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The Parent PLUS loan program was launched in 1980 through the Higher Education Act, giving high-asset families a bit of liquidity to cover their Expected Family Contribution (EFC). Since then, the program has expanded to cover other demographics, providing a wider audience with federally-sponsored college financing.
If you’re considering borrowing a Parent PLUS loan to cover the cost of your child’s education, there are several factors to consider. This guide explains everything you need to know, from the eligibility criteria, to the interest rates, to how to navigate repayment.
Jump Ahead > Eligibility Criteria • Borrowing Process • Loan Repayment
A Parent PLUS Loan is a type of Direct loan provided by the U.S. Department of Education that allows eligible parents to borrow money to pay for their child’s education.
To be eligible for a Parent PLUS loan, you must:
Note that grandparents and legal guardians are not eligible for Parent PLUS loans unless they have adopted the student.
The student you borrow for must also:
When you borrow a Parent PLUS loan, your credit history will be checked. To pass, you must not have any of the following on your record within the 2 years prior to applying:
You must also not have any of the following within the 5 years prior to applying:
If you are concerned about meeting the credit requirements of a Parent PLUS loan, there are some ways to get around it:
Prove extenuating circumstances. If you believe your credit is insufficient due to extenuating circumstances, you can submit a document to the U.S. Department of Education. The document will require you to detail the circumstances leading to poor credit history. For example, situations of divorce or excessive medical bills may contribute to extenuating circumstances. While this doesn’t guarantee you eligibility, it is always worth a shot.
Obtain an endorser. An endorser is an individual who agrees to sign onto the loan alongside you, taking legal responsibility for the loan just like you. In the realm of private student loans, this is called a cosigner.
Adding an endorser to the loan can help you qualify if your credit is not as established as it could be. Note that the endorser cannot be the child you are borrowing for.
To borrow a Parent PLUS loan, complete the online application. Note that the application will instruct you to complete the FAFSA prior to completing the Parent PLUS loan application.
Parent PLUS loans can cover up to the cost of attendance minus other aid your child receives. For example, if the cost of attendance at your child’s school is $30,000, and they received $10,000 in additional aid, you may be eligible to borrow up to $20,000 in a Parent PLUS loan.
Note that you do not have to accept the full amount given. For example, if offered $20,000, you can choose to only borrow $15,000.
Parent PLUS loan rates change annually. For loans disbursed on or after July 1, 2022 and before July 1, 2023, the interest rate is 7.54%. This interest rate is fixed, meaning it will remain the same throughout the life of the loan.
Parent PLUS loans do come with a loan fee. This loan fee is a percentage of the amount being borrowed and is deducted from each disbursement over the life of the loan. While the loan fee can and does change, it has remained at 4.228% the last two academic years.
So, for example, if you borrow $10,000, $422.80 will be deducted due to the loan fee, and $9,577.20 will be disbursed to the school. That said, you will still be responsible for repaying the entire $10,000.
Repaying a Parent PLUS loan is the legal responsibility of the borrower – the parent. While you may ask your child to contribute to repayment, it is ultimately your responsibility. Before borrowing a Parent PLUS loan, take the time to understand what that means for you in terms of repayment and to discuss repayment with your child.
When borrowing a Parent PLUS loan, you will have the option to request a deferment. This deferment would excuse you from making payments while your child is enrolled and for an additional six months after your child graduates.
However, if a deferment is not requested, you will be expected to make payments immediately after the loan is disbursed.
Regardless of whether you decide to make payments while your child is in school, interest will continue to accrue on the loan.
Parent PLUS loans have a few repayment options:
If you’re struggling to make payments on your Parent PLUS loan, there are a few things you can do:
Refinance the Parent PLUS loan(s) to a private student loan. By refinancing through a private lender, you may be able to score a lower interest rate or longer repayment period, which could in turn, lower your monthly payment.
Switch repayment plans. If you are currently on the standard repayment plan, consider switching to the extended repayment plan. By doing so, your monthly payments will decrease, which may make it more manageable to repay.
Request a deferment or forbearance. Deferment and forbearance both allow you to temporarily postpone payments. You will need to be able to prove financial or other hardship, however, to qualify. Additionally, interest will still accrue during these periods, which could increase your monthly payment after you return to repayment.
Before making any decision regarding your Parent PLUS loan(s), contact your loan servicer. They can help you determine the best course of action to remedy your situation.
Parent PLUS loans cannot be directly transferred to a child. However, you can have your child refinance the loan through a private lender to remove your name from the loan.
Parent PLUS loans are eligible for a variety of student loan forgiveness programs, such as:
Note that each student loan forgiveness program will have its own unique requirements. To ensure you are eligible for a certain forgiveness program, make sure to read its eligibility requirements carefully.
A Parent PLUS loan is a great option for parents who want to help support their children through their education. Before agreeing to any loan, however, it’s a good practice to compare interest rates across all loans. In fact, you may be able to score an even lower interest rate with a private student loan.