Parent PLUS Loans: Understanding financial aid can be tough, especially with loan options. The Parent PLUS Loan can help parents a lot. But, who can get this federal student loan?
To get a Parent PLUS Loan, you must be the parent of a dependent undergrad student at an approved school. You also need to meet the basic requirements for federal student aid, like being a U.S. citizen or eligible non-citizen.
Applying parents will have their credit checked. If you have a bad credit history, you might not qualify. But, you can still get the loan by adding an endorser or explaining special circumstances. Bad credit means having debts over 90 days late, a loan default, or a bankruptcy discharge.
Key Takeaways
- To qualify for a Parent PLUS Loan, you must be the biological or adoptive parent of a dependent undergraduate student enrolled at least half-time at an eligible institution.
- You’ll need to meet basic federal student aid eligibility requirements, such as being a U.S. citizen or eligible non-citizen.
- The parent applying for the loan will undergo a credit check, and cannot have an “adverse credit history” such as debts more than 90 days overdue, a loan default, or a bankruptcy discharge.
- If you have poor credit, you may still qualify by adding an endorser or documenting extenuating circumstances.
- The Parent PLUS Loan can provide valuable financial assistance to parents helping their children pursue higher education.
What is a Parent PLUS Loan?
A Parent PLUS Loan is a type of federal student loan. It lets parents of undergraduate students borrow money for college costs. These loans come from the U.S. Department of Education’s Federal Direct Loan program. They cover the full cost of attendance at school, minus other federal student aid the student gets.
Overview of Parent PLUS Loans
The Parent PLUS Loan helps parents cover education costs when other funds like scholarships and federal loans aren’t enough. Parents are the ones who pay back the loan amount.
How Parent PLUS Loans Work
When a student gets a Parent PLUS Loan, the loan goes straight to the school. Any extra money can be given back to the parent or the student, based on what the parent wants. Parents must apply for the plus loan and pass a credit check to get the federal education loan.
“The Parent PLUS Loan can be a valuable tool for families looking to finance their child’s college education, but it’s important to understand the terms and conditions before taking out the loan.”
Eligibility Requirements for Parent PLUS Loans
To get a Parent PLUS Loan, you must meet certain criteria. First, you must be the biological or adoptive parent of a dependent undergraduate student. The student needs to be enrolled at least half-time at an approved college or career school. They also need to meet the general federal student aid requirements.
Credit Requirements
Getting a Parent PLUS Loan also depends on your credit history. You will go through a credit check. You can’t have an “adverse credit history.” This means you can’t have debts over 90 days late, a loan default, or a bankruptcy discharge.
Student Eligibility Criteria
- Enrolled at least half-time at an eligible college or career school
- Meet general federal student aid requirements
- Be a dependent undergraduate student
If you have poor credit, you might still get a Parent PLUS Loan. You can add an endorser or explain any issues that led to your bad credit.
| Requirement | Details |
|---|---|
| Parent Relationship | Biological or adoptive parent of a dependent undergraduate student |
| Student Enrollment | Enrolled at least half-time at an eligible college or career school |
| Student Aid Eligibility | Meet general federal student aid requirements |
| Credit History | Cannot have an “adverse credit history” (e.g., debts more than 90 days overdue, loan default, or bankruptcy discharge) |
Understanding the requirements for Parent PLUS Loans helps families see if this aid is right for them.
Applying for Parent PLUS Loans
Applying for a Parent PLUS Loan has a few steps. First, fill out the Free Application for Federal Student Aid (FAFSA) for your child. This form is key to getting federal student aid, including the Parent PLUS Loan.
Completing the FAFSA
The FAFSA asks about your family’s finances. By sending it in, your child’s school can check if they qualify for aid like the Direct PLUS Loan. Make sure to fill it out right and send it early to get the best aid package.
Submitting the Parent PLUS Loan Application
After the FAFSA, you can apply for the Parent PLUS Loan online or through your child’s school. You’ll need to give details like the loan amount, school, student, and your work info. After applying, your credit will be checked, and the school will tell you if you’re eligible and how much you can borrow.
By following these steps, you’re helping finance your child’s education with federal aid.
Parent PLUS Loan Interest Rates and Fees
Understanding the interest rates and fees of parent plus loans is key. These education loans, known as direct plus loans, help parents pay for their child’s college. But, the costs can change.
The interest rate for parent plus loans given out from July 1, 2024, to July 1, 2025, is 9.08%. This rate stays the same for the loan’s life, making it predictable for borrowers.
There’s also a 4.228% fee for parent plus loans given out after October 1, 2020. This fee is taken off the loan amount. Borrowers should think about it when figuring out the total cost.
Parent plus loans have higher interest rates than federal student loans. Yet, they let families borrow more to cover all college costs. This is great for families with big education bills.
“The higher interest rates and fees of parent plus loans can be a trade-off for the increased borrowing capacity they provide.”
Knowing about the interest rates and fees of parent plus loans helps families make smart choices for their education funding.
Parent PLUS Loan Repayment Options
When repaying parent PLUS loans, borrowers have a few options. The main plans are the standard repayment plan and the income-contingent repayment plan.
