1. Determine whether you are eligible. The government won't make PLUS loans to parents with "adverse credit," which means having a bankruptcy, foreclosure or similar debt problem within the last five years, or at least one bill currently more than 90 days overdue.
2. Determine whether a PLUS loan is a good idea. Can you afford the extra monthly payments? PLUS loans allow parents to start repaying immediately, or defer monthly payments until the student has left school. If you put payments off, remember that the interest builds up, and your total debt and monthly bills will be higher.
3. Consider alternatives. Alternative borrowing options include home equity lines of credit, second mortgages or private loans, especially if you have good credit and lots of home equity. In 2010, private banks offered financially secure borrowers initial variable interest rates lower than the PLUS's fixed rate, which ranged from 7.9 percent to 8.3 percent, depending on the borrower's payment method and on-time payment record. Each kind of loan has its own tax and financial advantages and disadvantages. Learn more by reading this PLUS loan FAQ.
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4. Contact the financial aid office of your child's college. Officials there can tell you the maximum amount you can borrow through the federal PLUS program. (Your college may require your student to sign a waiver allowing you to discuss financial issues.) Each parent's maximum PLUS eligibility can change every year because parents are allowed to borrow no more than the student's net price for that year—the total cost of attendance minus the students' financial aid, such as scholarships and Stafford loans. Ask whether you will need to fill out a FAFSA. Some schools require that while others don't.
5. Fill out the college's PLUS application. Many colleges recommend you fill out the form on Studentloan.gov. Pay close attention: Make sure you put the parent information in the parent questions, and student information in the student questions. If you make a mistake, your application can be delayed, or you might have to start a new application.
6. Take rejection seriously. PLUS rejections are warning flags, say financial aid officers. Those who get rejected should reconsider their children's college choices and costs. If you're sure you want to go ahead with the parent loan, you can reapply if you get a cosigner with good credit to agree to repay if you miss payments. Or you can accept the rejection and ask for your student to be given a larger Stafford student loan. Colleges can only increase the student's Stafford loan by $4,000 to $5,000, depending on the student's year in school. That may not be enough to cover all the student's college costs.
7. Consider asking to be rejected. If you are approved and want to be rejected so that your student can get a larger loan without imposing any additional debt upon you, ask your college to use "professional judgment" to override the approval. Typically, colleges ask for proof that you really can't afford the loan and should have been rejected. Financial aid officers say they follow federal guidelines, which only allow them to override approvals for the most compelling cases, such as for families on limited, fixed incomes.
8. Make sure you want the loan. If you are approved but decide you don't want the loan, or want a smaller loan, call the school. There is no penalty for changing your mind within 14 days of approval.
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