by Fred Reich, special to CalCPA.org
Under the provisions of the U.S. Higher Education Act, parents may be eligible to receive their students total cost of education, including living expenses, less any other financial aid awarded. This money is available through the Parent Loan for Undergraduate Student (PLUS) Program, regardless of income and assets and with no collateral requirement. Many families have found the PLUS to be an attractive alternative to depleting their savings, paying out of pocket, or borrowing against their home or 401(k).
Who Is Eligible?
All U.S. citizens and resident aliens are eligible, regardless of income level. Your family qualifies if you are the natural, step or adoptive parent of a dependent undergraduate student who is under age 24, single with no dependents and going to school at least half time.
Which Schools Participate?
Most universities, colleges, trade and vocational schools participate in the Federal Family Education Loan Program. The Federal Student Aid Information Center will confirm your school's participation at 1-800-433-3243. The call is free.
How Much Can a Parent Borrow?
You may be eligible to borrow up to the total cost of your child's education including tuition, room and board, books, travel and administrative fees. School costs vary, but the information center will provide you with an estimate of your school's costs. Contact the information centere even if you are considering several schools, or are uncertain about the amount you'll need. Because processing time of PLUS applications varies from school to school, it is best to inquire as soon as possible.
What Are the Terms of the Loan?
The Federal PLUS is a simple interest, non-collateral loan with a variable interest rate that is capped at 9%. The information center will provide details about current interest rates. The Federal PLUS is government guaranteed and offers a variety of repayment plans including deferrals in the event of financial hardships, no prepayment penalties and loan forgiveness in some circumstances.
Some repayment examples:
$ 5,000 - $ 64/mo.
$10,000 - $127/mo.
$15,000 - $190/mo.
$20,000 - $254/mo.
$25,000 - $317/mo.
The PLUS Hotline provides specific payment options and details.
What Credit Requirements Apply?
Credit standards for the Federal PLUS are more lenient than most private loans. Many families with negative credit histories qualify.
Is the Interest Tax Deductible?
In some cases yes, under the provisions of the U.S. Taxpayer Relief Act.
I've Already Paid the College Bill, Can I Be Reimbursed?
Under the Federal PLUS Program, a parent may be reimbursed for educational costs already paid that academic year. Deadlines for reimbursement vary from school to school. The information center can provide current information on your school.
How Do I Get a PLUS Loan?
Call the information center at 1-800-433-3243 or http://studentaid.ed.gov.
In accordance with IRS Circular 230, the information on this website is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.
