All You Need to Know About PLUS Loans
By: Staff

The cost of college can be hugely expensive for students and parents alike. The majority of the financial burden, however, often falls on the parents, since they are older and have hopefully been saving up for their child’s education. As a matter of fact, for many parents, it is expected that they will have to foot the bill for the entire cost of the child’s education. While this can be a scary proposition, there are plenty of public and private resources that can help you afford the high cost of college tuition, regardless of your financial position.

PLUS (Parent Loans for Undergraduate Students) loans are some of the most commonly used funding sources for college students. They are guaranteed by the government and feature a low, fixed interest rate of 8.5% for loans disbursed after July 1, 2008 through FFELP lenders like Sallie Mae (Stock Quote: SLM). You can get a 7.9% interest rate with direct government funding sources, though, so it pays to shop around. In addition to the amount borrowed, parents are also responsible for a 3% loan origination fee and/or a federal default fee of 1% in some cases. These fees are deducted from the principal at each disbursement.

While Stafford and Perkins loans feature much lower interest rates than PLUS loans, they also have income requirements and loan limits. Any parent can obtain a federal PLUS loan, regardless of income, as long as the recipient of the funds is enrolled in an accredited institution of higher education. There is a modest credit check to make sure that you don’t have an adverse credit history, but the requirements are not as strict as private loans. Furthermore, PLUS loans are limitless. You can borrow up to the full cost of your child’s tuition and related expenses, minus any financial aid rewarded.

Only parents for undergraduate students can take out PLUS loans. It is the ultimate responsibility of the parents to repay PLUS loans, even if the student agrees to make payments. As of July 2006, professional and graduate students are also eligible to take out PLUS loans in their own names.

History of PLUS loans

PLUS loans are offered under Title IV of the Higher Education Act of 1965. Although they have undergone some changes over the years, the basic tenet of the loan (to provide parents a reliable way to help pay for their child’s education) remains the same.

Repayment Schedule

Repayment for PLUS loans begins 60 days after your child’s funds have been fully dispersed. The repayment period normally lasts up to 10 years, or as long as it takes you takes you to pay off the balance, whichever comes first. Graduate students may defer this debt while in school, however.


—For more ways to save, spend, invest and borrow, visit

Sign Up Now for Our FREE Newsletter
Search for Rates

US Rate Map - National Money Market Rates

Roll over states to see best rates.
Lower Rates Higher Rates

This illustration shows rates based on all terms and locations of a particular state. Products may not be offered by all institutions. Individual institutions determine the availability and required qualifications of their products. Product restrictions may apply.


Calculator Access our Savings, Mortgage, Auto Loan and Personal Finance Tools here.