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How PLUS Loans Work

PLUS Loan Eligibility

PLUS loans are parent loans, not student loans. PLUS loans are designed to give extra financial support to parents who are still covering the majority of their child's living expenses.

To be eligible to receive a PLUS loan, you must be the parent of a student who'll be enrolled at least half-time in a degree program at an eligible undergraduate institution. Eligible schools are part of the Federal Family Education Loan (FFEL) program. That includes most American colleges and universities. Ask your financial aid office if you're not sure.

In addition, the student in question must be listed as your dependent for tax purposes. Stepparents are also eligible, as long as the child is listed as their dependent. The child must live with the parents when he or she is not at school and parents must provide for at least 50 percent of the student's total living expenses.

For divorced parents, only one parent can apply since only one parent can claim the child as a dependent. However, if the custodial parent doesn't qualify because of bad credit, the other parent can sign as an endorser or co-signer [source: Rebello]. Legal guardians cannot apply for PLUS loans.

The same citizenship requirements apply to PLUS loan applicants as the other federal financial aid programs. Both the student and the parent must be U.S. citizens, nationals or eligible non-citizens [source: FinAid].

If you're the parent of a student attending graduate or professional school, you're ineligible for a PLUS loan, but your student is. Graduate PLUS loans carry the same requirements and interest rates as so-called Parent PLUS loans, but they're in the student's name. To qualify for a graduate PLUS loan, a student must have submitted a Free Application for Federal Student Aid (FAFSA) and received all federal financial aid, including Stafford loans. Only then can the student apply for a graduate PLUS loan.

Grad PLUS loans, as they're known, have an advantage over Stafford loans because they're based on credit rather than need. So if you don't qualify for a lot of money in Stafford loans, you can still secure a low-interest student loan if you have a good credit history.

Unfortunately, just because you're eligible for a PLUS loan doesn't mean that you're guaranteed to get one. Keep reading to learn what it takes to qualify for a PLUS loan.