A college education has never been more important than it is today. Unfortunately, paying for that education has never been more of a challenge. Tuition rates are rising faster than the overall inflation rate, and most students will need to take out some sort of loan to pay for their college education. This article will help you to understand how Direct PLUS Loans work.

What are Direct PLUS Loans?

Direct PLUS Loans are loans taken out by parents to pay for the educational expenses of their children. The money is borrowed directly from the U.S. Department of Education so there is no other lender involved. To be eligible, the child must be a dependent undergraduate student enrolled at least half time. Also, the parents must not have an adverse credit history.

Can parents get both Direct PLUS Loans and FFEL PLUS Loans?

Parents can apply for either Direct PLUS Loans or for FFEL PLUS loans, but may not apply for both loans for the same child during the same enrolment period. A parent may apply for a Direct PLUS Loan for one child and a FFEL PLUS Loan for another child.

How can I apply for Direct PLUS Loans?

For Direct PLUS loans, you must complete a Direct PLUS Loan application and promissory note. These forms can be obtained at your school’s financial aid office. Your financial aid office can also provide you with information on other federal loan programs.

Are there other borrowing requirements that must be met for Direct PLUS Loans?

Generally, you have to pass a credit check in order to get Direct PLUS Loans. However, if you don’t pass the credit check, you may still be able to obtain the loan if a relative or friend with good credit agrees to endorse the loan and promises to pay if you are unable to. You may also be eligible if you can demonstrate extenuating circumstances.

Do I need to find my own lender?

Not if you borrow under the Direct PLUS Loans program, because the lender will be the federal government’s Department of Education. The school assists the federal government in administering Direct PLUS Loans by distributing the loan application, processing the loan and disbursing the loan funds.

How much can I borrow?

The yearly limit on Direct PLUS Loans is equal to the cost of attendance minus any other financial aid you receive.

What is the interest rate on Direct PLUS Loans?

The interest rate on Direct PLUS Loans can change each year of repayment but does not exceed 9 percent. Interest rates on Direct PLUS Loans are adjusted on July 1 of each year. You will be notified of any interest rate changes throughout the life of the loan. Interest is charged on the loan from the date of the first disbursement until the loan is paid in full.

When must borrowers begin repaying Direct PLUS Loans?

Repayment of Direct PLUS Loans must begin within 60 days of the final loan disbursement for the period of enrolment for which you borrowed. Interest begins to accumulate at the time the first disbursement is made. You must begin repaying the principal and interest while your child is still in school.