Federal
PLUS loans are part of a family of student loans under the Federal
Family Education Loan (FFEL) Program and are authorized by the
federal government. These loans are backed by the federal government,
guaranteed by guaranty agencies such as the California Student
Aid Commission (CSAC), and administered by CSAC's student loan
services auxiliary corporation, EdFund, FFEL Program Loans are
made by banks, savings and loans, and credit unions.
A PLUS loan can help your family realize the educational goals
of your dependent student, but it also requires that you understand
your repayment obligations. The following information will help
to answer many of the more frequently asked questions and help
you to become a more informed, responsible borrower.
WHAT
IS A PLUS LOAN?
A
PLUS loan is a federally guaranteed loan made to parents and legal
guardians of dependent students to pay for education expenses-regardless
of financial need. The federal government sets parameters for
PLUS loan interest rates, fees, loan limits, repayment terms,
deferment options and eligibility requirements.
HOW
DO I QUALIFY FOR A PLUS LOAN?
PLUS
Loans are intended to provide a source of financial assistance
to parents or dependent students. To qualify for a PLUS Loan,
you must first pass a credit check. Generally, applicants with
an adverse credit history cannot qualify for a PLUS Loan.
- To
qualify as a parent, you must be:
-
A natural or adoptive mother or father;
-
A legal guardian appointed by a court who is specifically
required to use your own resources for the support of the
student; or
- The
spouse of a parent who has remarried, if your income and assets
would be taken into consideration when determining the student's
eligibility for other federal student aid.
- Both
you and your dependent student must:
-
Be a U.S. citizen/national, permanent resident, or an eligible
noncitizen;
-
Not be in default on a federal student loan, have obtained
loan amounts which exceed the annual or aggregate limits,
or be liable for a grant of federal Perkins Loan overpayment;
and
- Possess
a valid Social Security Number.
In
addition, the student must:
- Be
enrolled or accepted for enrollment on at least a half-time
basis in a degree or certificate program at a college, vocational
school or correspondence program approved by the U.S. Department
of Education;
- Have
complied with U.S. Selective Service registration requirements;
- Be
making satisfactory academic progress; and
- Have
a high school diploma or GED, or have passed an approved,
independently administered "ability to benefit" exam.
NOTE:
By federal law, students enrolled in graduate or professional
programs are not considered dependent students. Parents are ineligible
for PLUS Loans for these students.
HOW MUCH CAN I BORROW?
You
may borrow up to the full cost of your child's education minus
other financial aid your child may be awarded. The financial aid
office your child's school coordinates the overall financial aid
package your child receives. Included in the total cost of education
used to determine your PLUS loan maximum amount are such expenses
as tuition and fees, room and board, books, supplies, transportation
and certain miscellaneous expenses.
WHAT
ARE THE COSTS ASSOCIATED WITH PLUS LOAN?
Borrowers
are charged interest during the life of the loan as well as an
insurance fee and an origination fee at time of disbursement.
The interest rate is a variable amount adjusted annually on July
1st, with a maximum rate of 9%. Currently, EDFUND does not assess
an insurance fee for new loans guaranteed.
ARE THESE LOANS AVAILABLE AT ANY SCHOOL?
Eligibility
for PLUS Loans require that the student attend a school approved
by the U.S. Department of Education. Most two-and four-year colleges,
universities, as well as many vocational/trade schools are approved
for the PLUS Loan Program. However, a school's eligibility to
participate in these federal student aid programs does not ensure
the quality of education or the student's ability to benefit from
its training. Select the school that best meets the student's
educational goals.
ARE THERE ANY RESTRICTIONS ON HOW I SPEND MY LOAN?
Like
all types of federal financial aid, a PLUS Loan is intended for
education related expenses at the school that certifies you eligibility.
These expenses may include tuition and fees, book and supplies,
room and board, reasonable transportation, and other miscellaneous
or personal expenses. If you student changes schools you will
need to reapply for a new loan at the new school.
WHEN DO I BEGIN THE REPAYMENT OF MY PLUS LOAN?
Repayment
of PLUS Loans begins immediately after the final disbursement
of the loan occurs, with the first payment due within 60 days.
Interest on the loan begins to accrue with the first disbursement.
Payments will include both principal and interest and usually
will be scheduled over a 10-year period.
