college finance options

student loans

Interest rates:

The interest rate is variable (adjusted each year on July 1), but it does not exceed nine percent. For 2005-06, the interest rate for loans made on or after July 1st, 1998 was 6.1 percent.

Your parents will be notified of interest rate changes throughout the life of their loan. Interest is charged on the loan from the date of the 1st disbursement until the loan is paid.

Other charges:

Your parents will pay a fee of up to four percent of the loan, deducted proportionately each time a loan disbursement is made. For a FFEL PLUS Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the PLUS Loan Program in your state) to help reduce the cost of the loans. For a Direct PLUS Loan, the whole fee goes to the government to help reduce the cost of the loans. Also, your parents may be charged late fees and collection costs if they don’t meet their loan payments when scheduled.

Loan Repayments:

Normally, the 1st payment is due within sixty days after the loan is fully disbursed. There is no grace period for these loans. Interest begins to accumulate at the time the 1st disbursement is made. Your parents must begin repaying both principal and interest while you’re in school.

They will repay a FFEL PLUS Loan to a private lender or loan provider. They will repay their Direct PLUS Loan to the United States Department of Education’s Direct Loan Servicing Center.

Postponing repayment of a PLUS Loan:

Under certain circumstances, your parents can receive a deferment on their loans.

If they temporarily can’t meet the repayment schedule, they can also receive forbearance on their loan, as long as it isn’t in default. During forbearance, their payments are postponed or reduced.

Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance apply to both Stafford Loans and PLUS Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance. If they don’t pay the interest as it accrues, it will be capitalized (that is, added to the principal amount of the loan, and additional interest will be based on that higher amount).

Discharging a PLUS loan:

Yes, under certain conditions. A discharge (cancellation) releases your parents from all obligation to repay the loan.

Your parents’ PLUS Loan can’t be canceled for these reasons: You didn’t complete your program of study at your school (unless you couldn’t complete the program for a valid reason—because the school closed, for example), you didn’t like the school or the program of study, or you didn’t obtain employment after completing the program of study.

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California Student Aid Commission FAFSA Federal Supplemental Education Opportunity Grant Pell Grants Perkins loans PLUS Loans Stafford loans