The Federal Direct Parent PLUS Loan program allows a parent to borrow funds for the educational costs of a dependent student which are not covered by other sources of financial aid. This is a credit-based loan and will require repayment. Parents should carefully review the following information before continuing with the application process.
- Who Can Borrow?
- How Much Can a Parent Borrow?
- What are the Costs of Getting a Loan?
- How Does the Process Work?
- What if the Student Stops Attending Class?
- What if the Parent Defaults on the Federal Direct Parent PLUS Loan?
Who Can Borrow?
A parent may be eligible to borrow if the dependent student meets the following requirements:
- Is eligible to receive federal financial aid as described on the “Eligibility Requirements” page.
- Is enrolled in an eligible degree-seeking program or certain certificate programs.
- Has educational costs not covered by other types of financial aid.
- Is enrolled in, attends and maintains at least 6 credit hours during the semester.
- Has shown ability to benefit as described on the “Eligibility Requirements” page.
- Is making Satisfactory Academic Progress (SAP) according to the standards established by federal regulations and Owens Community College.
In addition, the parent borrower must meet the following requirements:
- Is a U.S. citizen, national, permanent resident or other eligible non-citizen.
- Is not in default on any federal student loan with the U.S. Department of Education or another institution, and does not owe a grant overpayment.
- Does not have an adverse credit history. Credit guidelines are established by the U.S. Department of Education in accordance with federal regulations.
- If a parent borrower has previously borrowed a Federal Direct Loan or Federal Direct Parent or Graduate PLUS Loan on which collection activity has ceased or which has been cancelled due to total and permanent disability, or if the federal government holds a judgment lien on the borrower’s property, please check with Oserve regarding eligibility issues.
Individuals who may request the Federal Direct Parent PLUS loan are:
- A parent: the student’s biological, adoptive or state-designated mother or father.
- A stepparent: the spouse of a parent who has remarried, if his/her income and assets must be reported on the student’s FAFSA.
A legal guardian is not considered a parent for financial aid purposes and may not request a Federal Direct Parent PLUS loan.
How Much Can a Parent Borrow?
A Federal Direct Parent PLUS Loan can only cover educational costs not met by other sources of financial aid. Loan eligibility is determined by the Office of Financial Aid. Factors taken into account are the cost of attendance for the loan period requested and the total amount of any other financial aid awarded.Conservative borrowing is strongly encouraged.
What are the Costs of Getting a Loan?
To receive a Federal Direct Parent PLUS Loan, the parent must pay an origination fee which is deducted from the loan before funds are disbursed. The current origination fee is:
For loans first disbursed between October 1, 2018 and September 30, 2019, there is a fee of 4.248% for the loan.
For loans first disbursed between October 1, 2019 and September 30, 2020, there is a fee of 4.236% for the loan.
The interest rate for Federal Direct PLUS Loans disbursed between July 1, 2019, and June 30, 2020 is 7.08% fixed.
Note: Certain members of the U.S. Military Service serving in a hostile area may be able to request an interest rate of 0% from the Federal Direct Parent PLUS Loan Program. Eligible borrowers should contact their servicer for further details. For additional information regarding federal student loan benefits for members of the U.S. Armed Forces, click here.
How Does the Process Work?
Step 1: The parent applies for a loan and completes the PLUS Master Promissory Note.
The parent completes a Federal Direct Parent PLUS Request and Master Promissory Note at StudentLoans.gov. Please refer to the Federal Direct Parent PLUS Loan Application Instructions.
The Federal Direct Parent PLUS Loan can only be processed until the last day of classes for the semester(s) for which the loan is intended. Applying early is recommended. Late applicants may not meet all of the eligibility criteria by the deadline.
In order for loan funds to be disbursed, the parent’s signed, completed Federal Direct Parent PLUS Loan Master Promissory Note (MPN) must be received by the U.S. Department of Education. Loans will be cancelled if verification of MPN completion is not received by Owens within 170 days after the last date of enrollment for the loan period, or the end of the spring semester, whichever is earlier.
If the parent would like to cancel all, or a portion of, the Federal Direct Parent PLUS Loan, he/she should email Oserve.
Step 2: The student applies for aid.
The student completes the Free Application for Federal Student Aid (FAFSA).
Step 3: The parent’s credit history is reviewed.
