Parent PLUS Loans

As the name implies, a Parent PLUS Loan is a form of financial aid that parents of dependent undergraduate students can obtain to help pay for the cost of college.

A Direct Parent PLUS Loan is part of the Direct Loan Program of the U.S. Department of Education (ED). These loans can help pay for college expenses that are exempt from other types of financial aid.

As with all types of federal student financial aid, applicants for the Parent PLUS Loan must meet minimum requirements to be approved. Continue reading to find out more about the federal Parent PLUS Loan program, including borrowing limits and how to apply.

Parent PLUS Loan Eligibility Requirements

Parent PLUS Loan eligibility is based on meeting several requirements. To apply for a loan, you must be the biological or adoptive parent of a dependent undergraduate student who is enrolled at least half-time at a qualifying school. In some cases, step-parents may apply for a Parent PLUS Loan for their stepchildren.

All FAFSA parent loan applicants must meet the basic eligibility requirements for federal student aid, which include financial need, enrollment in an eligible degree or certificate program and being a U.S. citizen or eligible non-citizen. Moreover, all applicants must undergo a credit check and must not have an adverse credit history. For FAFSA Parent PLUS Loan purposes, an adverse credit history means that your credit check has revealed one or more of the following conditions:

  • An account with a total outstanding balance greater than $2,085 that is delinquent for 90 or more days at the date of your FAFSA parent loan credit report.
  • An account with a total outstanding balance greater than $2,085 that has been charged off or placed in collection within 2 years prior to the date of the credit report.
  • A loan default or bankruptcy discharge during the 5 years prior to the credit check.
  • A repossession or foreclosure during the 5 years preceding the credit report.
  • A write-off or charge-off of a federal student aid debt during the past 5 years.
  • A wage garnishment or tax lien, if it happened in the most recent 5 years before the credit report.

If you have a Parent PLUS Loan denied due to an adverse credit history, you may still be able to qualify if you have an endorser or co-signor who agrees to repay the loan if you cannot. In some cases, your FAFSA parent loan application may be accepted if you can provide proof of extenuating circumstances that caused your credit history problems.

Borrowing Limits, Interest Rates and Other Parent PLUS Loan Information

The maximum amount you can borrow on a Parent PLUS Student Loan is the school’s cost of attendance minus any other financial assistance the student has received. It is important to keep the Parent PLUS Loan amount as close to the actual cost of attendance as possible, based on federal guidelines. Your school will notify you of the loan periods it most frequently uses. You may choose one of those, or request another time limit for repaying your loan.

Related Article: Direct Unsubsidized Loans

Direct Parent PLUS Loans disbursed between July 1, 2018 and before July 1, 2019 will have an interest rate of 7.6 percent. This is a fixed interest rate that will remain for the life of the Parent PLUS Loan, unless you end up consolidating it in a Direct Consolidation Loan. In addition, these loans come with a loan fee that covers the costs involved in managing the loan. For Direct Parent PLUS Loans disbursed between October 1, 2018 and before October 1, 2019, the loan fee is 4.248 percent.

How to Apply and Receive a Parent PLUS Loan

The first step in applying for a Parent PLUS student loan is to make sure that you or your child have submitted the Free Application for Federal Student Aid (FAFSA) form. Most schools require parents to submit the FAFSA application online at the Student Loans government website, but other schools may have different requirements for these applications.

After it is verified that you meet all Parent PLUS Loan requirements, you will receive a promissory note to sign, agreeing to the loan’s terms. Then the loan will first be distributed to the school. It will use the Direct PLUS Loan funds to pay for tuition, room and board and other school charges and fees. You will be given any funds that remain to use for other school expenses. Your loan servicer will remain in contact with you to keep you updated on the loan status.

Parent PLUS Loan Repayment Terms

There are many Parent PLUS Loan repayment options to choose from. Standard, Graduated and Extended Parent PLUS Loan repayment plans provide a way to pay off the loan by making equal monthly payments over the course of 10 to 25 years. There are also several income-based repayment plans that are calculated to meet your income level and the size of your family.

Some of these plans are adjusted on a regular basis to meet current financial need. You may start out making lower Parent PLUS Loan payments that increase slightly each year, or the loan servicer may provide a more personalized plan.

In most cases, repayment begins once the loan funds have been fully paid out. Parents may request a deferment while the student is enrolled at least half-time and for up to 6 months after graduation. When a Parent PLUS Loan is in deferment, no payments are required. Note that interest still accrues during the period of deferment and will be added to the principal amount due.

Parent PLUS Loan holders often wonder if they can transfer responsibility for repaying the loan to the student once he or she graduates. Legally, the parent borrower is responsible for repaying the loan and cannot transfer that responsibility to the student or another person.

Related Article: Receiving Your Federal Student Aid

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