With more than 10 years of experience making loans and other complex money matters more accessible to the everyday person, Jennifer has helped readers build manageable and healthy money habits. Her work has been featured on numerous national financia.
Jennifer Calonia Loans ExpertWith more than 10 years of experience making loans and other complex money matters more accessible to the everyday person, Jennifer has helped readers build manageable and healthy money habits. Her work has been featured on numerous national financia.
Written By Jennifer Calonia Loans ExpertWith more than 10 years of experience making loans and other complex money matters more accessible to the everyday person, Jennifer has helped readers build manageable and healthy money habits. Her work has been featured on numerous national financia.
Jennifer Calonia Loans ExpertWith more than 10 years of experience making loans and other complex money matters more accessible to the everyday person, Jennifer has helped readers build manageable and healthy money habits. Her work has been featured on numerous national financia.
Loans Expert Kennedy Edgerton Personal Finance EditorKennedy Edgerton is a personal finance editor, leveraging his passion for writing and personal finance to produce stimulating content that empowers readers to enhance their lives through advised decision-making. He has written for several publication.
Kennedy Edgerton Personal Finance EditorKennedy Edgerton is a personal finance editor, leveraging his passion for writing and personal finance to produce stimulating content that empowers readers to enhance their lives through advised decision-making. He has written for several publication.
Kennedy Edgerton Personal Finance EditorKennedy Edgerton is a personal finance editor, leveraging his passion for writing and personal finance to produce stimulating content that empowers readers to enhance their lives through advised decision-making. He has written for several publication.
Kennedy Edgerton Personal Finance EditorKennedy Edgerton is a personal finance editor, leveraging his passion for writing and personal finance to produce stimulating content that empowers readers to enhance their lives through advised decision-making. He has written for several publication.
| Personal Finance Editor
Updated: Jan 18, 2024, 9:03am
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Parent PLUS loans are a common financial aid option for parents who want to help their undergraduate student pay for college.
Although it offers advantages like accessing loan amounts up to the school’s cost of attendance minus existing aid, there are some notable details to consider before you apply.
A parent PLUS loan falls under the federal Direct Loan Program offered by the U.S. Department of Education. It’s the only student loan option directly accessible to parents for their dependent child who’s an undergraduate college student.
Eligible parents can use this loan to cover the financial aid gap between the student’s aid and the school’s reported cost of attendance. Funds from the loan can be used to cover school-related expenses, like tuition and school fees, books and supplies, transportation or housing.
You can apply for a parent PLUS loan if you have a child enrolled at an accredited college or university as an undergraduate student. The process requires a credit check and parents must not have adverse credit.
If you have adverse credit, you can add a willing endorser who doesn’t have adverse credit to the loan agreement. If you experienced extenuating circumstances that caused your credit to drop, you can make a claim and submit supporting documentation to the Department of Education for review. If approved under either situation, you’ll also need to complete credit counseling.
The parent PLUS loan rate is currently at 8.05%. Once you sign your master promissory note, your interest rate is locked in, regardless of any annual changes.
Along with principal interest payments, Federal Student Aid automatically deducts a 4.228% fee before disbursing the funds. The remaining amount is sent directly to the school to cover unpaid charges on the student’s account.
Residual funds are sent to the parent borrower as a refund, which can be used for the student’s other education-related expenses. Additional funds can also be sent directly to the student if the parent wishes.
Parent borrowers are solely responsible for repaying PLUS loans.
When you accept a parent PLUS loan, a student loan servicer will track your loan’s status and collect payments. You must pay your servicer immediately after your school receives the loan funds unless you request a deferment. Interest continues to accrue during deferment, but you can make interest-only payments to avoid capitalized interest.
Federal student loan borrowers, including those with parent PLUS loans, have a standard repayment plan over a 10-year period. The standard repayment plan will save you the most on interest charges, but other repayment plans are available, including:
An Income-contingent repayment (ICR) plan is the only income-driven repayment (IDR) option available to parent borrowers. To be eligible for ICR, you must first consolidate your parent PLUS loan into a direct consolidation loan. For parent borrowers pursuing student loan forgiveness, being on an IDR plan, specifically ICR, is a requirement.
Borrowing a parent PLUS loan in support of your child’s education is a generous gift for your college student. Even so, there are still some pros and cons to consider:
