Parent PLUS loans, which are federal student loans for parents of undergraduate students, can be a readily available source of funding for families. A choice to take on additional debt should be carefully considered. To determine whether parent PLUS loans are an inexpensive approach to meet your college financial needs, consider the information below.
What is a Parent PLUS Loan ?
A federal student loan program, the Direct PLUS loan. The Parent PLUS loan is one type of Direct PLUS loan given to the parent or legal guardian of an undergraduate dependent student to assist in paying for the student's education.
PLUS stands for Parent Loan for Undergraduate Students. Parents who qualify get Direct PLUS Loans from the U.S. Department of Education through institutions that take part in the Direct Loan Program.
Parents of dependent undergraduate students who are enrolled at least half-time may apply for a parent PLUS loan, which is a federal direct student loan. It has adjustable borrowing caps that permit parents to borrow up to the full cost of a student's attendance, less any other financial aid they may obtain. The parent taking out the loan must own it and repay it, and they must have generally decent credit.
Key Facts of Parent PLUS Loan
- When given to a parent borrower, a Direct PLUS Loan is frequently referred to as a parent PLUS loan.
- You are able to borrow with a PLUS loan up to the full cost of college, less any additional financial aid.
- Parent PLUS loans are direct loans that parents can use to pay for their children's college expenses.
- The child must be enrolled at least half-time and applicants must have relatively good credit.
- To get parent PLUS loans, you must submit an application and sign a promissory note.
- There are four different repayment options available for parent PLUS loans, one of which is contingent your income rather than a fixed repayment schedule.
How Does the Parent PLUS Loans Works ?
The William D. Ford Federal Direct Loan Program of the U.S. Department of Education also offers federal student loans and PLUS loans. The term "direct" loans refers to the fact that the government is the lender.
The interest rate for parent PLUS loans is fixed, and each loan has an origination fee that the borrower must pay. Due to the non-subsidization of parent PLUS loans, interest starts to accumulate on the outstanding loan sum as soon as funds are disbursed and keeps accruing even when the loan is in deferment.
Money from a PLUS loan is first sent to the school, which uses it to pay for things like tuition, room and board, fees, etc. Any money that is left over is paid out directly to the parent or the student.
Who is Eligible for a Parent PLUS Loan ?
For parent PLUS loan you must meet the following criteria :
Parent PLUS Loan Eligibility :
- Be the parent of a dependent undergraduate student enrolled at least half-time at a qualified school, whether biological, adoptive, or stepparent (in some situations).
- Not have an adverse credit history (unless you meet certain additional requirements).
- Satisfy general eligibility requirements for federal student aid.
Note :
Even though they have been primarily responsible for raising the student, grandparents and legal guardians are not eligible for parent PLUS loans (unless they have legally adopted the dependent student).
Credit Requirements for Parent PLUS Loan
The Department of Education mandates that candidates for parent PLUS loans have a recent credit history that is largely unblemished. You cannot have any of the following blemishes from the previous five years on your credit report :
- Default
- Wage garnishment
- Bankruptcy discharge
- Foreclosure
- Repossession
- Tax lien
- Write-off or charge-off of federal student aid
In addition, accounts with balances of more above $2,085 cannot have any 90-day delinquencies, charge-offs, or collections.
Parent PLUS Loan Interest Rate
The interest rate is 7.54% for Parent PLUS Loans that are disbursed for the first time on or after July 1, 2022, but before July 1, 2023. This is a fixed interest rate for the life of the loan.
Parent PLUS Loan Borrowing Limits
The maximum Parent PLUS loan amount you can borrow is the cost of attendance at the school your child will attend minus any other financial assistance your child receives. The school determines how much it will cost of attendance.
This total price is adjusted to account for student help like scholarships, grants, and your child's student loans. How much you can borrow with parent PLUS loans depends on the gap between the amount of student aid awarded and the remaining costs.
Parent PLUS Loan Rates and Fees
Loan costs, such as interest rates and fees, are an important consideration when choosing the best student loan. The combined interest and fees for parent PLUS loans for the 2022–2023 academic year come to 7.54%. That is much higher than the 4.99% rate offered on Direct Loans extended to undergrads for the same year.
All federal student loans charge a one-time origination fee, which is taken from your loan proceeds. For loans disbursed in the academic year after October 1, 2020, the parent PLUS loan origination fee is equal to 4.228% of the loan's principal.
Each loan distribution is reduced proportionately by the loan fee, which is calculated as a percentage of the loan amount. The figure below illustrates how the percentage changes based on when the loan is initially disbursed.
|
First Disbursement Date |
Loan Fee |
|
On or after Oct. 1, 2021, and before Oct. 1, 2022 |
4.228% |
|
On or after Oct. 1, 2022, and before Oct. 1, 2023 |
4.228% |
Parent PLUS Loan Calculator
Using the Loan Simulator, you may determine your monthly student loan payments and pick the loan repayment plan that best suits your requirements and objectives. Additionally, you can use it to determine whether or not to consolidate your student debts. To acquire a early estimate of your monthly payment amount under the plans for which you are qualified, use Loan Simulator.
