If you have a child in college, you may be able to take advantage of a federal loan program that enables parents to take out secured loan their children’s university education. The Parent Loan for Undergraduate Students (PLUS loan) is a federal loan that works much like any other student loan, except that this is a loan for parents. These loans are accessible through the government and additionally through banks and other lenders.
Although PLUS loans are a type of student loan, they do not provide all of the exact benefits as other student loans. The interest rate on these loans is fixed at 8.5%, which is higher than other student loans. Unlike the Stafford and Perkins loans, which are subsidized pending the student is out of university, this loan is not. There is also a 4% fee taken out of each disbursement check.
There is a two month period trailing the final disbursement of the funds from a PLUS loan during which no payments have to be made. Payments commence following this two month period, and the loan is must be paid within ten years. Unlike the Stafford loan, there is no grace period. Nevertheless, parents may participate in a deferment program which allows them to capitalize their interest and make money at home, and parents who are also going to university themselves, may be able to get a deferment.
Similar to other loans, the PLUS loan can be combined, but usually only with other PLUS loans. If your children have gotten Stafford or Perkins loans, then the student is accountable for paying them back, not the parent. The borrowers are not the same person, so the loans can’t be combined. Nevertheless, if the parent has Stafford or Perkins loans from paying for their own university education, those loans may be combined with the parent’s PLUS loan. You can save on interest by merging your PLUS loans. There is a restriction on consolidations that limits the interest rate to 8.25%. That’s only a quarter of a percent fewer than the fixed rate on the loan, but it’s probable you may be able to get an even better rate.
The PLUS loan for parents is an excellent option for families who require fast easy cash. If your children are incapable to get enough financial aid and student loans to cover their entire education, the parent’s PLUS loan can help. Just remember that paying back the PLUS loan is the parent’s duty, not the child’s.