A third federal college-loan program is the Parent Loan for Undergraduate Students (PLUS) loan program. Unlike Stafford and Perkins loans, PLUS loans are made to the parents of the college student.
The borrowing limit for a PLUS loan is not a fixed dollar amount. Rather, it is equal to the student's total cost of college, less any other sources of financial aid. For example, if it costs your child $12,000 a year to attend a state college for all expenses, and he or she receives a grant of $2,000, you can borrow up to $10,000 a year.
In order for parents to be eligible for a PLUS loan, their child must be an undergraduate student and attending college on at least a half-time basis. If you are uncertain about the half-time status, you should check with the records office of your child's college. In order for parents to be eligible for a PLUS loan, their child must be dependent on their financial assistance.
Since parents are the borrowers of a PLUS loan, the lender will check their credit report as part of the loan-approval process. In the event of bad credit, the parents may still be able to obtain a PLUS loan if they charged interest on a Perkins loan until the loan repayment period begins. Borrowers of unsubsidized Stafford loans owe interest from the beginning of the loan period (when the loan is disbursed).