't have to make
payments, or you can extend the time between
payments, or you can make smaller payments than
originally scheduled. As is true for deferments, if
you choose not to pay the interest during the
forbearance period, it will be capitalized (added to
your loan principal when your forbearance ends).
You may also receive forbearance if you meet one
of the following conditions:
- You serve in a medical or dental internship or
- You serve in a position under the National and
Community Service Trust Act of 1993.
- You are obligated to make federal student loan
payments equal to, or greater than, 20 percent of
your total monthly gross income. There is a
three-year limit for this forbearance.
Contact the Servicing Center to request forbearance.
You'll be asked to provide documentation showing
that you qualify.
Can my loan ever be discharged (canceled)?
You can receive a discharge under these specific
- You (or the student for whom you borrowed)
- You become totally and permanently disabled. A
physician must certify total and permanent
disability. Also, the condition can't have existed
before you applied for a Direct PLUS Loan, unless
a doctor certifies that the condition has substantially
deteriorated since the loans were made.
- The student for whom you borrowed cannot
complete a course of study because the school
- The school falsely certified the eligibility of the
student for whom you borrowed.
- You file for bankruptcy (in rare cases).
You apply for a discharge through your Servicing
Is there some way to combine my loans to make
Yes, you may want to consider a Federal Direct
PLUS Consolidation Loan. Consolidation means
you make only one monthly payment to cover all
your loans, including Federal PLUS Loans under
the FFEL Program. There may be several
advantages for you if you consolidate. Because the
interest rate is the same as under Direct PLUS
Loans, you may be able to pay less interest than
you're paying on your current loans. Also, you can
choose a repayment plan that best suits your
financial circumstances, and you may be able to
reduce your monthly payments.
To receive a Direct PLUS Consolidation Loan, you
must have an outstanding balance on a Direct PLUS
Loan or a Federal PLUS Loan. If you don't already
have a Direct Loan, you can consolidate your
Federal PLUS Loan under Direct Loans only if
you're unable to receive an FFEL consolidation
loan. Also, you must not have an adverse credit
history, or you must obtain an endorser for
the loan who does not have an adverse credit
Direct PLUS Loan borrowers may consolidate the
following loans into a Direct PLUS Consolidation
- Direct PLUS Loans
- other Direct PLUS Consolidation Loans
- Federal Consolidation Loans
- Federal PLUS Loans
- Parent Loans for Undergraduate Students (PLUS)
If you have Direct or FFEL student loans for
yourself, you may also consolidate those under
If you have any questions about Direct Loans,
contact your Direct Loan Servicing Center.
HOW TO REACH US
Applicant Services/Loan Servicing
working hours are from 8 a.m. to 8:30 p.m. (EST)
U.S. Department of Education
Borrower Services Department
Direct Loan Servicing Center
P.O. Box 4609
Utica, NY 13504-4609
TDD: (800) 848-0983
[[This file contains the "Plus Basics" booklet in Portable Document Format (PDF).
It can be viewed with version 3.0 or greater of the free Adobe Acrobat Reader software.]]