The Truth of the PLUS Loan

Basically, there are two types of loans for colleg, the need-based loan, which are meant to mees the family's need and the type (like a PLUS loan) that is meant for families that dojn't have the cash to pay their EFC, which is most families.

The second type of loan does not and should not appear on the aid package. Your EFC is your business and the colleges do not care how you pay for it, but many times they include them in the aid package - like the PLUS and Unsubsidized Stafford.

Virtually any parent can get a PLUS loan for the amount of attendance minus the financial aid that is offered through the school (as long as the parents credit score justifies the risk).

There are a couple downsides of the PLUS loan that need to be understood when considering the PLUS loan.

1. The PLUS loan repayment generally has to begin within 60 days of the date the loan was made
2. You may eventually run out of credit, or be overextended and the lender will refuse additional PLUS loans to you

When you get your award letters and there is a PLUS loan in the award package, be aware that the college has NOT met your need in full and an award package that includes a PLUS loan is not as valuable as one that doesn't.

In a future post, I will talk about alternatives to PLUS loans.