A PLUS for Your Child's Education

As a parent, it's only natural to want to do everything you can to ensure the best possible future for your child. Unfortunately, the process of obtaining financial aid for college can be an overwhelming experience. The cost of higher education has skyrocketed in the last 20 years, leading to an entire industry devoted to helping confused parents find their way through a maze of paperwork.

When your son or daughter fills out the Free Application for Federal Student Aid (FAFSA), he or she will receive a Student Aid Report (SAR) listing your Expected Family Contribution (EFC). This number is what you're expected to contribute to your child's educational expenses, based on your annual income and the other personal data you've provided. If you don't have enough room in your budget to meet the obligation of the EFC, don't panic. This is when you can apply for a federal Parent Loan for Undergraduate Students (PLUS).

To apply for a PLUS loan, you must be a US citizen, US national or permanent resident alien. Your son or daughter must be classified as a dependent student who is attending school on at least a half-time basis. Eligibility for a PLUS loan does require a credit check, but your child will be eligible for an increase in his/her Stafford loans if you are denied a PLUS loan due to poor credit history.

PLUS loans are either provided by private banks or directly through the government.

Since PLUS loans are the responsibility of the parent and not the student, there is no repayment grace period. You must begin making loan payments 60 days after receiving the money, with a repayment term of up to 10 years.

If you have PLUS loans for more than one child's educational expenses, loan consolidation services are available. This allows access to extended, income contingent, or graduated repayment plans that can help you better manage your debt burden.

Since the program is not based on financial need, there is no cumulative limit on the amount that you can borrow through a PLUS loan. However, it's best to investigate all possible sources of funding before making your final decision. Alternative private loans, home equity loans, and borrowing from retirement funds may be options for you to consider as well.

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