Parent Plus Student Loan Guide: How They Work, How to Get Them

Federal Parent PLUS Loans

Parent Plus Student Loan Guide: How They Work, How to Get Them

Published February 9, 2024 | Last Updated May 22nd, 2024 at 12:43 pm

Federal Parent PLUS Loans

Nearly 4 million U.S. parents have $111 billion in Parent PLUS loans to help their kids pay for college. That averages out to $28,000 per borrower, reflecting the challenges of paying for college these days. This Road2College guide will help determine if a Parent PLUS loan is right for your family. 

How Does a Parent PLUS Loan Work?

A federal Parent PLUS loan is available to all parents of dependent college students. It’s a federal loan, meaning the federal government backs it rather than a bank or credit union.

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While it’s best to avoid personal debt for your children’s education, a Parent PLUS loan can be a good option if necessary.

Because it originates from the government, you can expect excellent borrower protections, flexible repayment plans, and forgiveness options you would not find with another lender.

A PLUS loan doesn’t have a maximum borrowing limit, so it’s an option if there is a large gap between the aid package and the full cost of school.

The fixed interest rate is 9.083% for Direct PLUS loans disbursed between July 1, 2024, and June 30, 2025.

Remember, however, that as good as the rates on a PLUS loan are, Direct Stafford loans are still less expensive for your family, so it’s best to max out that source first.

Compare Student Loan Rates From Top Lenders

LenderCo-Signer ReleaseRepayment OptionsTermInterest Rates
Yes- Flat Payment (In-School)
- Full (principal & interest)
- Deferred
- Interest-only
5, 8, 10, 15 years4.39% - 16.49% (Fixed)
5.59% - 16.85% (Variable)
Check Rate
Yes- Deferred
- $25 Minimum Amount
- In-School Interest Only
5, 7, 10, 12, 15 years4.29% - 15.76% (Fixed)
6.24% - 15.85% (Variable)
Check Rate
Red circle with sallie mae written in the center Yes- Pay now or later: Make interest payments
- Pay a fixed $25 payment
- Defer payments until after school
-Undergraduate loan rates displayed. Lower interest rates shown include the auto debit discount.
10-15 years4.50% - 15.49% (Fixed)
6.37% - 16.70% (Variable)
Check Rate
SofiYes- Immediate repayment
- Interest-only
- Fixed monthly payments in school
- Fully deferred
5, 7, 10, 15 years4.44% – 14.30% (Fixed)
5.99% – 14.30% (Variable)
Check Rate
Yes- Full payments (Principal and Interest)5, 10, 15 yearsAs low as 4.39% (Fixed)
As low as 6.07% (Variable)
Check Rate
- Deferred
- $25 Minimum Amount
- In-School Interest Only
5, 7, 10, 12, 15 years9.16% - 15.11% (Fixed)
9.27% - 15.20% (Variable)
Check Rate

How Do You Qualify for a Parent PLUS Loan?

The PLUS loan will be in your name as the parent. As a result, it’s fully your responsibility, and your credit and application are all you need to apply.

Your first step is to fill out the Free Application for Federal Student Aid (FAFSA). Once you’ve completed that form, you can request a PLUS loan online at StudentLoans.gov.

You will qualify only if your student is a dependent or an undergraduate. Only biological or adoptive parents or a stepparent married to the student’s parent can apply for a parent PLUS loan.

Foster parents and other relatives don’t qualify.

For wealthier families, the PLUS loan can be a way to access important funding since it is not a need-based program.

Your credit history does matter for the Parent PLUS program but in a different way. They require no adverse credit history. Your credit score and debt-to-income ratio are not part of the calculation.

You can still qualify with a cosigner if you have an adverse credit history.

Being approved for a Parent PLUS loan does not mean you can afford the payments, so be smart about the amount you choose to borrow.

What if you get denied? Your student will be eligible for additional unsubsidized Direct Stafford Loans.

>>RELATED: 2024-25 FAFSA Guide: How to Fill Out the New FAFSA to Get the Aid You Deserve

How to Apply for Parent PLUS Loans

Applying for Parent PLUS Loans involves a few key steps designed to ensure that parents can successfully secure funding for their child’s education.

Step-by-Step Application Process

  1. Complete the FAFSA Form: You and your child must complete the FAFSA before you can apply for Parent PLUS.
  2. Sign In to Apply: Use your FSA ID to apply for a Parent PLUS Loan. You likely already have an FSA ID from filling out your part of the FAFSA.
  3. Complete the Direct PLUS Loan Application for Parents: This application will ask for personal and financial information and the amount you wish to borrow. It will also include a credit check.

