Parents of dependent students1 may apply for Parent Loan for Undergraduate Students or PLUS Loan to help pay their child’s education expenses.
Who is responsible for paying Parent PLUS loan?
Here, the parents are responsible for repayment on the loan, not the student.
Eligibility for PLUS Loan is not based on financial need, but credit must be in good standing. Unlike the subsidized Stafford> and Perkins loans, the interest on the PLUS loan is not “subsidized” while the student is in school.
To be eligible for a PLUS Loan,
- The parent borrower must be the student’s biological or adoptive parent.
- The child must be a dependent student who is enrolled at least half-time at a school that participates in the Direct Loan Program.
- The student and parent must be U.S. citizens or eligible non-citizens and
- must not be in default on any federal education loans or owe an overpayment on a federal education grant.
Most importantly, the parents must be creditworthy to qualify for a PLUS loan. The college may refuse the loan application or approve it for less than the cost of attendance.
Those with adverse credit history may still qualify by getting an “endorser,” which is essentially a co-signer who agrees to repay the loan if they don’t, and that person cannot be the student.
Borrowers with very good or excellent credit may find better rates through private lenders, although repayment options may be more limited.
Parent PLUS Loan FAQ
- Is there a limit to Parent PLUS loans?
The annual limit on a Parent PLUS Loan is equal to the student’s cost of attendance (COA) — which includes tuition, fees, books, and living costs — minus any other financial aid the student receives.
For example, if the cost of attendance (COA) is $8,000 and the student receives $5,000 in other financial aid, the student’s parent can borrow as much as $3,000 through the PLUS Loan.
- What is the current interest rate on Parent PLUS loans?
The current interest rate for the Parent PLUS loan is 7.6% APR, and is fixed for the life of the loan. Interest is charged from the date of the first disbursement until the loan is paid in full.
In addition to interest, you will also pay a fee of 4.248% origination fee, deducted proportionately each time a loan disbursement is made. That means if you borrowed $10,000, you’ll only receive $9,575.20 as $424.80 would be deducted as your loan origination fee.
- Do Parent PLUS loans have to be paid back immediately?
Yes. There is no grace period for a PLUS Loan. The first payment is due within 60 days after the final disbursement. Depending on the repayment plan that you choose, you’ll generally have between 10 and 25 years to repay the balance.
To help you decide which option is best suited for you, here is a simplified guide to different repayment plans for federal student loans — each with its own pros and cons.
- How do I get the Parent PLUS loan?
To apply for Parent PLUS Loan, the student’s parents must submit the FAFSA and complete a loan application and a master promissory note, both of which are available through StudentLoans.gov or the college’s financial aid office.
- Can I transfer Parent PLUS loan to student?
With this strategy, the child refinances the Parent PLUS loan into a private student loan, transferring the debt into the student’s name in the process.
- Are Parent PLUS loans eligible for forgiveness?
Yes. One way to get Parent PLUS loan forgiveness is through Public Service Loan Forgiveness (PSLF) — a federal program that forgives non-profit and government employees’ loans after they make 120 monthly payments.
To be eligible for PSLF, you must first consolidate your parent PLUS loans into a direct consolidation loan and complete a PSLF Employment Certification form. Once approved, the remainder of your loans will be forgiven tax-free.
- A student is considered “dependent” if he or she is under 24, unmarried, and has no legal dependents at the time the FAFSA is submitted. [↩]