Parent PLUS Loan FAQ

General

What is a Parent PLUS Loan?

A Parent PLUS loan is a low-interest loan provided to parents through the Federal Family Education Loan Program. This loan enables parents to pay the education expenses for dependent children enrolled at least half-time in a college or career school.

Who pays back the loan?

The parent.

How does my child’s school get the loan money?

Parent PLUS loan funds are sent directly to your child’s school. Your loan money must first be applied to pay for tuition and fees, room and board, and other school charges. If loan money remains, you will receive the funds, unless you authorize the school to release the funds to your child or hold them in a school account.

What should I do before I apply?

Several events must happen before you should apply for a Parent PLUS loan. You must:

  • Complete the Free Application for Federal Student Aid (FAFSA). This is required for your child to be considered for federal and most other types of student aid awarded by state agencies and colleges. If you do not submit a FAFSA, you will NOT be eligible to receive student aid.
  • Receive a Student Aid Report (SAR) which tells you what federal funding your child can get.
  • Receive student aid award letters from schools that have accepted your child.
  • Review and compare your child’s student aid awards.
  • Determine whether the student aid award meets your child’s education costs for their school. If it does not or you need funding to meet your Expected Family Contribution (indicated in the SAR), then it is time to apply.

Apply for a Parent PLUS loan online (recommended) or print the Parent PLUS loan application (832 KB PDF).

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What is a Parent PLUS Master Promissory Note (MPN)?

An MPN is a “promise to pay” document under which you may receive Parent PLUS loans for either a single or multiple enrollment periods.

You may need to sign the MPN only once, but you must apply for additional Parent PLUS loan funds each academic year, as needed.

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Eligibility

Am I eligible?

Parent
To get a PLUS loan, you must:

  • Be the student’s natural parent, adoptive parent, or in some cases, stepparent
  • Be a U.S. citizen or eligible non-citizen
  • Have no education loans in default or owe educational grant refunds
  • Be creditworthy

Student
For your parent to get a PLUS loan, you must:

  • Complete the Free Application for Federal Student Aid (FAFSA)
  • Be a dependent student. Parents of independent students are not eligible.
  • Be enrolled in a school that participates in the Federal Family Education Loan Program
  • Be enrolled at least half-time while working toward a degree or certificate
  • Have no education loans in default or owe educational grant refunds
  • Register with the Selective Service, if you are a male 18-25 years old

Is there a credit check involved?

Yes, you will undergo a credit check to verify your credit history. We recommend you apply for the PLUS loan which will also determine if you passed the credit check. If it is determined that you are denied, you may still qualify for a Parent PLUS loan by securing a creditworthy endorser. Your endorser must complete the Endorser Addendum and return to AES.

Print the following:

Is my child an independent student?

If your child can answer yes to any of the following questions, he/she is an independent student for the 2009-2010 academic year:

  • Were you born before January 1, 1986?
  • Are you married as of the day you apply (or separated but not divorced)?
  • Will you be enrolled in a master’s or doctorate program (beyond a bachelor’s degree) at the beginning of the 2009-2010 academic year?
  • Do you have children who receive more than half their support from you?
  • Do you have dependents (other than your children or spouse) who live with you and who receive more than half their support from you and will continue to receive more than half their support from you through June 30, 2010?
  • Are both your parents deceased?
  • Are you or were you a ward or dependent of the court until age 18 years?
  • Are you a veteran of the U.S. Armed Forces? (includes students who attended a U.S. service academy and who were released under a condition other than dishonorable)
  • Are you currently serving on active duty in the Armed Forces for other than training purposes?

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Terms

What is the interest rate?


  • The current fixed rate is 8.5% for loans paid out on/after July 1, 2006.
  • The rate is adjusted each July 1st and is based on the 90-day Treasury bill plus a margin determined by your lender.
  • Select lenders offer additional rate reductions.
  • The rate will never exceed 9.0%.


How much can I borrow?

You may borrow up to the full cost of your child's education less other aid received. You can use the loan funds for all associated costs - including tuition, room and board, books, computer, etc.

Loan fees total 4% of the borrowed amount.

  • Federal default fee will not exceed 1%
  • Federal origination fee: 3%


Can I consolidate?

Yes. Parent PLUS loans in repayment are eligible for loan consolidation.

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Advantages & Disadvantages

Is this the right loan for me?

A Parent PLUS loan is the best option for parents who want to pay for their child’s education costs.

  • Low, fixed interest rate of 8.5% – get even lower rates with AES benefits
  • Borrow the difference between your child’s cost of attendance and financial aid award
  • No income requirements
  • Payments on interest can be tax deductible
  • No penalties for paying your loan off early
  • Flexible repayment options

AES offers two Parent PLUS loan programs:



Why should I work with AES?


  • Choose to pay by automatic direct debit and, if eligible, we may reduce your interest rate.
  • Manage your loans online any time.
  • Get single-point servicing for the life of the loan with AES.
  • Get one statement for all AES-serviced loans.
  • We help you every step of the way, from choosing a loan to repaying your loan.


Is it better to take out a Parent PLUS loan or a home equity loan?

In most cases, a Parent PLUS loan is a better option than a home equity loan. Here’s why:

  • Parent PLUS loan interest rates are fixed. Many home equity loans have high interest rate caps. If interest rates rise, the loan could become very expensive – even with a tax advantage.
  • You can take out multiple Parent PLUS loans to pay for all years of schooling for all of your children; whereas, you may not have enough equity in your home.
  • A Parent PLUS loan is not secured by your assets. Payments can be deferred during times of financial difficulty without putting your home at risk.
  • If you are carrying high-interest debt, using a Parent PLUS loan for college expenses can free up monies (like equity) to pay other expenses.
  • A Parent PLUS loan is fully insured against death and disability.

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Repayment

What are my repayment options?

The standard repayment period is 10 years. Loans become due for repayment 60 days after the school receives the loan funds. Postponement of repayment may be available upon request while your dependent student is enrolled at least half-time.

We understand that things do not always go as planned, so we offer several repayment plans:

  • Level.  Pay the same amount each month on the principal and interest throughout repayment.
  • Graduated. Pay a smaller amount at the beginning of repayment and increase your payment amount over time.
  • Income Sensitive. Base your monthly payment amount on your gross income and student loan debt for a limited period of time.


What if I pay my loan off early?

You can pay your loan off early without penalty. This is known as prepayment.

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