Necessary Documentation and Information

To complete the application, you need:

  • Your personal information and Social Security number.
  • Your child’s information, including their Social Security number and school details.
  • Financial information to determine your eligibility and the loan amount.

Deadlines and Timing for Application

  • Check School Deadlines: Each school may have a deadline for applying for Parent PLUS Loans, so it’s important to consult with your child’s financial aid office.
  • Federal Deadlines: Additionally, be aware of federal deadlines for the FAFSA® form, as this affects your eligibility for the loan.

After You Apply

  1. Await Credit Check Results: A credit check is part of the application process, and they will notify you of the outcome.
  2. Sign a Master Promissory Note (MPN): If approved, you must sign a Master Promissory Note agreeing to the loan terms.
  3. Loan Disbursement: The loan amount will be disbursed directly to the school to cover tuition and fees, with any excess funds given to you or your child, as designated.

How Much Can You Borrow With a Parent PLUS Loan?

The PLUS loan program does not have a specific dollar limit, but borrowing is limited to the cost of attendance minus other financial aid your student receives.

Remember that while one year’s worth of borrowing may not seem like a big deal, if you plan to borrow this difference every year, it can add up quickly!

In addition, if you borrow for one child and have other children, you may feel obligated to do the same for them.

There is a 4.6 percent origination fee for a PLUS Loan, so you won’t receive quite the full amount of the loan when it disburses.

Generally, repayment begins within 60 days of receiving the loan. However, you can defer repayment while your student is in school if enrolled at least half-time.

Is a federal Parent PLUS loan subsidized? No, a PLUS loan is unsubsidized, so interest does accrue during deferment and is not paid for you by the government.

The Parent PLUS interest rate and origination fee change each July 1 based on the yield of the last 10-year Treasury auction in May of that year.  

Interest rates remain fixed for the life of the loan, but each year’s rate may be different based on market conditions. 

Does a Parent PLUS Loan Affect a Parent’s Credit?

The repayment term for a Parent PLUS loan is generally 10 years. Extended or graduated plans may also be available, and loan consolidation can open additional payment options.

Because the loan is in your name, as the parent, a missed payment does not impact your child’s credit history. Instead, it impacts yours.

In addition, the debt is recorded as part of your debt-to-income ratio and may affect future borrowing applications.

Remember that PLUS loans cannot be transferred even if you have a spoken agreement with your student that you will take the loan and they will make the payments.

Using a private loan to transfer the debt to your child will remove it from the federal program, and you will lose the borrower’s protections and repayment options you would otherwise have.

If you fall behind on a Parent PLUS loan, contact the lending agency and see what payment options are available. You may be able to change the loan term or use federal consolidation to access income-contingent repayment.

If you have a PLUS loan and work in a non-profit or other eligible public service job, such as teaching, you may qualify for loan forgiveness after making payments for 10 years.

All education loans, including Parent PLUS loans, are hard to discharge through bankruptcy. So make sure you are clear on how much you are borrowing in the big picture — not just in one year — and that you can handle the debt.

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Repayment Plans for Parent PLUS Loans

Parent PLUS Loans offer several repayment plans designed to give borrowers flexibility based on their financial situation and preferences. Understanding these options can help parents manage their loan repayment effectively. Here’s an overview of the repayment plans available for Parent PLUS Loans.

Standard Repayment Plan

  • Duration: Up to 10 years.
  • Monthly Payments: A fixed amount, determined by the total loan amount, that ensures the loan pays off within 10 years.
  • Suitable for: Borrowers looking for a fast payoff period and who can manage higher monthly payments. This plan usually results in the lowest total interest paid over the life of the loan.

Graduated Repayment Plan

  • Duration: Up to 10 years (can extend up to 30 years for consolidated loans).
  • Monthly Payments: Payments start lower and increase every two years.
  • Suitable for: People who expect their income to rise in coming years. Initially, lower payments can help manage financial strain, but the total interest paid over the life of the loan will be higher than the Standard Repayment Plan.

Extended Repayment Plan

  • Duration: Up to 25 years.
  • Monthly Payments: Payments can be fixed or graduated, extending the repayment period to reduce monthly payments.
  • Suitable for: Borrowers with more significant loan balances looking for lower monthly payments. Extending the repayment term reduces the monthly burden but increases the total interest paid over the life of the loan.

