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Many students today must turn to student loans to afford their college education. Unfortunately, the loans a student can borrow aren’t always sufficient to cover the full price tag. A Parent PLUS Loan can help parents fill the gap for their child.
These federal student loans allow you to borrow money for your child’s education. They don’t come with all the same perks as other federal loans, but they have some advantages.
Here’s what you need to know about Parent PLUS Loans:
- What is a Parent PLUS Loan?
- How does a Parent PLUS Loan work?
- How to apply for a Parent PLUS Loan
- Parent PLUS Loans vs. private student loans
- What happens if you don’t repay a Parent PLUS Loan?
What is a Parent PLUS Loan?
A Parent PLUS Loan is a federal student loan available to parents of college students. They’re designed to cover any expenses — up to the full cost of attendance — that aren’t covered by any financial aid the student received.
To qualify for a Parent PLUS Loan, you must:
- Be the parent of a dependent undergraduate student attending an eligible school at least half-time
- Have good credit history
- Meet the federal student aid eligibility requirements
Like other federal student loans, Parent PLUS Loans have fixed interest rates that are set for each school year. Unfortunately, these loans tend to have higher interest rates than other federal loans.
While the amount students can borrow in federal loans is limited, Parent PLUS loans allow you to borrow up to the full cost of attendance for your child’s education. They’re often used in combination with other student loans.
How does a Parent PLUS Loan work?
A Parent PLUS Loan is one of a few types of Direct PLUS Loans available from the federal government. These loans work differently than other federal loans because of the borrowing requirements.
Rather than being in the student’s name — as other federal student loans are — Parent PLUS Loans are in the parent’s name, and the parent is ultimately the one responsible for repaying the loan.
In most cases, federal student loans don’t require a credit check. But for Parent PLUS Loans and other Direct PLUS Loans, a borrower must have a good credit history to qualify. You’ll have to go through a credit check in order to get a Parent PLUS Loan.
Interest on Parent PLUS Loans
Like other federal loans, a Parent PLUS Loan can be deferred while the student is in school at least half-time. But unlike other federal student loans, Parent PLUS Loans don’t have a grace period after the student leaves school. You can request a six-month deferment, though, after the student leaves school.
Once the student graduates, drops below half-time enrollment, or leaves school for any reason, the loan will go into repayment. At that time, any unpaid accrued interest will capitalize, meaning it’s added to the principal balance and also begins to accrue interest.
Our student loan repayment calculator can help you understand how interest will accrue on your Parent PLUS Loan. Enter your loan information into the calculator below to find out how long it will take to pay off your student loans. Use the slider to see how increasing your payments can change the payoff date.
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How to apply for a Parent PLUS Loan
If you’re considering applying for a Parent PLUS Loan for your child, follow these steps:
- Have your child complete the FAFSA. Just like any other federal financial aid, a Parent PLUS Loan requires completion of the FAFSA. This form allows you and your child to share important information about your financial situation, which is used to determine what aid, if any, your child qualifies for.
- Fill out the Parent PLUS Loan application. In addition to completing the FAFSA, you’ll also have to apply specifically for the PLUS Loan. On this application, you’ll provide information about your child’s school and the loan amount you’re requesting, and you’ll agree to a credit check.
- Sign the repayment agreement. Once you’ve completed the application for your Parent PLUS Loan and have been approved, you’ll have to sign the Master Promissory Note, just as you would with any federal student loan. When you sign this note, you agree to the terms of the loan and its repayment.
- Prepare for repayment. Even if you don’t plan to make payments on your Parent PLUS Loan while your child is in school, it’s never too early to start thinking about repayment. Remember that you can also start making payments right away to reduce the amount of interest that accrues.
The companies in the table below are Credible’s approved partner lenders. Whether you’re the borrower or cosigner, Credible makes it easy to compare rates from multiple private student loan providers without affecting your credit score.
|Lender||Fixed Rates From (APR)||Variable Rates From (APR)|
|4.50%9 - 15.49%9||6.37%9 - 16.70%9|
Lowest APRs reflect autopay, loyalty, and interest-only repayment discounts where available. Prequalified rates are not an offer of credit. | 10Ascent Disclosures | 1Citizens Bank Disclosures | 2,3College Ave Disclosures | 11Custom Choice Disclosures | 7EDvestinU Disclosures | 8INvestEd Disclosures | 9Sallie Mae Disclosures
Parent PLUS Loans vs. private student loans
Many students prefer to use Direct Subsidized and Direct Unsubsidized loans to cover their higher education costs. These loans come with certain benefits, including low interest rates and flexible repayment. Unfortunately, these loans aren’t always able to cover the full cost of college. And when that happens, students must resort to other loan options, such as Parent PLUS Loans or private student loans.
Private lenders make private student loans. Both Parent PLUS Loans and private student loans have pros and cons to consider.
Pros of Parent PLUS Loans
- Parent PLUS Loans have fixed interest rates, meaning your rate and payment won’t increase during the life of the loan.
- Parent PLUS Loans can become eligible for income-driven repayment (the Income-Contingent Repayment Plan) if they’re consolidated into a Direct Loan, which isn’t an option for private student loans.
- Like other federal student loans, Parent PLUS Loans are eligible for Public Service Loan Forgiveness based on the employment of the borrower (in this case, the parent).
Cons of Parent PLUS Loans
- Parent PLUS Loan interest rates are higher than other federal loans and many private student loans.
- These loans have fees that are deducted from disbursements — similar to an origination fee. Many private student loans don’t have origination fees, though late payment fees and other fees may apply.
- Parent PLUS Loans lack some benefits that come with other federal loans, including an automatic grace period and many income-driven repayment options.
Pros of private student loans
- Private student loans often have lower interest rates than Parent PLUS Loans, especially for borrowers with good credit.
- Many private lenders offer private student loans without origination fees.
- Private student loans often come with longer repayment terms..
Cons of private student loans
- Private student loans don’t always offer deferment or forbearance options.
- Private student loans can have variable interest rates, meaning while the rate may be lower at the time you borrow the money, it can increase later on.
- For borrowers with poor credit, the interest rate on a private student loan may be considerably higher than the interest rate on a Parent PLUS Loan.
What happens if you don’t repay a Parent PLUS Loan?
The consequences of not repaying a Parent PLUS Loan are similar to those for failing to pay back any other type of loan. Your loan will go into delinquency on the first day after you miss a payment and will remain that way until you catch up on your payments or make other arrangements (like deferment).
Once your Parent PLUS Loan has been delinquent for at least 90 days, your loan servicer will begin reporting it to the three major credit bureaus — Equifax, Experian, and TransUnion. At that point, it’ll appear on your credit report, which can negatively affect your credit score.
Parent PLUS Loan default
Once your Parent PLUS Loan has been delinquent for 270 days or more, you’re in default. When you’ve defaulted on the loan, the entire unpaid balance — including interest — immediately becomes due. You may also have your wages garnished, and your tax returns and other federal benefits may be withheld.
Defaulting on a loan can also have major long-term consequences for your credit. A default remains on your credit report for up to seven years. This may bring down your credit score, making it difficult to qualify for any other type of financing.
Some parents agree to take on Parent PLUS Loans for their children with the understanding that their child will make the loan payments after they graduate. Unfortunately, no matter what you and your child agreed to, it’s ultimately you as the borrower that’s responsible for paying back the loan.