Questions About Direct Loan Plus?

Question

I friend of mine got a Direct Loan Plus for his college son, this year, and last year. My friend said he did not use the money from the Direct Loan Plus, last year and doubts he will use it this year. My friend never saw the money. It was not deposited in his his account.

My questions are:
1. Can the student acess the Direct Loan Plus without his parent's signature or knowledge?
2. Where is the money deposited that this Plus loan provides?
3. Does the parent have to sign, when he acesses the Direct Plus Loan, at the time of the disbursement, of the cash?

If money is given to the college in the parent's name, and the student does not use this money, where does the money get deposited? Is it returned to the lender?


thanks.

Answer 1

If you are referring to the PLUS loan, otherwise known as the Federal Parents' Loan for Undergraduate Students? If so, know that it is given directly to the college, not deposited into a banking account. Here is a website that explains more about the PLUS plans

http://www.studentaid.ed.gov/PORTALSWebApp/students/english/parentloans.jsp

If there is money left over after tuition costs, then the school will either issue a check to the parents, or apply the $$ to future tuition costs, I believe. And PLUS loans are made in the parent's name, NOT the student's, so the student is not financially responsible for paying them back.

Answer 2

1. The student cannot access the PLUS without the parent's knowledge.

2. When the PLUS is approved, the parent is notified by disclosure statement that the loan is approved and a disbursement has been made to the student's school account. The disbursement will cover any charges on the account. If there is any overage, the student would receive the refund for the balance, unless they specify otherwise.

3. Once the parent is approved for the loan and signs the pnote, the disbursement will be scheduled. If the parent wants to stop the loan from disbursing or cancel the loan, he/she must contact the lender prior to disbursement. Once the loan disburses and the school disburses the loan to the student's account, you will have to work with the school and the lender to have the loan cancelled.

Just because the PLUS appears on the award letter does not mean the loan was generated or disbursed. The parent will have to submit an application for the PLUS to begin the process. The parent receives a letter when the loan is approved and when it is disbursed...and the letter will come from the lender.

Hope this information helps.

Answer 3

A direct loan is different from a typical student or parent loan in the fact that the "lender" is the government and not a lender like Wachovia or Citibank. The borrower benefits are almost nonexistent. I would ask for something other then a direct loan IF the school processes them.

The PLUS in any form is signed for by the parents. It is unlikely that the student could get hold of the funds. The funds would be sent to the school first to cover expenses then sent to the parent once all expenses are met. Ask your school for the exact process because they can differ from school to school.

Answer 4

i agree with the previous poster, it depends on the school as some do not participate in the loan program. the information that you are needing should be located on the school's financial aid website. if you can provide us with the name of the school we may be able to look it up for you. either way, you need to contact BOTH schools and make them aware of the fact that she's withdrawing from one school to attend another. she has to take into consideration that she may be stuck having to pay $ back to the school that she withdraws from since i am sure its way past the drop period.