Helping Pay For Your Child’s College

Trying to help your first-year college student choose the best institution for them is difficult enough without having to think about how you’re going to pay for it.

And it doesn’t get any easier in the second, third or fourth years, either. So what happens when you file the FAFSA and find that your Expected Family Contribution, or EFC, is much higher than you’re able to contribute? Don’t panic. There is a backup plan for just this situation, notably referred to as PLUS, or Parents’ Loans for Undergraduate Students.

What are PLUS? Stafford and Perkins loans are student loans intended to provide college students with money to attend college at a below-market rate. PLUS are loans intended to provide the same funding for college at a below-market rate, but to parents instead of students.

What is the interest rate on PLUS? The interest rate changes each year, but can never exceed nine percent. Find up-to-date PLUS interest rates at FinAid.org.

What is the grace period for repayment? Unlike with student loans, PLUS have no grace period. You will begin receiving bills for repayment of the principal and the interest immediately.

Does the EFC affect how much we can borrow? PLUS are not based on need. PLUS are based on the difference between your student’s financial aid package and actual college costs.

How much can we borrow? With a PLUS, you can borrow the difference between your child’s financial aid package and the cost of college. If your student receives $3500 and their actual college costs will be $5500, you will be eligible to borrow $2000.

When will we receive a check? You will not receive a check for the money you borrow with a PLUS. The money will be sent directly to the school.

How do we apply for a PLUS? If your student’s financial aid package doesn’t meet or exceed total costs, you should automatically receive a letter from your student’s institution. If not, you can contact the financial aid office on campus and have the information sent to you.

We have a poor credit history, but I heard that this doesn’t count against you on student loans? What you heard is true, for student loans. However, PLUS are not student loans. PLUS are loans for the parents of students and are therefore treated as a regular loan in terms of credit. Your credit history will be checked when you apply for a PLUS and a poor credit history may prevent you from receiving the loan at all.
If you decide that a loan will be the best way to offset the costs of your student’s college education, a PLUS loan may be right for you. However, it is important to remember that a PLUS is treated the same as any other loan—it can and will affect your credit history. With the high costs of college and other bills piling up, it may be safer to seek other routes to paying for your student’s higher education.