Understand Direct PLUS Loans

Understand Direct PLUS Loans

For parents

You must repay Direct PLUS Loans, even if the student:

  • does not complete his or her education;
  • is not employed upon completion of his or her studies; or
  • feels that the education he or she received did not meet expectations.

Generally, federal student loans may not be cancelled or discharged due to bankruptcy.

Always borrow conservatively!

  • To best understand the amount you may need to borrow, compare the actual, out-of-pocket costs for your student's academic year against other sources of financial aid, such as scholarships and grants, as well as other resources that may be available to you.
  • The school may award a Direct PLUS Loan up to your student's cost of education minus any other financial aid, including scholarships. This is the MAXIMUM amount you may borrow.
    • Only borrow what you need.
    • You can apply for another Direct PLUS Loan during the academic year if you discover you need more funding, as long as you don't exceed the cost of education, less other financial aid.
  • You may reduce or cancel your loan at any time before the loan is disbursed.
  • The Direct Loan Program disburses the Direct PLUS Loan funds to the school (unless your child is at a foreign school).
  • The Direct Loan Program will send you a Notice of Disclosure, detailing the loan amount and interest rate, estimates the amount of interest that may be charged, and estimates monthly loan payments.
  • You would normally be required to start repaying your loan effective the date the loan is fully disbursed, with the first payment due no more than 60 days later. However, for loans first disbursed on or after July 1, 2008, you can request to defer repayment during the time you or your child are enrolled at least half time and up to six months after you or your child graduate, withdraw, or drop below half-time enrollment. Interest continues to accrue on the loan even during a deferment.

Satisfactory academic progress

The student must meet satisfactory academic progress standards set by the school in order to receive federal student aid!

Withdrawals and refunds

  • The law specifies the amount of financial assistance the student earns each academic year and how the school determines eligibility.
  • If your student withdraws, the school uses a specific formula to calculate how much aid he or she has earned to that point.
    • If your student received less aid than the amount earned under the formula, he or she is able to receive those additional funds.
    • If your student received more aid than he or she was entitled to, the excess funds must be returned to the Direct Loan Program.

If your student stops attending school before the end of a loan period, the school may be required to refund all or part of the student's financial aid. Please contact the school for its published refund policy.

Loan servicers and sales

Frequently, the Direct Loan Program contracts with loan servicers to maintain loan records and files. Your servicer is responsible for processing payments or deferments, among other duties.