Office of Student Aid : Loans : The Federal Direct Parent PLUS Loan

Federal Direct Parent PLUS Loan
The Parent Loan for Undergraduate Students (Federal Direct Parent PLUS) is a federal loan that parents with good credit histories may borrow to help pay the educational expenses of an undergraduate student enrolled in at least 6 credit hours per semester and is maintaining Penn State’s Satisfactory Academic Progress Standards.

A parent may borrow up to the total Cost of Attendance less all other financial aid received by the student. The interest rate is a fixed rate of 7.9% and is charged on the loan from the time the loan funds are disbursed until it is paid in full.

To apply for a Federal Direct Parent PLUS Loan, parents need to:

• Apply for a federal PIN number, also used to sign the Free Application for Federal Student Aid (FAFSA).
• Complete the FAFSA for the appropriate year.
• Set up a “Friends of Penn State” eLion Access Account after the student has obtained his or her own eLion Account Access,  given at the Freshmen, Testing, Counseling and Advising Program for Students (FTCAP).
• Complete the Federal Direct Parent PLUS Loan Request Form on the parent’s eLion Friends of Penn State account for each loan period a loan is requested.
  • This form will be available May 30th for Parent PLUS Loans for the Fall 2008 and Spring 2009 semesters.
  • This form collects loan period, requested amount and authorization for a credit check.
  • Results of the credit check are mailed to the family and electronically transmitted to the school. Parents whose loans are denied for credit will also receive an Endorser Form, which will enable them to obtain a co-signer for the Parent PLUS Loan.  Otherwise, denials will result in the additional Federal Extended Unsubsidized Stafford Loan being processed on behalf of the student.
• Sign the Master Promissory Note (MPN) on the Direct Loan Web site by choosing the Complete New MPN for Parent PLUS Loans option.
  • This is a one time action step and can be taken before or after the result of the credit check is obtained.
  • The Parent PLUS Loan will be available to claim as an aid resource on the bill when (1) the credit check is complete and (2) the MPN is signed.
  • Parents are encouraged to review their student’s tuition bill prior to applying for a Federal Direct Parent PLUS Loan to determine the amount of loan to borrow. 
  • 2.5% fees will be deducted from the gross amount of loan borrowed, so parents need to take that into consideration when determining the amount to borrow. By law, the total origination fee is 4%; however, Direct Loans currently offer a 1.5% rebate on this origination fee. If a parent fails to make 12 on-time monthly payments, a charge for the difference between the 2.5% origination fee and the 4.0% origination fee will be added to the outstanding balance of the loan.
  • If a parent prefers to sign a paper MPN, they can request one from the Office of Student Aid. Please note that an electronic MPN usually processes in less than two weeks, while a paper MPN will take three to four weeks to process.

Federal Direct Parent PLUS Loan Processing/Receipt of Funds
The Direct Loan Processor will notify the parent borrower and the Office of Student Aid of the result of the credit check. If credit is approved, loan funds will be disbursed no sooner than ten days prior to the start of any semester. The funds will be applied to tuition, fees, and other University charges.

Refunds
If a credit balance remains after all charges are paid, the credit (as a check or as a direct deposit to a bank account) will be refunded. To learn more about Penn State's refund policy, please visit the Office of the Bursar Web site.

Repayment of Federal Direct PLUS Loans
Repayment begins within 30 days of the final loan disbursement during the academic year, and parents will have ten years during which to repay the loan.

Postpone Repayment on a Federal Direct Parent PLUS Loan
Parents can defer repayment of the Federal Direct Parent PLUS Loan for up to one year by applying for a General Forbearance, and can re-apply for this provision annually while their student is enrolled at least half-time as an undergraduate. To apply electronically, parents can complete the electronic General Forbearance Form, then select the Submit Online – Paperless option or contact the U.S. Department of Education's processing center at 1-800-848-0979 directly. To qualify, parents need to state verbally or in writing that they are financially unable to make the monthly payments. Parents cannot apply for this forbearance until the loan has fully disbursed and prior to repayment commencing. If parents choose the forbearance provision, we recommend paying the interest while the student is in school to lessen the amount that will ultimately have to be repaid.

Increase or Decrease a PLUS Loan
To increase a Direct Parent PLUS Loan, parents will need to complete the Federal Direct Parent PLUS Loan Request Form on the parent’s eLion Friends of Penn State account for each loan period a loan is requested.

• This form will be available May 30th for Parent PLUS Loans for the Fall 2008 and Spring 2009 semesters.

To decrease a Federal Direct Parent PLUS Loan, please contact the Office of Student Aid by e-mail or by calling (814) 865-6301.