The Parent PLUS Loan is a federal loan designed to help parents of undergraduate students cover the cost of education. Unlike the Direct Unsubsidized Loan and Direct PLUS Loan, which are available to students, the Parent PLUS Loan is available to parents of dependent undergraduate students.
The Parent PLUS Loan has several advantages over private student loans, including lower interest rates, more flexible repayment options, and the ability to consolidate loans. However, it also has some disadvantages, such as a higher borrowing limit and the requirement for a credit check.
Before applying for a Parent PLUS Loan, it's important to understand the eligibility requirements, application process, and repayment options.
Applying for Parent PLUS Loan
Before applying for a Parent PLUS Loan, it's important to understand these key points:
- Federal loan for parents
- Covers cost of undergraduate education
- Lower interest rates than private loans
- More flexible repayment options
- Higher borrowing limit
- Credit check required
- Cosigner option available
- Loan forgiveness available
To apply for a Parent PLUS Loan, you will need to complete the Free Application for Federal Student Aid (FAFSA) and then submit a separate Parent PLUS Loan application. You will also need to provide documentation of your income and credit history.
Federal loan for parents
The Parent PLUS Loan is a federal loan specifically designed to help parents of undergraduate students cover the cost of education.
- Lower interest rates:
Parent PLUS Loans have lower interest rates than private student loans, making them a more affordable option for parents.
- More flexible repayment options:
Parent PLUS Loans offer a variety of repayment options, including income-driven repayment plans that can lower your monthly payments.
- Higher borrowing limit:
Parent PLUS Loans have a higher borrowing limit than Direct PLUS Loans, which are available to graduate and professional students.
- Cosigner option available:
If you have a poor credit history, you may be able to get a Parent PLUS Loan with a cosigner who has good credit.
Parent PLUS Loans also offer several repayment options, including the ability to consolidate loans and access to loan forgiveness programs. These features make the Parent PLUS Loan a good option for parents who need help paying for their child's education.
Covers cost of undergraduate education
The Parent PLUS Loan can be used to cover the cost of attendance (COA) at an eligible undergraduate school. The COA includes tuition and fees, room and board, books and supplies, transportation, and other related expenses.
To determine the amount you can borrow, the school will subtract any financial aid your child is receiving from the COA. This includes scholarships, grants, and work-study awards. The remaining amount is the maximum amount you can borrow with a Parent PLUS Loan.
Here are some examples of how the Parent PLUS Loan can be used to cover the cost of undergraduate education:
- Tuition and fees: The Parent PLUS Loan can be used to pay for tuition and fees, which are the charges assessed by the school for instruction and other services.
- Room and board: The Parent PLUS Loan can be used to pay for room and board, which are the charges for housing and meals on campus.
- Books and supplies: The Parent PLUS Loan can be used to pay for books and supplies, which are the materials needed for coursework.
- Transportation: The Parent PLUS Loan can be used to pay for transportation, such as gas, public transportation, or parking.
- Other related expenses: The Parent PLUS Loan can be used to pay for other related expenses, such as child care, dependent care, and disability services.
The Parent PLUS Loan can be a valuable resource for parents who need help paying for their child's undergraduate education.
It's important to note that the Parent PLUS Loan is not a scholarship or grant. It is a loan that must be repaid, with interest.
Lower interest rates than private loans
One of the biggest advantages of the Parent PLUS Loan is that it has lower interest rates than private student loans.
- Fixed interest rates:
Parent PLUS Loans have fixed interest rates, which means that the interest rate will not change over the life of the loan.
- Rates are set by law:
The interest rates for Parent PLUS Loans are set by law and are usually lower than the interest rates for private student loans.
- Rates are lower for good credit:
Borrowers with good credit will get the lowest interest rates on Parent PLUS Loans.
- Rates are the same for all borrowers:
Unlike private student loans, Parent PLUS Loans have the same interest rates for all borrowers, regardless of their credit history.
The lower interest rates on Parent PLUS Loans can save you a significant amount of money over the life of the loan. For example, if you borrow $10,000 with a Parent PLUS Loan at a fixed interest rate of 6%, you will pay $1,200 in interest over 10 years. If you had borrowed the same amount with a private student loan at a fixed interest rate of 8%, you would pay $1,600 in interest over 10 years. That's a difference of $400!
