If parents decide they need to take out a loan for college, the campus financial aid staff can help determine how much they will need to borrow and answer questions about the loan application process. To qualify for a PLUS loan, parents must pass a credit evaluation. Indications of adverse credit include being 90 days or more past due in the repayment of a debt, or having been in default or foreclosure on a loan, or having had a bankruptcy discharge or write-off of a federal education debt during the past five years. A lender may still approve a PLUS loan if parents can demonstrate extenuating circumstances, such as updated credit information that shows they have brought their accounts up to date or have made satisfactory arrangements to repay their debts. When parents are denied a PLUS loan because of adverse credit, the student may qualify to borrow additional sums under the unsubsidized Stafford loan program.
Many parents establish arrangements with their children to repay their PLUS loans.
If their child fails to make the loan payments, however, the parent who signed for the PLUS loan is legally obligated to repay the debt. Because PLUS loan repayment begins within 60 days after the loan is disbursed, some parents may face cash flow issues as they make their monthly loan payments. Lenders may grant forbearance to PLUS borrowers while their children are still attending college. The graduated repayment option provides lower monthly payments initially. These federal student loans are usually the least expensive loan option.