The Ultimate Guide to Parent PLUS Loans in 2024 and 2025

A Parent PLUS loan is often the best choice for parents who need to cover the full cost of their child’s college education after financial aid. These federal loans allow borrowing up to the total cost of attendance and offer flexible repayment options and protections that private loans typically lack.

However, with a 9.08% fixed interest rate and a 4.228% origination fee, Parent PLUS can be more expensive than private loans, particularly for parents with strong credit. Below, we’ll examine the benefits, requirements, repayment options, and alternatives to help you determine if Parent PLUS is right for you.

What is a Parent PLUS loan? 

A Parent PLUS loan is a federal loan from the U.S. Department of Education designed to help parents bridge the gap between their student’s financial aid and the full cost of attendance. Parents can use these funds for school-related expenses like tuition, housing, books, and supplies.

Detail	Amount
Loan amounts	Up to the full cost of attendance minus financial aid
Rates (APR)	8.05%, fixed
Initial term	10-year standard repayment term with options to adjust
Fees	Origination fee of 4.228%

Who is eligible for a Parent PLUS loan?

To qualify for a Parent PLUS loan, applicants must meet certain requirements:

• Parent status: You must be the biological or adoptive parent of an undergraduate student, or in some cases, a stepparent if your financial information was included on the FAFSA. Eligible students must be enrolled at least half-time in an eligible school. Note: Grandparents and other legal guardians are not eligible.
• Citizenship: Applicants must be U.S. citizens or eligible noncitizens with a valid Social Security number.
• Credit requirements: Parent PLUS loans require a credit check, meaning you must have a financial history free of recent adverse events. This includes no recent charged-off accounts, collections, or delinquent accounts with a balance over $2,085.
• FAFSA submission: Your child must complete the Free Application for Federal Student Aid (FAFSA) by their school’s deadline, which includes parents’ financial information. This application determines eligibility for all federal student aid, including Parent PLUS loans.

Parent PLUS loans vs. private parent loans

Parent PLUS loans and private parent loans each have unique benefits, so it’s important to understand how they compare to make the best choice for your situation.

Parent PLUS loans, while widely available and offering fixed rates, may have higher rates and more stringent eligibility requirements than other federal student loans. For some borrowers, a private parent loan could offer a more affordable option with greater flexibility.

Key differences of Parent PLUS loans vs. private parent loans include:

Feature	Parent PLUS loan	Private parent loan
Rate (APR)	9.08%	4 – 18% fixed or variable; varies
Credit requirements	Requires credit check; no min. credit score	Good to excellent credit for lowest rates
Repayment terms	10 – 25 years	5 – 20 years
Rate options	Fixed only	Fixed or variable
Fees	4.228% origination	Varies
Federal benefits	Income-driven plans forgiveness	None

I’d recommend considering a private loan in three situations:

1. You want a variable rate. Variable-rate loans may start off lower than fixed-rate loans, but they can rise over time. If you are able to pay down your private student loan quickly, a variable rate could lead to savings. A variable-rate loan may be wise if you anticipate rates declining in the future and staying lower than the fixed rate over the life of the loan.
2. You’re looking for a loan term shorter than 10 years: If the goal is to pay off the loan quickly, you may be able to qualify for a lower rate with a private lender. Parent PLUS loans offer only a fixed 8.05% interest rate and a standard 10-year repayment period.
3. You have very good credit: You might qualify for a lower rate through a private lender. If you’re confident you won’t use the federal benefits of a Parent PLUS loan, applying for private student loans instead can make sense.

Eric Kirste, CFP®

While Parent PLUS loans offer reliable terms and access to federal benefits like income-driven repayment, they may not be the most affordable option if you qualify for a private loan with a lower rate. Private loans, on the other hand, provide greater flexibility in rate type and term length, potentially saving you money if you can secure favorable terms and don’t need federal protections.

Here’s a list of our recommended private parent loan lenders. For more details, check out our best private parent loans page.

How do you repay Parent PLUS loans? 

As a parent, you are responsible for repaying a Parent Plus loan, even though it is intended for your child’s college education. Once you take one out, the loan is automatically enrolled in the 10-year standard repayment plan. 

The 10-year plan is typically the fastest way to pay back your debt, but you may switch to a different repayment plan if you prefer a longer repayment term or lower monthly payments. Your repayment plan options include: 

• Graduated repayment: With this plan, you’ll begin with lower payments that gradually increase over 10 years. It may make sense if you believe your income will rise over time.
• Extended repayment: The extended repayment plan allows you to make fixed or graduated payments over a 26-year period. Your payments will be more manageable, but you’ll pay more in interest in the long run.
• Income-Contingent Repayment (ICR): If you consolidate your PLUS loan into a debt consolidation loan, the ICR plan will give you the chance to pay 20% of your discretionary income or what you’d pay on a 12-year plan, whichever is lower. You may be eligible for student loan forgiveness if you still have a balance after 25 years. 