Types of Loan Repayment Plans for Parent PLUS Loan
A parent who takes out a parent PLUS loan is solely responsible for it. In general, once the complete loan has been disbursed, payment on a PLUS loan must start. While the student is still enrolled in school, you can either begin debt repayment or apply for a deferral.
Borrowers who are Parent PLUS loan are qualified for the following repayment plans :
1) Standard Repayment Plan :
You are required to pay fixed monthly payments under this plan for up to 10 years. The repayment duration may be increased to 30 years if you aggregate multiple parent Plus loans.
2) Graduated Repayment Plan :
You can repay your loan over a maximum of 10 years with this arrangement. However, instead of being constant, your payments will initially be low and then rise every two years.
3) Extended Repayment Plan :
You can repay your debts over a 25 year period using this plan, which is accessible to borrowers who owe more than $30,000 in direct loans, by paying either fixed or graduated payments.
4) Income-contingent repayment (ICR) :
The lesser of 20% of discretionary income divided by 12 or fixed payments over 12 years applies to income-based monthly installments, the remaining balance is forgiven after 25 years.
Note :
If you consolidate your parent PLUS loan into a direct consolidation loan is the ICR repayment option available.
Parent PLUS Loan Deferment, Forgiveness and Forbearance
You can decide whether to start making full payments right away or defer them until your student is enrolled on the loan application. When you lose your job, go back to school, experience financial hardship, or in any other event that meets the requirements, you can postpone or request forbearance on your parent PLUS loans. The Public Service Loan Forgiveness program or other options, such as closure of your student's school or a borrower's or student's death, may be used to forgive these loans, among many other federal advantages and safeguards.
Note :
On August 24, 2022, President Joe Biden announced via Twitter that qualifying borrowers, including those with parent PLUS loans, would have $10,000 of their federal student loan debt forgiven. Additionally, Biden extended the suspension of interest and payment on federal student loans until December 31, 2022.
How to Apply for a Parent PLUS Loan ?
Applying for a PLUS loan is the next action to take if you are eligible. Students and their parents must complete the Free Application for Federal Student Aid (FAFSA) in order to apply for a Parent PLUS loan. Fill out an application at fafsa.ed.gov online, or ask the student's school's financial aid office for an FAFSA application form.
Visit the federal StudentLoans.gov website and look through the list of participating colleges to find out if your student's school is a part of the PLUS programme. In order to apply for a PLUS loan at a school that isn't on the list, get in touch with the financial aid department.
A Direct PLUS master promissory note, which represents a promise to abide by the loan's requirements, must be filled out and signed by qualified applicants. Loan counselling is necessary for graduate and professional students who have never taken out a PLUS loan before. Again, information about procedures and demands should be available from the institution's financial aid office.
The money from a PLUS loan will be used to pay for tuition, fees, room and board, as well as other academic expenses, once it has been authorised. If there are any leftover loan money, the school will credit the parent or student for the excess.
Note :
The majority of schools demand that you submit your Direct PLUS Loan application online, however other schools have distinct application requirements. The website will let you know if the school has a separate application process when you choose the one for your child from the list. In that instance, inquire about the process for submitting a parent PLUS loan request with the school's financial aid office.
Parent PLUS Loan Denied Options
Not everyone will be eligible for a parent PLUS loan, but in the event that you are, you can attempt the following options :
- Obtain a parent PLUS loan endorsement. This is the same as having a co-signer, who has good credit and agrees to pay back the loan if you can't.
- Document extenuating circumstances. Extenuating circumstances can include things like negative material that is inaccurate, older than stated, or accounts that are addressed through bankruptcy settlements or other legal means. Begin the credit appeal procedure to demonstrate your exceptional circumstances. Additionally, you must finish PLUS credit counselling.
Even if these procedures are unsuccessful and your parent PLUS loan is rejected, there may still be a benefit. More federal student loans are available to students whose parents are not eligible for PLUS loans. Federal student loans are limited to $5,500 each school year for dependent first-year students, for instance. However, if the student's parents were refused PLUS Loans, the upper ceiling rises to $9,500.
Advantages of Parent PLUS Loan
1) Borrow up to the full cost of attendance for your student :
You can decide to pay for your child's education completely.
2) Benefits of federal student loans are accessible :
Parent PLUS borrowers are eligible for the same loan forgiveness, forbearance, and postponement options as direct-loan borrowers.
3) Fixed student loan rates :
Each academic year, a fixed student loan rate that is the same for all PLUS loan borrowers is determined by law.
Disadvantages of Parent PLUS Loan
1) No negative credit history is required :
The last five years must have been largely free of bankruptcies, defaults, and tax liens for borrowers.
