FEDERAL PARENT (PLUS) LOAN INFORMATION

The Federal Parent Loan for Undergraduate Students (PLUS Loans) enable parents with good credit histories to borrow to pay the education expenses of the student who is a dependent undergraduate student enrolled at least half-time. Please note that with regard to the PLUS loan, any reference to the 'borrower' refers to the parent and not the student

ELIGIBILITY CRITERIA

Both the student and borrower must meet the general eligibility requirements for federal student aid. For example, both the student and borrower must be a citizen or eligible non-citizen and may not be in default or owe a refund to any federal aid program. To be eligible to receive a PLUS Loan, the parent borrower generally will be required to pass a credit check. If they do not pass the credit check, they might still be able to receive a loan if someone, such as a relative or friend who is able to pass the credit check, agrees to endorse the loan, promising to repay it if the borrower should fail to do so.

APPLICATION AND PROMISSORY NOTE 

The application process includes the borrower going through the following steps: provide basic demographic information to our office; going through an optional credit pre-approval; select a lender; complete a PLUS Loan Master Promissory Note and submit this to our office. Please read more detailed information regarding or to begin the PLUS Loan application process. Included in the application process is a listing of our recommended lenders. These lenders have shown the most efficient service to Vanderbilt students and provide borrower benefits to help lower the overall cost of the PLUS Loan.

INTEREST RATES

The interest rate for loans disbursed after July 1, 2006, is 8.5% for the life of the loan. Please note that some lenders provide an interest rate discount to PLUS borrowers.

ANNUAL LOAN LIMITS

The yearly limit on a PLUS Loan is equal to the student's cost of attendance minus any other financial aid they receive.

DISBURSEMENT

Funds are normally disbursed in two equal installments either by check or electronic funds transfer (EFT) and is credited directly to the student's Vanderbilt Student Account.

LOAN FEES

The borrower may pay fees of up to 4 percent, deducted proportionately from each loan disbursement, as determined by the lender.

REPAYMENT

The borrower generally begins repayment of a PLUS Loan within 60 days after the final loan disbursement. There is no grace period for these loans, so interest begins to accumulate at the time the first disbursement is made. Some lenders, however, will allow for postponement of loan payments or interest only payments while the student is enrolled.

The lender will send information about repayment, and the borrower will be notified of the date repayment begins. The PLUS Loan program offers four repayment plans the borrower can choose from, but the terms differ slightly. More detailed information on repayment options is available from the lender. If the borrower fails to make their loan payments when scheduled, they may be charged collections costs and late fees and be considered in default.

TAX INCENTIVES

There are tax incentives for certain higher education expenses, including a deduction for student loan interest for certain borrowers. This benefit applies to all loans taken out to pay for postsecondary education costs. The maximum deduction is $2,500 a year. IRS Publication 970, Tax Benefits for Higher Education, explains these credits and other tax benefits. More information is available at www.irs.gov or by calling the IRS at 1-800-829-1040. TTY callers can call 1-800-829-4059.

REPAYMENT DIFFICULTIES

Under certain conditions, the borrower can receive a ²defermentÓ or ²forbearanceÓ on the PLUS loan, as long as the loan isn't in default. A deferment allows for the temporarily postpone payments on the loan. View the list of deferments available for loans disbursed on or after July 1, 1993.

If the borrower is temporarily unable to meet the repayment schedule, but is not eligible for a deferment, the lender might grant a forbearance for a limited and specified period. During forbearance, payments are postponed or reduced. The borrower will be charged interest during a period of forbearance.

Deferment and forbearance are not automatic. The borrower should contact the lender or agency that holds the loan. The borrower might have to provide documentation to support each request. he borrower  must continue making scheduled payments until notified that the defermentor forbearance has been granted. Not making payments on the loan will have a negative effect on the borrower's credit rating, and the loan could go into default.

LOAN CANCELLATION

In certain circumstances, the borrower may be eligible for a cancellation or discharge of the Parent PLUS Loan. A discharge releases the borrower from all obligations to repay the loan. A complete list of cancellation provisions is given below. For more information about discharge, the borrower should contact the lender.

PLUS LOAN DISCHARGE/CANCELLATION SUMMARY

Cancellation Conditions	Amount Forgiven	Notes
Borrower's total and permanent disability1 or death	100%	For a PLUS Loan, includes death but not disability of the student for whom the parents borrowed.
Bankruptcy (in rare cases)	100%	Cancellation is possible only if the bankruptcy court rules that repayment would cause undue hardship.
Closed school (before student could complete program of study) or false loan certification	100%	For loans received on or after January 1, 1986
School does not make required return of loan funds to the lender	Up to the amount that the school was required to return	For loans received on or after January 1, 1986

 

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¹Beginning July 1, 2002, if you are determined to be totally and permanently disabled based on a physician's certification, you'll have your loan placed in a conditional discharge period for three years. During this time, you don't have to pay principal or interest. If you continue to meet the total-and-permanent disability requirements during, and at the end of, the three-year conditional period, your loan will be canceled. If you don't continue to meet the cancellation requirements, you must resume payment. Total and permanent disability is defined as the inability to work and earn money because of an injury or illness that is expected to continue indefinitely or to result in death. You cannot qualify based on a condition that existed before the loan was made, unless a doctor certifies that the condition has substantially deteriorated. For more information on qualifying for this discharge, review your promissory note and contact your loan holder.

CONTACT INFORMATION

For more information regarding this program, you may contact our office at 1-800-288-0204 or loans@vanderbilt.edu.

* The information listed above is a basic overview of the program and is accurate to the best of our knowledge. The actual promissory note will be more detailed and will contain specific terms and conditions of the program.