Standard Repayment Plan
The standard repayment plan is a 10-year plan. It has the lowest total interest cost over the loan’s life. Borrowers make fixed monthly payments for a predictable repayment schedule.
Income-Contingent Repayment Plan
The income-contingent repayment plan offers flexibility. It sets payments based on the parent’s income. This can lead to lower monthly payments. But, the total interest paid might be higher than with the standard plan.
Parent PLUS loan borrowers can’t transfer the loans to their kids. They must repay the loans themselves. But, they can consolidate their PLUS loans for more flexible repayment options.
| Repayment Plan | Description | Pros | Cons |
|---|---|---|---|
| Standard Repayment Plan | Fixed monthly payments over 10 years | Lowest total interest cost | Higher monthly payments |
| Income-Contingent Repayment Plan | Monthly payments based on parent’s discretionary income | Lower monthly payments | Higher total interest cost |
What if You Don’t Qualify for Parent PLUS Loans?
If your Parent PLUS Loan application gets denied because of your credit, don’t give up hope. You might still get approved by adding an endorser with good credit or by showing extenuating circumstances that hurt your credit.
Adding an Endorser
Having an endorser with great credit can help you get the Parent PLUS Loan. This person will also be on the hook for the loan, so pick someone you really trust. You’ll also need to do some extra credit counseling before the loan is approved.
Documenting Extenuating Circumstances
If certain events or situations hurt your credit, like medical bills or a divorce, you might get the loan approved. You just need to show these extenuating circumstances. This means you’ll provide more info and paperwork to explain why your credit is bad.
Either way, these steps can help you get the parent plus loan you need, even if you were denied at first because of credit requirements. An endorser or showing extenuating circumstances can really help you get the federal student aid your family needs.
Parent PLUS Loans vs. Private Student Loans
When financing your child’s education, you have two main options: parent plus loans and private student loans. Both can be valuable, but knowing their differences is key.
Federal parent plus loans are a top choice for many. They offer fixed interest rates, flexible repayment plans, and loan forgiveness options. Yet, private student loans might have lower interest rates for those with great credit.
| Feature | Parent PLUS Loans | Private Student Loans |
|---|---|---|
| Interest Rates | Fixed, currently around 7.5% | Variable or fixed, can be lower than PLUS loans |
| Repayment Options | Standard, income-contingent, and other plans | Limited repayment plans, typically standard |
| Eligibility | Parents of eligible students | Students or parents, based on credit |
| Loan Limits | Cost of attendance minus other aid | Up to the cost of attendance |
Choosing between parent plus loans and private student loans requires a close look at your finances and your family’s needs. Think about interest rates, repayment options, and your credit score to pick the best loan for your situation.
“The choice between parent plus loans and private student loans ultimately depends on your individual circumstances and financial goals.”
Also Read: What Factors Determine Student Loan Interest Rates?
Pros and Cons of Parent PLUS Loans
Parent PLUS Loans help finance your child’s college education. They have fixed interest rates and offer various repayment plans. You can also borrow up to the full cost of attendance. But, there are some downsides to consider.
One big plus is the fixed interest rate, which doesn’t change. Parents can choose from different repayment plans, like the Standard and Income-Contingent Plans. This makes managing the loan easier. Plus, you can borrow enough to cover all your child’s education costs.
But, Parent PLUS Loans have higher interest rates than some other federal loans. They also have origination fees and require a credit check. Also, the parent, not the student, is always responsible for paying back the loan, even if the child grows up and makes money on their own.
FAQs
Q: Who qualifies for a Parent PLUS loan?
A: A parent borrower must meet the eligibility requirements for a Parent PLUS loan, including having an acceptable credit history and meeting other requirements set by the U.S. Department of Education.
Q: What are the requirements for a Parent PLUS loan?
A: The main requirements for a Parent PLUS loan include being the parent of a dependent undergraduate student, completing the PLUS application process, and signing a Master Promissory Note.
Q: How much loan amount can be obtained through a Parent PLUS loan?
A: The loan amount for a Parent PLUS loan is determined by the cost of attendance at the child’s school minus any other financial aid the student receives.
Q: What is adverse credit in relation to a Parent PLUS loan?
A: Adverse credit refers to a negative credit history that may impact the parent borrower’s ability to qualify for a Parent PLUS loan.
Q: What should a parent do if they are denied a Parent PLUS loan due to adverse credit?
A: If a parent is denied a Parent PLUS loan due to adverse credit, the student may be eligible for additional unsubsidized loan funds.
Q: What is the role of a loan servicer in the context of a Parent PLUS loan?
A: A loan servicer is a company that handles the billing and other services on parent federal student loans. They are the main point of contact when it comes to repaying the loan.
Q: Are there any options for loan forgiveness for Parent PLUS loans?
A: Parent PLUS loans are generally not eligible for loan forgiveness programs, so it is important to consider all repayment options before taking out a Parent PLUS loan.
Source Links
- https://www.salliemae.com/blog/what-is-a-parent-plus-loan/
- https://www.forbes.com/advisor/student-loans/what-is-a-parent-plus-loan/
- https://www.nerdwallet.com/article/loans/student-loans/parent-plus-loan-eligibility
