Parents and graduate students can take out PLUS federal education loans. With PLUS loans, borrowers can receive the difference between the cost of attending a given school and the amount of financial aid. If Paul Martin attends a college where the total cost is $30,000, for example, and gets a $10,000 financial aid package, his parents can borrow up to $20,000 with a federal PLUS loan.
As of July 1, 2010, all PLUS loans will come from the federal government, at a 7.9 percent fixed rate. Unlike federal loans made to undergraduates, PLUS loans require borrowers to pass a credit test:
* Borrowers may not have a current delinquency of 90 or more days.
* Also, borrowers must not have had any adverse items such as a bankruptcy discharge or a foreclosure on their credit history within the previous five years.
In prior years, parents have been denied PLUS loans more than 40 percent of the time by private lenders. When loans came directly from the federal government, loans were rejected about 20 percent of the time. Starting this July, when private lenders no longer can make PLUS loans, these loans may be easier to obtain than they have been in the past.