The U.S. Department of Education will review the parent’s credit history.
If the Federal Direct Parent PLUS Loan is denied based on adverse credit, a notice will be sent to the parent. Parents who have an adverse credit history but who are approved for a PLUS loan based on extenuating circumstances or who obtain an endorser must complete Parent PLUS loan counseling.
Step 4: The loan is awarded and an award notice is sent.
The Office of Financial Aid calculates loan eligibility based on federal and institutional guidelines. The information is transmitted to the U.S Department of Education.
An award notice is sent to the student’s Ozone account once the loan is processed. Students who do not have an Ozone account will receive a notice by mail.
Step 6: The parent receives a disclosure statement.
Owens sends the parent’s loan information to the U.S. Department of Education, who is the lender for the Federal Direct Parent PLUS Loan.
The U.S. Department of Education will then send the parent a Plain Language Disclosure and a Disclosure Statement which indicates the anticipated disbursement dates and amounts. Parents should keep these for their records. The specific terms and conditions which apply to a loan will be provided on the disclosure statements and Master Promissory Note.
Step 7: The loan is disbursed.
Once disbursements begin for the semester, Owens will apply the loan funds to the student’s account as long as the student is enrolled at least six credit hours, meets eligibility requirements, and has been verified as attending class for at least six credit hours.
All loan funds are disbursed in a minimum of two disbursements. If the parent applies for a loan for two or more semesters, one disbursement will occur for each semester. If the parent applies for a loan for only one semester, the loan will be provided to the student in two separate disbursements within the semester. The second disbursement will be issued after half of the semester has been completed.
Any amount remaining after tuition, fees, and authorized charges have been paid will be provided as a refund. If a parent indicates on the Federal Direct Parent PLUS Request that the refund should be provided to the student, the student will receive the refund based on the refund preference selected on the BankMobile website. Otherwise, parents will receive a paper check which is mailed from the Office of Student Accounts. Please allow approximately ten business days for a refund check to be printed and mailed.
Step 8: The parent establishes an account with his/her servicer
Once the loan has been disbursed, the parent may receive a notice from his/her loan servicer. The Direct Loan servicer collects payments, processes deferment and forbearance requests and handles correspondence on behalf of the Federal Direct Loan program. Parents can also identify their loan servicer by checking NSLDS.
The parent should set up an online account with his/her servicer as soon as possible and notify them any time there is a change in name, address, phone number, or email address.
Step 9: The parent repays the loan.
Repayment of the principal and interest begins when the loan is fully disbursed to the institution. The first payment is generally due within 60 days, or the parent can choose to begin repayment six months after the student has graduated or is no longer enrolled at least half time. Contact the PLUS loan servicer for more information.
What if the Student Stops Attending Class?
If the student does not complete all classes in which he/she is enrolled for the semester, federal regulations may require that the Office of Financial Aid return a portion, or the full amount, of the Federal Direct Parent PLUS Loan to the U.S. Department of Education.
What if the Parent Defaults on the Federal Direct Parent PLUS Loan?
Making loan payments on time is one of the easiest ways to demonstrate a good credit history.
Parents who are experiencing difficulty in repaying the Federal Direct Parent PLUS Loan should immediately contact their loan servicer for free advice and assistance, including deferment and forbearance options.
Parents should avoid companies who promise to eliminate debt or resolve a default – they will often pressure the parent to pay up front for services that are available at no cost through the federal loan servicer. They may also promise immediate results, demand that the parent sign an authorization, or ask for the parent’s FSA ID.Click here for more information.
If loan payments are not made and the delinquency is not resolved, the Federal Direct Parent PLUS Loan(s) will go into default. Default means that the parent has failed to make payments on the loan(s) according to the terms of the parent’s Master Promissory Note (MPN).
If the parent’s loan defaults:
- The parent’s wages can be garnished.
- The parent’s federal and state income tax refund(s) can be withheld.
- The default will be reported to a national credit bureau and make it difficult for the parent to make major credit purchases such as a new car or home.
- The parent will lose eligibility for additional federal financial aid, including Federal Direct Parent PLUS Loans.
- The parent may be denied professional licenses to practice an occupation.
- The entire unpaid balance of the parent’s loan and any interest is due immediately, and the parent loses eligibility for deferment, forbearance, and repayment plans.
- The parent may be subject to legal action and additional collection costs.