Income-Contingent Repayment (ICR) Plan

  • Eligibility: Parent PLUS Loans are eligible for the ICR plan only if consolidated into a Direct Consolidation Loan.
  • Duration: Up to 25 years.
  • Monthly Payments: Whichever is less – 20% of your discretionary income, or what you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income.
  • Suitable for: Borrowers seeking a payment amount tied to their income. This plan offers the possibility of loan forgiveness after 25 years of qualifying payments. It’s particularly beneficial for parents with a fluctuating or lower income and can manage a higher total interest cost over the loan’s life.

Key Considerations

  • Loan Forgiveness: Under the ICR plan, any remaining loan balance is forgiven after 25 years of qualifying payments. However, it’s important to note that forgiven amounts may be taxable.
  • Changing Plans: Borrowers can usually change their repayment plan anytime. Contact your loan servicer to discuss other options if you’re struggling with your current plan.
  • Interest Accumulation: While lower monthly payments can ease financial burdens, they can also mean more interest accumulates over time. It’s essential to balance manageable payments with the overall cost of the loan.

These repayment plans provide various options to manage your Parent PLUS Loans effectively. Consider your financial situation, future income prospects, and how long you’re willing to make payments when choosing your best plan. Please refer to the Federal Student Aid website for the most accurate and current information on repayment plans, including any recent changes or updates.

Pros and Cons of Parent PLUS Loans

Pros

  • Higher Loan Limits: Parent PLUS Loans allow parents to borrow up to the full cost of their child’s education minus other financial aid.
  • Fixed Interest Rate: These loans have a fixed interest rate, providing predictability in loan costs over time.
  • Deferment and Forbearance Options: Borrowers can apply for deferment or forbearance, temporarily suspending or reducing payments during financial hardship.
  • Eligibility for Loan Forgiveness: Under certain conditions, such as through the Public Service Loan Forgiveness (PSLF) program after consolidation, loans may be forgiven.

Cons

  • Credit Check Required: Unlike other federal student loans, a credit check is required for Parent PLUS Loans, which could be a barrier for some borrowers.
  • Higher Interest Rates and Fees: These loans typically have higher interest rates and origination fees than other federal student loans.
  • Financial Responsibility: Parents, not students, are legally responsible for repaying the loan, which could impact retirement planning and financial stability.

Alternatives to Parent PLUS Loans

  • Private Student Loans: Offered by banks, credit unions, and other private lenders, these loans can sometimes offer competitive interest rates for borrowers with strong credit. However, they lack the flexible repayment options and protections federal loans provide.
  • Home Equity Loans: Parents who own their home may consider a home equity loan to finance education costs, potentially at a lower interest rate. This option risks the home if you can’t make the payments.
  • Payment Plans through the College or University: Many institutions offer payment plans that allow tuition and fees to be paid over time, reducing the need for loans. These plans are often interest-free but require payments within the academic year.

Tips for Managing Repayment of Parent PLUS Loans

  • Make payments while the student is in school or paying more than the minimum can reduce the total interest paid.
  • Take advantage of tax deductions. Interest paid on Parent PLUS Loans may be tax-deductible, potentially lowering overall costs.
  • Use loan forgiveness programs. After consolidating into a Direct Consolidation Loan, parents may be eligible for programs like ICR or PSLF, leading to forgiveness of the remaining balance under certain conditions.
  • Refinance Parent PLUS Loans. Private refinancing can offer lower interest rates for borrowers with strong credit, potentially reducing the cost of borrowing. However, refinancing federal loans with a private lender eliminates federal protections and benefits.

RELATED: 4 Options to Refinance Your Parent PLUS Loans

FAQ: Parent PLUS Loans

Can Parent PLUS Loans Be Transferred to the Student?

Legally, Parent PLUS Loans cannot be transferred to the student. However, some families make informal arrangements where the student agrees to make the payments.

What Happens if You Can’t Repay a Parent PLUS Loan?

Options like deferment, forbearance or switching to an income-driven repayment plan can help manage payments. In severe cases, bankruptcy may discharge the loans, but this is rare and requires proving undue hardship.

Are There Forgiveness Options for Parent PLUS Loans?

Yes. After consolidation into a Direct Consolidation Loan, Parent PLUS Loans may be eligible for forgiveness under the ICR plan after 25 years of payments or under PSLF if the borrower works in a qualifying public service job.

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