October 22, 2009

Parent Plus Deferral Has Repercussions

Posted in Parent PLUS Loans tagged , at 1:07 PM by dbonvie

One of the big changes in the world of federal loans over the past 18-months impacted the Parent Plus loan repayment time frame. It had always been that repayment on a Plus loan began once the loan was fully disbursed, however, that all changed in 2008.

Plus loan borrowers now have the option to defer repayment for as long as the student is enrolled in school half-time or greater. In addition parents enjoy an additional six months of grace from the time the student ceases to be enrolled at least half-time. There is one downside, however, the loan value keeps climbing.

The Plus loan begins accruing interest from the moment it is disbursed. It is advisable to make at least interest only payments if you are able during this deferral state, otherwise the loan will continue to capitalize each quarter inflating your loan balance considerably.

Talk to your lender about interest only payments while your child is in school.