The financial needs of our students' families are as different as the families themselves. For most students, the need-based assistance offered by HMC is sufficient to pay for college when combined with the family's calculated contribution.
However, the reality for many families is that they are not prepared to contribute the calculated family contribution. Many parents look for low interest financing options, such as the Federal Direct Parent Loan for Undergraduate Students (PLUS) to help reduce monthly expenses and extend the payment of the academic year's costs.
The Direct PLUS Loan offers parents an excellent low-interest loan alternative to paying for college costs during the academic year. With the Direct PLUS Loan, a family can borrow up to the difference between the cost of attendance and the amount of any financial aid the student is eligible to receive.
The parent borrower must pass a mandatory credit check performed by the Direct Loan Servicing Center (DLSC). If a parent's Direct PLUS Loan application is denied due to unsatisfactory credit, the student is automatically eligible for an additional Direct Unsubsidized Loan. First- and second-year students are eligible for an additional $6,000 and third- and fourth-year students are eligible for an additional $7,000 if the Direct PLUS Loan is denied. This unsubsidized loan amount is in addition to the loan limits for the Direct Subsidized and Unsubsidized Loans.
Direct PLUS Loan Benefits
Benefits of the Direct PLUS Loan include:
- low interest rate
- lower monthly payments
- an extended payment period for educational costs
- option of deferring repayment based on student's enrollment status
To borrow a Direct PLUS Loan for a student, the parent borrower must pass a mandatory credit check performed by the Direct Loan Servicing Center (DLSC) and be the student's biological or adoptive mother or father. A stepparent whose assets and income are taken into account when determining the student's Expected Family Contribution is also eligible to borrow a Direct PLUS Loan. There is no grace period for a Direct PLUS Loan. Interest begins to accrue immediately after the first disbursement of the Federal Direct PLUS Loan and repayment of both principal and interest begins within 60 days after the final disbursement of the loan.
Interest rate is fixed at 7.9 percent.
Direct PLUS Loan is subject to a 4.0 percent origination fee with a 1.5 percent up-front interest rebate. Effective for the 2012-2013 academic year, the up-front interest rebate will not be available.
There is no grace period for Direct PLUS Loans. However, after July 1, 2008, parent borrowers have the option of deferring repayment based on your enrollment status. Specifically, parent borrowers may defer repayment:
- While you, the student, are enrolled on at least a half-time basis, and
- During the six-month period after you cease to be enrolled on at least a half-time basis
The parent borrower may complete and submit the In-School Deferment Request Form, which is available on the Direct Loan website or by calling the Direct Loan Servicing Center (DLSC) at (800) 848-0979 for assistance. Note that if the parent borrower does not choose to defer payment, repayment begins 60 days after full disbursement of the loan.
Interest will be capitalized until repayment begins. If a deferment is chosen, your parent will be sent a quarterly interest statement and will have the option of paying the interest as it accrues during the deferment period. The parent borrower may be allowed up to 30 years for repayment.
In addition, if a parent's Direct PLUS Loan application is denied due to unsatisfactory credit, the student is automatically eligible for an additional Direct Unsubsidized Loan. First- and second-year students are eligible for an additional $6,000 and third- and fourth-year students are eligible for an additional $7,000 if the Direct PLUS Loan is denied.
1) Submit the Direct PLUS Loan Request (required each year) and Direct PLUS Loan Master Promissory Note (first-time PLUS borrowers only) at StudentLoans.gov. The Direct PLUS Loan Request includes four steps: Personal Information, Student & Loan Info, Review Application, and Credit Check & Submit. You will need to sign in using your FAFSA PIN to complete the PLUS loan request process.
2) Submit the Authorization for Direct PLUS Loan Payment of Allowable Charges (PDF) (first-time PLUS borrowers only) and the Parent Property Lien Statement (PDF) (required each year) to the Office of Financial Aid.
Last Dated: November 2011
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