More flexible repayment options
Parent PLUS Loans offer a variety of repayment options, making them more flexible than many other types of loans.
One of the most popular repayment options is the Standard Repayment Plan. Under this plan, you will make fixed monthly payments for 10 years. This is the most straightforward repayment option, and it will help you pay off your loan faster.
If you have difficulty making your monthly payments, you may be eligible for an Extended Repayment Plan. This plan extends the repayment period to 25 years, which will lower your monthly payments. However, you will pay more interest over the life of the loan.
You may also be eligible for an Income-Driven Repayment Plan. These plans base your monthly payments on your income and family size. This can make your payments more affordable if you have a low income.
Finally, you may be eligible for loan forgiveness. If you work in certain public service jobs, you may be able to have your Parent PLUS Loan forgiven after 10 years of service. You may also be eligible for loan forgiveness if you become disabled or if your child dies.
The flexible repayment options for Parent PLUS Loans make them a good option for parents who are concerned about being able to afford their monthly payments.
Higher borrowing limit
The Parent PLUS Loan has a higher borrowing limit than other federal student loans.
For the 2023-2024 academic year, the annual borrowing limit for the Parent PLUS Loan is the cost of attendance (COA) minus any other financial aid your child is receiving. There is also an aggregate borrowing limit of $31,000 for Parent PLUS Loans.
The COA is determined by the school and includes tuition and fees, room and board, books and supplies, transportation, and other related expenses.
The higher borrowing limit for the Parent PLUS Loan can be helpful for parents who need to borrow more money to cover the cost of their child's education. However, it's important to remember that the Parent PLUS Loan is a loan that must be repaid, with interest. It's important to borrow only what you need and to make sure that you can afford the monthly payments.
If you are considering taking out a Parent PLUS Loan, it's important to shop around and compare interest rates from different lenders. You can also consider getting a cosigner to help you qualify for a lower interest rate.
Credit check required
Before you can take out a Parent PLUS Loan, you will need to pass a credit check.
- What is a credit check?
A credit check is a review of your credit history. Lenders use credit checks to assess your creditworthiness, or how likely you are to repay a loan.
- What information is included in a credit check?
A credit check includes information such as your payment history, the amount of debt you have, and the length of your credit history.
- What is a good credit score?
A good credit score is a number that lenders use to assess your creditworthiness. A higher credit score means that you are a lower risk to lenders and that you are more likely to get approved for a loan with a lower interest rate.
- What if I have bad credit?
If you have bad credit, you may still be able to get a Parent PLUS Loan, but you may have to pay a higher interest rate.
You can improve your credit score by paying your bills on time, keeping your credit utilization low, and disputing any errors on your credit report.
Cosigner option available
If you have bad credit or no credit history, you may be able to get a Parent PLUS Loan with a cosigner.
A cosigner is someone who agrees to repay the loan if you are unable to do so. Cosigners must have good credit and a steady income.
Having a cosigner can help you get approved for a Parent PLUS Loan and may also help you get a lower interest rate.
Here are some things to keep in mind if you are considering getting a cosigner for a Parent PLUS Loan:
- Choose your cosigner carefully. Your cosigner should be someone who you trust and who has good credit.
- Make sure your cosigner understands the risks. Your cosigner is legally responsible for repaying the loan if you are unable to do so. Make sure they understand this before they agree to cosign the loan.
- Get everything in writing. Have a written agreement with your cosigner that outlines their responsibilities and obligations.
The cosigner option can be a helpful way to get a Parent PLUS Loan if you have bad credit or no credit history. However, it's important to choose your cosigner carefully and to make sure that they understand the risks involved.
Loan forgiveness available
Parent PLUS Loans are eligible for loan forgiveness under certain circumstances.
- Public Service Loan Forgiveness (PSLF)
If you work in certain public service jobs, you may be eligible for loan forgiveness after 10 years of service. Eligible jobs include teaching, nursing, social work, and government service.
- Teacher Loan Forgiveness
If you are a teacher who teaches in a low-income school, you may be eligible for loan forgiveness after 5 years of service. You can forgive up to $17,500 in federal student loans, including Parent PLUS Loans.
- Disability Discharge
If you become disabled, you may be eligible for a discharge of your Parent PLUS Loans.
- Death Discharge
If your child dies, you may be eligible for a discharge of your Parent PLUS Loans.