Unlike other federal Direct PLUS loans, Parent PLUS loans do not qualify for the Pay As You Earn Repayment Plan (PAYE), the Saving on a Valuable Education (SAVE) Repayment Plan, or the Income-Based Repayment Plan (IBR).

How to apply for Parent PLUS loans 

If you’re interested in a Parent PLUS loan instead of a private student loan, follow these steps to apply.

• Ask your child to complete a FAFSA: First, your student will need to fill out and submit their FAFSA. They can print an application or apply on the StudentAid website.
• Determine financial gaps: After your child receives their financial aid package from their school and understands their living expenses, calculate the shortfall. This figure will inform you of how much to borrow through a Parent Plus loan.
• Start a Parent PLUS loan application: Depending on the school your child is attending, you may need to file a Parent Plus application. This will ask you for your desired loan amount and your student’s information, including the school they plan to attend. The application will also require you to enter personal information, such as your citizenship status, contact details, employer information, and relationship to the student. 
• Double-check your application: Make sure to review your application. Errors and inaccuracies can delay the acceptance and funding process, so it’s worth checking your work.
• Agree to a credit check and submit: After reading the disclosures, confirm that you agree to them and consent to a credit check. Then, submit your application and log in to the StudentAid website to monitor its status.

Can you transfer a Parent PLUS loan to a student? 

Yes, it’s possible to transfer a Parent PLUS loan to your child, but it involves refinancing through a private lender. Here’s how it works and what to consider:

• The refinancing process: For your child to take over the loan, they’ll need to qualify for refinancing, which typically means having a solid credit score and stable income. Once approved, the lender will issue a new loan in your child’s name, which they’ll use to pay off your Parent PLUS loan. The new loan might come with different terms and a new interest rate.
• Benefits of transferring: This approach releases you from the debt, and as long as your child makes on-time payments, their credit can improve. Plus, depending on their finances and market conditions, they may even secure a better interest rate, which could save money over time.
• Important trade-offs: Transferring the loan means losing federal benefits unique to Parent PLUS loans, like income-driven repayment and loan forgiveness. Also, if your child isn’t financially ready, they could struggle to keep up with payments, which might hurt their credit.

If you’re considering this option, have an open conversation with your child to ensure it’s the right move for both of you.

Pros and cons of Parent PLUS loans 

To determine whether a Parent Plus loan is suitable, you should weigh its benefits and drawbacks, including: 

Pros

• No caps on borrowing amounts

  With a Parent PLUS loan, you can borrow as much as you need to fill in your child’s financial gap for college. This is a huge plus because many federal and private loans impose limits on borrowing amounts.

• Multiple repayment options

  You can choose from several repayment options to align with your budget and financial goals. You might opt for the standard 10-year repayment term or change to a graduated, extended, or ICR plan.

• Fixed interest rate

  Your Parent PLUS loan will have a fixed interest rate. This means you can plan your repayments without worrying about higher interest costs due to market conditions.

• Eligibility for student loan forgiveness

  Since Parent PLUS loans are federal loans, your loan may be forgiven via the Public Service Loan Forgiveness (PSLF) program. To qualify for forgiveness, you’ll need to work for an eligible employer and make 120 payments.

Cons

• Credit check and clean credit history are required

  You must agree to a credit check to qualify for a Parent PLUS loan. Also, can’t have an adverse credit history, as defined by the U.S. Department of Education. Charged-off accounts, accounts in collections, or a delinquent account with a balance of $2,085 or more will make you ineligible.

• Origination fee

  You’ll be on the hook of a one-time origination fee of 4.228% of your total loan amount deducted from your funds.

• No guaranteed grace period

  Some student loans offer a grace period, meaning you won’t need to begin repaying them right away. However, Parent Plus loans don’t have grace periods, so you’ll be responsible for repayments immediately after your student graduates or dips below half-time enrollment status.

• Interest accrues during deferment

  Student loan deferment can allow you to avoid loan repayments while your child is in school. However, interest will still add up and could increase the amount you pay for the loan by thousands of dollars.

Alternatives to Parent PLUS loans 

While Parent PLUS loans and private parent loans are common ways for parents to help cover college costs, it’s often best to explore options that don’t require taking on debt first.

Scholarships, grants, and work-study programs can help reduce the amount you need to borrow. Once those options are exhausted, consider these alternatives to Parent PLUS loans:

• Scholarships, grants, and work-study programs
  Before taking on any debt, explore scholarships and grants, which don’t require repayment, and work-study programs that let students earn money while in school. These options can significantly reduce education costs.
• Federal student loans in the child’s name
  Federal student loans are taken out in the student’s name, allowing parents to avoid additional debt. Although these loans have lower borrowing limits, they offer federal protections and repayment options that can be beneficial for students after graduation.
• Private student loans with a cosigner
  For families seeking additional funding, private student loans with a cosigner can sometimes provide better rates and terms, especially if the cosigner has a strong credit profile. Keep in mind that cosigners share responsibility for repayment.

Read More

Best private student loans