How PLUS Loans Work

By: Dave Roos

Applying for a PLUS Loan

Like all federal financial aid programs, you have to apply for a new PLUS Loan every year, since financial circumstances and credit scores can change quickly. Whether your school participates in the Direct PLUS Loan or FFEL PLUS Loan program, the application process starts in your school's financial aid office or financial aid Web site.

Once you have completed the PLUS Loan application, you need to sign something called a Master Promissory Note (MNP). The MNP is exactly what it sounds like: a promise to repay the loan in full. You can sign a paper version of the MNP or sign it electronically using the Department of Education PIN you received when you filled out the FAFSA. Whether you are applying for a Direct PLUS or FFEL PLUS Loan, you return the application to your school's financial aid office.


Since we mentioned the FAFSA, it's not technically required as part of the PLUS Loan application process, but many schools ask for it anyway. The good news is that most students apply for federal financial aid before the PLUS Loan, so the FAFSA is usually already completed.

If your school participates in the Direct PLUS program, it will forward the PLUS Loan application to the U.S. Department of Education, and you will be sent either an award letter or a denial. If your school chooses to use the FFEL PLUS program, it will ask you to choose the private lender where your loan will originate. All private lenders must offer the same interest rate (8.5 percent), but there are other criteria that might sway your decision.

Your school likely maintains a list of preferred lenders. Research and compare the offers made by different lenders. Many will offer to waive upfront fees or give other discounts that could save you money. If you want more information about local lenders, contact your state guaranty agency. This is the agency that administers the FFEL program in your state. To locate your state's agency, call 1-800-4-FED-AID (1-800-433-3243).

Now let's look at exactly what you're signing up for with a PLUS Loan.