2) Not all federal student loan repayment plans are available :
The three repayment choices available to borrowers are standard, graduated, and extended.
3) High fees and interest rates :
PLUS For undergraduates, loan rates and origination fees are greater than those for federal student loans.
Contact Parent PLUS Loan
If you have any questions about PLUS loan contact Federal Student Aid Information Center (FSAIC) by calling 1-800-433-3243 or visit web-page.
Frequently Asked Questions
Where can I find the details about parent PLUS loans I’ve received?
To examine details about all federal student loans and other financial help you have received, as well as to find the phone number for your loan servicer, go to "My Aid".
What are parent PLUS loans?
Parents of college-bound students may apply for Parent PLUS loans, which are federal direct loans provided by the Department of Education. In addition to having fewer repayment alternatives, the loans have higher interest rates than federal student loans for students.
Even though I have a adverse credit history, am I still eligible for a parent PLUS loan?
During the application procedure, a credit check will be run. You may still be eligible for a parent PLUS loan even if your credit history is poor by using one of these two methods :
- the acquisition of an endorser without a bad credit history. An endorser is a person who promises to pay back the parent PLUS loan if you can't. The child on whose behalf you are borrowing cannot serve as the endorser.
- proving to the satisfaction of the U.S. Department of Education that your poor credit history is due to mitigating circumstances.
What if I am unable to repay my loan?
Get in touch with your loan servicer right away if you won't be able to make your planned loan payments. Your servicer can assist you in understanding your options for maintaining the status of your loan.
Can I transfer responsibility for repaying the loan to my child, as a parent PLUS loan borrower ?
No, a parent cannot transfer a loan to their child. You are obligated by law to pay back the debt as the parent borrower.
If I realise I don't need the loan or if I only need a portion of the provided amount, can I cancel it?
Yes, You can cancel all or part of your loan at any time by informing your child's school before the money is disbursed. You have a limited window of time to cancel all or a portion of your loan once it has been disbursed. The process and deadlines for cancelling your loan are described in your promissory note and other documents you'll get from the school.
How to Qualify for a Parent PLUS Loan?
The student must be a dependent of the parent, either biological or adoptive, or in some situations, a stepparent or grandparent, in order to qualify for a parent PLUS loan. The standard eligibility conditions for student aid, such as being a citizen of the United States or a permanent resident alien, and the parent's lack of a poor credit history, must be met by both parents and students.
How much money can I borrow with the Parent PLUS Loan?
You are permitted to borrow up to your child's annual full tuition costs, less any other forms of student help. The cost of attendance, which is the total of all costs associated with your child's education, is decided by their school. Interest paid on PLUS loans can be written off by parents up to a maximum of $2,500 annually. Since this is an above-the-line income tax exclusion, itemizing is not necessary.
What more steps do I need to do to get parent PLUS loan ?
You must sign a Direct PLUS Loan Master Promissory Note (MPN) and accept the loan's terms if you are qualified for a parent PLUS loan. You must sign distinct Direct PLUS Loan MPNs for the loans you receive for each child if you obtain parent PLUS loans for more than one kid.
What happens after I receive parent PLUS loan ?
Your loan servicer will get in touch with you after you get your parent PLUS loan. The status of your parent PLUS loan will be updated frequently by your loan servicer.
What is minimum payment on parent PLUS loan?
The minimum payment is $50 per month, though your actual payment may be more or less depending on your loan balance. You are not penalized if you prepay your loan at any time. The amount of interest you pay may be significantly lowered by prepayment.
What credit score am I required to have for parent PLUS loan?
For a parent PLUS loan, there is no minimum credit score requirement. Unlike private parent student loans, which base your eligibility and interest rate on your credit score, federal loans do not. However, there is a credit check for parent PLUS loans, and if your credit history is bad, you won't be eligible.
How much money can I borrow with a parent PLUS loan in total?
In contrast to other federal student loan programs, Parent PLUS Loans have virtually no borrowing restrictions. You are permitted to borrow up to your attendance costs less any other financial aid you have received.
What makes parent PLUS loans ineligible?
For credit issues like prior bankruptcies, sizable debts that are more than 90 days past due, a recent wage garnishment, or a tax lien, a borrower may be excluded from and rejected a PLUS loan.
How will I receive parent PLUS loan?
To cover tuition, fees, room and board, and other school costs, the school will first charge parent PLUS loan funds to the student's account. If there are any leftover loan funds, the school will provide them to you to use toward the student's other educational costs. The school may pay the remaining loan funds straight to the student with your approval.
What are the benefits of parent PLUS loan ?
Taking out a PLUS loan has a number of significant advantages. First, the parent is permitted to borrow the whole amount required for the student's undergraduate studies, less any other financial aid they may have received. This covers tuition, board, fees, textbooks, and other associated costs. Additionally, the borrower does not have to prove that they need the money to qualify for the loan.