If you think you may be eligible for loan forgiveness, contact your loan servicer to learn more.
FAQ
If you are a parent considering taking out a Parent PLUS Loan, you may have some questions. Here are some frequently asked questions about Parent PLUS Loans:
Question 1: What is a Parent PLUS Loan?
Answer 1: A Parent PLUS Loan is a federal loan that parents can take out to help pay for the cost of their child's undergraduate education.
Question 2: What are the eligibility requirements for a Parent PLUS Loan?
Answer 2: To be eligible for a Parent PLUS Loan, you must be the parent of a dependent undergraduate student who is enrolled at least half-time at an eligible school. You must also have good credit and a satisfactory credit history.
Question 3: How much can I borrow with a Parent PLUS Loan?
Answer 3: The amount you can borrow with a Parent PLUS Loan is the cost of attendance (COA) minus any other financial aid your child is receiving. The COA is determined by the school and includes tuition and fees, room and board, books and supplies, transportation, and other related expenses.
Question 4: What is the interest rate on a Parent PLUS Loan?
Answer 4: The interest rate on a Parent PLUS Loan is fixed and is set by law. The interest rate for the 2023-2024 academic year is 7.54%.
Question 5: What are the repayment options for a Parent PLUS Loan?
Answer 5: Parent PLUS Loans have a variety of repayment options, including the Standard Repayment Plan, the Extended Repayment Plan, and Income-Driven Repayment Plans. You can also apply for loan forgiveness if you work in certain public service jobs or if you become disabled.
Question 6: What are the benefits of a Parent PLUS Loan?
Answer 6: Parent PLUS Loans have several benefits, including lower interest rates than private student loans, more flexible repayment options, and the ability to consolidate loans.
Question 7: What are the drawbacks of a Parent PLUS Loan?
Answer 7: Parent PLUS Loans also have some drawbacks, including a higher borrowing limit, a credit check requirement, and the requirement to make payments even if your child drops out of school.
If you are considering taking out a Parent PLUS Loan, it's important to weigh the benefits and drawbacks carefully. You should also shop around and compare interest rates from different lenders to get the best deal.
Once you have decided to take out a Parent PLUS Loan, there are a few things you can do to make the process easier:
Tips
Here are a few tips for parents who are considering taking out a Parent PLUS Loan:
Tip 1: Shop around and compare interest rates.
Interest rates on Parent PLUS Loans can vary from lender to lender. It's important to shop around and compare interest rates to get the best deal. You can use a loan comparison website to compare interest rates from multiple lenders.
Tip 2: Get a cosigner if you have bad credit.
If you have bad credit, you may need to get a cosigner to qualify for a Parent PLUS Loan. A cosigner is someone who agrees to repay the loan if you are unable to do so. Cosigners must have good credit and a steady income.
Tip 3: Make sure you can afford the monthly payments.
Before you take out a Parent PLUS Loan, make sure you can afford the monthly payments. You can use a loan calculator to estimate your monthly payments. Keep in mind that the interest rate on your loan may increase over time, so your monthly payments could increase as well.
Tip 4: Consider other options for paying for college.
There are other options for paying for college besides Parent PLUS Loans. These options include scholarships, grants, work-study, and private student loans. You should explore all of your options before you decide to take out a Parent PLUS Loan.
Taking out a Parent PLUS Loan is a big decision. By following these tips, you can make the process easier and get the best deal on your loan.
If you have any questions about Parent PLUS Loans, you should contact your loan servicer or the U.S. Department of Education.
Conclusion
The Parent PLUS Loan is a federal loan that can help parents pay for the cost of their child's undergraduate education. Parent PLUS Loans have several benefits, including lower interest rates than private student loans, more flexible repayment options, and the ability to consolidate loans.
However, Parent PLUS Loans also have some drawbacks, including a higher borrowing limit, a credit check requirement, and the requirement to make payments even if your child drops out of school.
Before you take out a Parent PLUS Loan, it's important to weigh the benefits and drawbacks carefully. You should also shop around and compare interest rates from different lenders to get the best deal.
If you have any questions about Parent PLUS Loans, you should contact your loan servicer or the U.S. Department of Education.
Taking out a Parent PLUS Loan is a big decision, but it can be a helpful way to pay for your child's education. By following the tips in this article, you can make the process easier and get the best deal on your loan.