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Federal parent plus loans and how to avail them

February 26,2011 by: Dallas Browne

These loans are federally regulated loans that are taken by parents to help their child meet type educational expenses that he is bound to meet as he moves on for his higher education. This loan is helpful in meeting the tuition fees and other school related expenses. The loans have a fixed rate of interest which is below the interest rates levied on normal loans.

Features of federal parent plus loans

  1. Parent plus loans are not need based loans. This means that an applicant does not have to prove his financial disability to meet the expenses of education in order to qualify for the loan. Parents of any financial background irrespective of their annual income can apply for the loan.
  2. The federal institute might require the FAFSA financial aid application to qualify for the federal loan. All applicants therefore have to make sure to apply for FAFSA and place the report before the concerned officials before applying for the loan.
  3. The terms and conditions of the loan are decided by the federal government.
  4. The interest rate of the federal plus parent’s loan is fixed at 7.9% and does not change as per the markets trends or inflation.
  5. The applicant might be awarded a 0.25% interest rate credit on repayment when the payments are debited from a bank account.
  6. The processing and default fees charged are very low.
  7. These loans require no collateral. A number of non federal loans require the applicant to keep collateral to support their financial status. This is not present in Parent plus loans.
  8. The interest charged on the loan amount is not only low but can also be tax reputable.

How the loan disbursement works?

  1. There is a limit of the amount of the total educational fees that can be borrowed form Federal Parent plus loans. The limit is calculated on the numbers of cost of attendance minus the other financial aids received by the student.
  2. The loan amount gets disbursed in two installments. Each installment pertains to about half the total loan amount.
  3. The loan usually gets disbursed directly to the school or educational institute with who the child has enrolled.
  4. The schools notify the parents as soon as the loan amount gets credited in the plus loan funds. The notification is sent within thirty days of the loans entering the Plus account.
  5. The parents are then required to approve a disbursement check and send the amount back to school.
  6. In case the parents requirements get fulfilled then they might reject the loan by not endorsing the loan amount and will also have to notify the concerned school within fourteen days of the loan disbursement.
  7. In case the loan amount exceeds the actual educational cost then the rest amount is paid in check to the parents.

Benefits of Parents plus federal loans

  1. The primary benefit of these loans is that parents can borrow money for their child’s education at a very low interest charge.
  2. The processing fee charged is only three percent.
  3. In case of loan repayment default the penalty levied is only one percent.
  4. It allows the parents to borrow the total cost of the educational fees that is boarding, tuition fees etc. minus the amount of financial aid that he might be receiving from the other organizations.

These loans help to fill up the financial gap that might be there due to other loans like Stafford loans etc. These loans therefore help in meeting the other expenses of the educational process.


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