20 U.S.C. § 1078–2 — Federal PLUS loans

**(a) Authority to borrow** (1) **Authority and eligibility** — Prior to July 1, 2010, a graduate or professional student or the parents of a dependent student shall be eligible to borrow funds under this section in amounts specified in subsection (b), if— (A) the graduate or professional student or the parents do not have an adverse credit history as determined pursuant to regulations promulgated by the Secretary; (B) in the case of a graduate or professional student or parent who has been convicted of, or has pled nolo contendere or guilty to, a crime involving fraud in obtaining funds under this subchapter, such graduate or professional student or parent has completed the repayment of such funds to the Secretary, or to the holder in the case of a loan under this subchapter obtained by fraud; and (C) the graduate or professional student or the parents meet such other eligibility criteria as the Secretary may establish by regulation, after consultation with guaranty agencies, eligible lenders, and other organizations involved in student financial assistance. (2) **Terms, conditions, and benefits** — Except as provided in subsections (c), (d), and (e), loans made under this section shall have the same terms, conditions, and benefits as all other loans made under this part. (3) **Special rules** (A) *Parent borrowers* — Whenever necessary to carry out the provisions of this section, the terms “student” and “borrower” as used in this part shall include a parent borrower under this section. (B) (i) *Extenuating circumstances* — An eligible lender may determine that extenuating circumstances exist under the regulations promulgated pursuant to paragraph (1)(A) if, during the period beginning January 1, 2007, and ending December 31, 2009, an applicant for a loan under this section— (I) is or has been delinquent for 180 days or fewer on mortgage loan payments or on medical bill payments during such period; and (II) does not otherwise have an adverse credit history, as determined by the lender in accordance with the regulations promulgated pursuant to paragraph (1)(A), as such regulations were in effect on the day before May 7, 2008. (ii) *Definition of mortgage loan* — In this subparagraph, the term “mortgage loan” means an extension of credit to a borrower that is secured by the primary residence of the borrower. (iii) *Rule of construction* — Nothing in this subparagraph shall be construed to limit an eligible lender’s authority under the regulations promulgated pursuant to paragraph (1)(A) to determine that extenuating circumstances exist. **(b) Limitation based on need** Any loan under this section may be counted as part of the student aid index in the determination of need under this subchapter, but no loan may be made to any graduate or professional student or any parent under this section for any academic year in excess of (A) the student’s estimated cost of attendance, minus (B) other financial aid as certified by the eligible institution under [section 1078(a)(2)(A) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078/a/2/A&num=0&edition=prelim). The annual insurable limit on account of any student shall not be deemed to be exceeded by a line of credit under which actual payments to the borrower will not be made in any year in excess of the annual limit. **(c) PLUS loan disbursement** All loans made under this section shall be disbursed in accordance with the requirements of [section 1078–7 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078-7&num=0&edition=prelim) and shall be disbursed by— (1) an electronic transfer of funds from the lender to the eligible institution; or (2) a check copayable to the eligible institution and the graduate or professional student or parent borrower. **(d) Payment of principal and interest** (1) **Commencement of repayment** — Repayment of principal on loans made under this section shall commence not later than 60 days after the date such loan is disbursed by the lender, subject to deferral— (A) (i) during any period during which the parent borrower or the graduate or professional student borrower meets the conditions required for a deferral under section 1077(a)(2)(C) or 1078(b)(1)(M) of this title; and (ii) upon the request of the parent borrower, during any period during which the student on whose behalf the loan was borrowed by the parent borrower meets the conditions required for a deferral under section 1077(a)(2)(C)(i)(I) or 1078(b)(1)(M)(i)(I) of this title; and (B) (i) in the case of a parent borrower, upon the request of the parent borrower, during the 6-month period beginning on the later of— (I) the day after the date the student on whose behalf the loan was borrowed ceases to carry at least one-half the normal full-time academic workload (as determined by the institution); or (II) if the parent borrower is also a student, the day after the date such parent borrower ceases to carry at least one-half such a workload; and (ii) in the case of a graduate or professional student borrower, during the 6-month period beginning on the day after the date such student ceases to carry at least one-half the normal full-time academic workload (as determined by the institution). (2) **Capitalization of interest** (A) *In general* — Interest on loans made under this section for which payments of principal are deferred pursuant to paragraph (1) shall, if agreed upon by the borrower and the lender— (i) be paid monthly or quarterly; or (ii) be added to the principal amount of the loan not more frequently than quarterly by the lender. (B) *Insurable limits* — Capitalization of interest under this paragraph shall not be deemed to exceed the annual insurable limit on account of the borrower. (3) **Subsidies prohibited** — No payments to reduce interest costs shall be paid pursuant to [section 1078(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1078/a&num=0&edition=prelim) on loans made pursuant to this section. (4) **Applicable rates of interest** — Interest on loans made pursuant to this section shall be at the applicable rate of interest provided in [section 1077a of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1077a&num=0&edition=prelim). (5) **Amortization** — The amount of the periodic payment and the repayment schedule for any loan made pursuant to this section shall be established by assuming an interest rate equal to the applicable rate of interest at the time the repayment of the principal amount of the loan commences. At the option of the lender, the note or other written evidence of the loan may require that— (A) the amount of the periodic payment will be adjusted annually, or (B) the period of repayment of principal will be lengthened or shortened, in order to reflect adjustments in interest rates occurring as a consequence of [section 1077a(c)(4) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1077a/c/4&num=0&edition=prelim). **(e) Refinancing** (1) **Refinancing to secure combined payment** — An eligible lender may at any time consolidate loans held by it which are made under this section to a borrower, including loans which were made under this section as in effect prior to October 17, 1986, under a single repayment schedule which provides for a single principal payment and a single payment of interest, and shall calculate the repayment period for each included loan from the date of the commencement of repayment of the most recent included loan. Unless the consolidated loan is obtained by a borrower who is electing to obtain variable interest under paragraph (2) or (3), such consolidated loan shall bear interest at the weighted average of the rates of all included loans. The extension of any repayment period of an included loan pursuant to this paragraph shall be reported (if required by them) to the Secretary or guaranty agency insuring the loan, as the case may be, but no additional insurance premiums shall be payable with respect to any such extension. The extension of the repayment period of any included loan shall not require the formal extension of the promissory note evidencing the included loan or the execution of a new promissory note, but shall be treated as an administrative forbearance of the repayment terms of the included loan. (2) **Refinancing to secure variable interest rate** — An eligible lender may reissue a loan which was made under this section before July 1, 1987, or under this section as in effect prior to October 17, 1986, in order to permit the borrower to obtain the interest rate provided under [section 1077a(c)(4) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1077a/c/4&num=0&edition=prelim). A lender offering to reissue a loan or loans for such purpose may charge a borrower an amount not to exceed $100 to cover the administrative costs of reissuing such loan or loans, not more than one-half of which shall be paid to the guarantor of the loan being reissued to cover costs of reissuance. Reissuance of a loan under this paragraph shall not affect any insurance applicable with respect to the loan, and no additional insurance fee may be charged to the borrower with respect to the loan. (3) **Refinancing by discharge of previous loan** — A borrower who has applied to an original lender for reissuance of a loan under paragraph (2) and who is denied such reissuance may obtain a loan from another lender for the purpose of discharging the loan from such original lender. A loan made for such purpose— (A) shall bear interest at the applicable rate of interest provided under [section 1077a(c)(4) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1077a/c/4&num=0&edition=prelim); (B) shall not result in the extension of the duration of the note (other than as permitted under subsection (d)(5)(B)); (C) may be subject to an additional insurance fee but shall not be subject to the administrative cost charge permitted by paragraph (2) of this subsection; and (D) shall be applied to discharge the borrower from any remaining obligation to the original lender with respect to the original loan. (4) **Certification in lieu of promissory note presentation** — Each new lender may accept certification from the original lender of the borrower’s original loan in lieu of presentation of the original promissory note. **(f) Verification of immigration status and social security number** A parent who wishes to borrow funds under this section shall be subject to verification of the parent’s— (1) immigration status in the same manner as immigration status is verified for students under [section 1091(g) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1091/g&num=0&edition=prelim); and (2) social security number in the same manner as social security numbers are verified for students under section 1091(o) of this title.