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

(a) Authority to borrow. (1) Before July 1, 2010, a graduate or professional student, or the parent of a dependent student, was eligible to borrow under this section in the amounts in (b) if: (A) the graduate or professional student or parent did not have an adverse credit history under the Secretary’s regulations; (B) if the graduate or professional student or parent had been convicted of, or pleaded no contest or guilty to, a crime involving fraud in obtaining funds under this subchapter, that person had repaid those funds to the Secretary^*, or to the holder if the fraud involved a loan under this subchapter; and (C) the graduate or professional student or parent met other eligibility rules established by the Secretary after consulting guaranty agencies, eligible lenders, and other organizations involved in student financial assistance. (2) Except as provided in (c), (d), and (e), loans under this section had the same terms, conditions, and benefits as all other loans made under this part. (3)(A) When necessary to carry out this section, “student” and “borrower” in this part include a parent borrower under this section. (3)(B)(i) An eligible lender could decide that extenuating circumstances existed under the adverse-credit regulations if, from January 1, 2007, through December 31, 2009, a loan applicant was delinquent for 180 days or fewer on mortgage-loan or medical-bill payments during that period and otherwise did not have an adverse credit history under the regulations as they existed on May 6, 2008. (ii) In this subparagraph, “mortgage loan” means credit secured by the borrower’s primary residence. (iii) This subparagraph does not limit an eligible lender’s authority under the adverse-credit regulations to decide that extenuating circumstances exist. (b) Limitation based on need. A loan under this section could be counted in the student-aid index used to determine need. But a loan could not exceed the student’s estimated cost of attendance^* minus other financial aid certified by the eligible institution^* under 20 U.S.C. § 1078(a)(2)(A). A line of credit did not exceed the annual insurable limit for a student if actual payments to the borrower in any year did not exceed that annual limit. (c) PLUS loan disbursement. Loans under this section had to be disbursed as required by § 1078–7, either by electronic transfer from the lender to the eligible institution or by a check payable jointly to the eligible institution and the graduate or professional student or parent borrower. (d) Payment of principal and interest. (1) Repayment of principal had to begin no later than 60 days after the lender disbursed the loan, subject to these deferrals: (A)(i) during any period when the parent borrower or graduate or professional student borrower met the conditions for a deferral under § 1077(a)(2)(C) or § 1078(b)(1)(M); and (ii) at the parent borrower’s request, during any period when the student for whom the parent borrowed met the conditions for a deferral under § 1077(a)(2)(C)(i)(I) or § 1078(b)(1)(M)(i)(I); and (B)(i) for a parent borrower, at the parent’s request, during the six-month period beginning on the later of the day after the student stopped carrying at least one-half of the normal full-time academic workload, as determined by the institution, or, if the parent was also a student, the day after the parent stopped carrying at least one-half of that workload; and (ii) for a graduate or professional student borrower, during the six-month period beginning the day after the student stopped carrying at least one-half of the normal full-time academic workload, as determined by the institution. (2)(A) If the borrower and lender agreed, interest during a principal deferral could be paid monthly or quarterly, or the lender could add it to principal no more often than quarterly. (B) That capitalization was not treated as exceeding the borrower’s annual insurable limit. (3) No payment to reduce interest costs could be made under § 1078(a) for a loan under this section. (4) Interest had to use the applicable rate under § 1077a. (5) The periodic payment and repayment schedule had to be set using the applicable rate when principal repayment began. The lender could require the periodic payment to be adjusted annually or the repayment period to be lengthened or shortened to reflect interest-rate adjustments under § 1077a(c)(4). (e) Refinancing. (1) An eligible lender could at any time consolidate loans it held that were made under this section, including loans made under the pre-October 17, 1986 version, into one repayment schedule with one principal payment and one interest payment. For each included loan, the lender had to calculate the repayment period from the date repayment began on the most recent included loan. Unless the borrower was electing variable interest under paragraph (2) or (3), the consolidated loan had to bear interest at the weighted average of the rates on all included loans. Any extension of an included loan’s repayment period had to be reported to the Secretary or the guaranty agency insuring the loan, if that Secretary or agency required the report. No additional insurance premiums could be charged for that extension. The extension did not require a formal extension of the included loan’s promissory note or a new promissory note. Instead, it was treated as an administrative forbearance of that loan’s repayment terms. (2) An eligible lender could reissue a loan made before July 1, 1987, or under the pre-October 17, 1986 version, so the borrower could obtain the interest rate under § 1077a(c)(4). The lender could charge up to $100 for the administrative cost of reissuing one or more loans, and no more than half of that charge could be paid to the guarantor for reissuance costs. Reissuance did not affect the loan’s insurance, and no additional insurance fee could be charged to the borrower. (3) A borrower denied reissuance by the original lender under paragraph (2) could obtain a loan from another lender to discharge the original loan. That loan had to use the rate under § 1077a(c)(4), could not extend the note’s duration except as allowed by (d)(5)(B), could have an additional insurance fee but not the paragraph (2) administrative charge, and had to discharge the borrower’s remaining obligation to the original lender on the original loan. (4) A new lender could accept the original lender’s certification of the original loan instead of the original promissory note. (f) Verification of immigration status and Social Security number. A parent who wanted to borrow had to have the parent’s immigration status verified in the same way as for students under § 1091(g), and the parent’s Social Security number verified in the same way as for students under § 1091(o).