01 Jan How Does Federal Parent Plus Loans Work?
Federal Parent Plus Loans are quite simple – they are loans which are supported by the federal government. With Parent Plus Loans, parents are able to loan money in order to pay education costs of their children who are still dependent (undergraduate students only). This type of loan is generally given out depending on the credit of the parent. As for the interest rate, it is fixed, and after the second loan, repayment must start.
The requirements for a Federal Parent Plus loan is quite simple. Firstly, you must have very good credit, or else you are automatically not eligible. The student must also be in university or college half of the time. Some schools require students applying for a Federal Parent Plus Loan to fill out a FAFSA form. Although, this is only required by some schools, and not by others. You can ask the financial office of the university to find out. Lastly, the student must be a citizen of the US or a permanent resident. Those from Samoa and/or Swains Island are also eligible.
There are quite a few benefits as for this type of loan. For starters, the parent is obviously getting a fair bit of money to help their child enroll in higher education. Secondly, this type of loan as a set interest rate, meaning it cannot exceed it. This set interest rate is 8.5% — which was applied in 2006. There is also zero collateral required. Another great aspect of this type of loan is that one cannot be rejected for having a very high income. This loan is solely rewarded based on your credit. The funds do not only have to be for tuition – they can be for food, housing, textbooks, and so on.
The amount you can loan depends on how much other financial aid you are receiving. You must take the cost of your education for a year, subtract the amounts of other financial aid you are receiving, and that is how much you can loan.As for repaying, you have 10 years to do so. If you need to consolidate, you can also do that as well.