Who qualifies: Parents of dependent undergraduates that are enrolled at least half time in an eligible school, as well as graduate and professional degree students. Parents must also pass a credit check. Like Stafford loans, PLUS are either Direct (from the federal government) loans or FFEL (from private lenders guaranteed by the government) loans.
How it works: For a Direct PLUS, parents complete
a loan application obtained from the school and a promissory note. For a
FFEL PLUS, parents submit the application -- obtained from a school, a lender
or the organization that administers the loans in that state -- and it is
then evaluated by a lender. The loans have variable rates with a cap. Currently,
loans disbursed between July 1, 2007, and June 30, 2008, are capped at a
rate of 7.9 percent for Direct loans and 8.5 percent for FFEL loans.
Lender/payback: For a Direct PLUS, the lender is the U.S. Department of Education. For a FFEL PLUS, the lender is the school, a banking institution or the state loan administrator. Borrowers must begin repaying the loan 60 days after the final loan is disbursed and the entire loan must be repaid within 10 years. There is no prepayment penalty; however, there is a fee of up to 4 percent of the loan deducted from the loan disbursement. This fee is to defray the cost of the loans.