The U.S. Department of Education’s parent PLUS loan is a federal student loan option that lets parents help finance their child’s undergraduate education. Through the program, you can help your child with the cost of college—even if you can’t afford to simply write a check.
Before you tap into private loans to close a funding gap, consider parent PLUS loans. As federal student loans, they generally have lower interest rates, borrower protections, flexible repayment terms hat private loans don’t have.
This guide will explain everything you need to know about how to qualify, apply for, receive, and repay parent PLUS loans to fund your child’s college education.
In this guide
- What is a parent PLUS loan?
- Federal parent PLUS loan eligibility requirements
- Parent PLUS loan amount
- Parent PLUS rates, terms & fees
- How to apply for a parent PLUS loan
- Can you transfer a federal parent PLUS loan to a student?
- Pros & cons of parent PLUS loans
- Parent PLUS loan alternatives
What is a parent PLUS loan?
The parent PLUS loan is part of the PLUS Loan program of the U.S. Department of Education. (The program also includes the graduate PLUS Loan.) It offers families a way to pay for college after the student is maxed out on other financial aid.
Unlike other Direct loans, a parent, not the student, borrows a parent PLUS loan. You could be eligible to borrow up to the cost of attendance minus other financial assistance, including scholarships and other federal aid.
Federal parent PLUS loan eligibility requirements
If your child is enrolled at least half-time in an eligible program at a participating college, university, or vocational school, you can apply for the parent PLUS loan as a parent borrower.
You must meet these eligibility criteria to qualify:
- You must be the biological or adoptive parent or stepparent of an undergraduate student.
- The student must be attending a participating school at least half-time and enrolled in a program that grants a degree or certificate.
- You’ll have to pass a credit check. If you have a poor credit history, you could still qualify with an endorser (who is similar to a cosigner) or by documenting extenuating circumstances surrounding your adverse credit history. You’ll also need to complete PLUS credit counseling.
- You must have remaining demonstrable financial need.
- You and your dependent student must be U.S. citizens or permanent residents.
- Neither you nor the student can be in default on any previous federal loans.
Parent PLUS loan amount
The amount you can borrow on a parent PLUS loan is the school’s certified cost of attendance, minus any financial aid—including federal and private student loans, grants, and scholarships— your student has already received.
Parent PLUS rates, terms, & fees
PLUS loans come with a fixed interest rate based on the academic year they’re borrowed. Federal student loan interest rates are set by Congress and are updated every year. They tend to be around two to three percentage points higher than rates for other federal student loans.
You’ll also pay an origination fee on a PLUS loan, which is deducted before the loan is disbursed.
Regardless of how much you borrow, you’ll have either 10 or 25 years to repay the balance. Parent PLUS loans are eligible for these repayment plans:
- Standard repayment plan: This is the default, and it splits your balance evenly over 120 monthly payments, with the plan to pay off the loan in 10 years.
- Graduated repayment: You’ll still pay off the loan in 10 years, but payments start lower and increase about every two years. This plan could be helpful if your income is lower now and you expect it to increase, but you’ll pay more in interest.
- Extended repayment: The repayment period on this plan is stretched to 25 years, and you can choose fixed or graduated payments. It’ll significantly lower your monthly payments but also significantly increase your accrued interest.
Parent loans aren’t eligible for federal income-driven repayment plans.
How to apply for a parent PLUS loan
Before you apply for a PLUS loan, your student should complete the Free Application for Federal Student Aid (FAFSA).
Along with the financial aid offer, the school will advise you on how to apply for a PLUS loan. Most will direct you to StudentAid.gov to fill out an online application.
Can you transfer a federal parent PLUS loan to a student?
You cannot transfer responsibility for the PLUS loan to your student through the Department of Education. However, you can refinance parent PLUS Loans with a private lender that allows your child, if they’re creditworthy, to assume responsibility for the new loan.
Note that any time you refinance a federal loan with a private lender, you replace the loan with a private loan and lose borrower protections that come with federal student loans.
>> Read More: Best Student Loan Refinance Options
Pros & cons of parent PLUS loans
- It could close the financing gap to pay for your child’s education.
- You may qualify even with poor credit.
- Creditworthy borrowers might be better off with a private loan versus a parent PLUS loan, because they could find better interest rates.
- Parent loans don’t come with all the benefits of federal student loans, including income-driven repayment plans.
Parent PLUS loan alternatives
Before you take on personal debt to fund your child’s education, exhaust other options for funding. Look for any scholarships and grants you might have missed. You might even consider choosing a school that offers need-based grants.
When you decide to take out a loan, compare your options to make sure you get the best deal. Check out our guide to the best student loan options for parents to find the right federal or private lender for your family.
Author: Nate Matherson
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