The Federal Parent PLUS loan is the acronym for the Parent Loan for Undergraduate Students, a type of loan offered by the US Department of Education for parents who want to borrow funds to pay the cost of attendance for a dependent student. Parents of dependent undergraduates can borrow up to the cost of attendance minus all other financial aid.
The interest rate on Federal Direct Loans is a fixed rate set annually based on 10-year Treasury plus 4.6%. Federal law created caps on these annual rates at 10.5%. Interest accrues from disbursement. Parents can opt to make no payment while their student is enrolled at least half-time or in their six-month grace period. Interest accrues from disbursement. Unpaid interest is capitalized once prior to entering repayment.
The current PLUS loan rate is 7.08% (but starting July 1, 2020 the rate will be 5.30%) with a 4.236% loan fee that is deducted from the proceeds sent to the school. This means that if borrowing $1,000 to pay a tuition bill, the borrower will only receive $958, requiring the family to make up the difference or borrow a higher amount. At Quatromoney, we calculate the higher borrowing amount needed to pay $1,000 to the school.
Standard Repayment Plan is shown, which is 10 years, but multiple repayment plan options exist. Federal Parent PLUS Loan offer several deferment and forbearance options. If a borrower is permanently disabled or dies, the loan will be discharged.