WHAT
ELSE SHOULD I KNOW BEFORE ACCEPTING A LOAN?
Before
applying for a loan or accepting a loan check, consider the following:
Is the school or program a good investment? You have a
right to be informed about, a school's tuition and refund policies;
academic and training programs, financial aid programs and its
graduates' success in finding jobs. Remember, even if your student
does not graduate, is not happy with the education or training,
or cannot locate employment, you must still repay your loan. Your
loan is from your lender, not the school.
Are there other options? Check out all scholarships, grants,
and work-study programs. Can you borrow less? Can your student
live more economically? Borrow only what you need.
Can you repay the loan? Before applying, determine if the
loan is affordable. Estimate how must you will need and how much
your monthly payments will be, using the repayment guides in the
application. By projecting your monthly payments, you can set
your borrowing limits.
Keep in touch with the lender and school. Problems arise
if your records with the lender are inaccurate or outdated. If
you or the student have a name change, move, or if the student
leaves school, or changes graduation date, inform the lender promptly.
Avoid default by filing for a deferment. If unemployment,
temporary financial setbacks or other circumstances such as attending
school yourself, make it difficult for you to repay your loan,
you may be eligible for a deferment. If you don't qualify for
a deferment and are unable to make payments, ask your lender for
a hardship extension or "forbearance". Both deferments and forbearances
allow for temporary cessation of payment. Contact your lender
for more information.
WHAT
DOES IT MEAN IF I DEFAULT ON MY PLUS LOAN?
If
you default, it means that after numerous attempts, the lender
has been unsuccessful in acquiring payment from you has turned
the loan over to the guaranty agency for collection. If this occurs,
the entire outstanding amount is due and payable. EDFUND will
take all necessary steps to collect the money owed, including
taking legal action. Consequences of default include loss of further
student financial aid eligibility, garnishment of state and federal
tax refunds, wage garnishment, damaged credit rating, loss of
PLUS Loan benefits and assessment of collection costs. These consequences
are important reasons to pay close attention to the terms of your
loan and to determine before applying, if the loan you are requesting
is your best option.
An education loan is a serious commitment. Student loans must
be paid back with interest and you must make payments until the
loan is fully repaid. For questions or help in completing
the application, call EdFund at 916-526-7900
AVOID
DEFAULT
If
unemployment or temporary financial setback make it difficult
to repay your loan, ask your lender about deferment or forbearance.
EdFund collects on defaulted loans. Aggressive collection efforts
and touch penalties include:
- Reporting
loan status to national credit reporting agencies.
- Assignment
to collection agencies where full payment is demanded.
- Loss
of eligibility for future student financial aid.
- Withholding
of state and federal income tax refunds and California lottery
winnings.
- Loss
of deferment and monthly payment options.
- Higher
interest rate assessed on defaulted loans.
- Assessment
of collection costs.
- Court
action or litigation.
- Wage
garnishment and attachment of property.
KEEP
IN CONTACT
It's
important to keep track of school or lender contacts. Use the
space below to record the names, addresses and phone numbers of
the school and lender (or servicer). School Financial Office Counselor
Address Phone Number Lender /Servicer Loan Officer Address Phone
Number
APPLICATION CHECKLIST
- Be
sure you have not forgotten these important steps:
- Read
carefully the Promissory Note and the Borrower's Rights and
Responsibilities.
- Answer
every item in the Borrower and Student sections. Blank or
unreadable items can delay the processing of your application.
- Make
sure all the answers can be read on all four copies of the
application.
- Write
in the amount you want to borrow in item 10 (Borrow Section).
- Sign
and date the Application and Promissory Note, items 18 and
24.
- Keep
the Borrower's copy for your records.
- Forward
the Application and Promissory Note to a participating lender
after the Borrower, Student, and School sections have been
completed.
LOAN MANAGEMENT TIPS
Remember,
you will receive your PLUS Loan from a bank, savings and loan,
or credit union. Always keep the lender or holder informed of
your current mailing address and telephone number, and those of
the student, and of the student's enrollment.
- If
you or the student has a name change, let the lender know.
- If
you change jobs, notify the lender of your new place of employment.
- Save
this folder and keep the copies of all forms, documents and
correspondence relating to your loan.
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California State University,
Dominguez Hills • 1000 E. Victoria Street • Carson, California
90747 • (310) 243-3696