Considering college for your child but don’t want the financial burden to fall solely on their shoulders? If so, you may want to consider the federal Parent PLUS Loan. Designed to assist parents in financing the higher education costs of dependent undergraduate students, this loan offers several unique features that set it apart from other education financing options.
Unlike the Direct Loans your child may be eligible for, the Parent PLUS Loan is a credit-based loan secured by the parent’s credit history. Due to this difference, your credit score will largely determine several key aspects of the loan, including the interest rate, the amount you are eligible to borrow, and your qualifying terms.
The Parent PLUS Loan offers several unique features, including competitive interest rates, flexible repayment options, and the ability to borrow up to the full cost of attendance. To help you navigate the application process, we’ll provide a comprehensive overview of the Parent PLUS Loan, including its benefits, eligibility criteria, application procedures, and repayment options.
What is the Parent PLUS Loan?
Federal loan for parents of undergraduate students.
- Credit-based loan
- Competitive interest rates
- Flexible repayment options
- Borrow up to full cost of attendance
- No origination fees
- Available to both biological and adoptive parents
- Stepparents eligible if they legally adopted the student
- Repayment begins after six months of grace period
- Loan forgiveness available under certain circumstances
- Can be consolidated with other federal student loans
The Parent PLUS Loan is a valuable resource for families seeking to finance their child’s higher education. By understanding the loan’s features and benefits, parents can make informed decisions about how to best cover the costs of college.
Credit-based loan
Unlike Direct Loans, which are not based on credit history, the Parent PLUS Loan is a credit-based loan. This means that your credit score will be a major factor in determining whether you are approved for the loan and the interest rate you will be offered.
- Good credit score: If you have a good credit score, you are more likely to be approved for the Parent PLUS Loan and you will likely receive a lower interest rate.
- Bad credit score: If you have a bad credit score, you may still be approved for the Parent PLUS Loan, but you may be offered a higher interest rate.
- No credit history: If you have no credit history, you may still be able to qualify for the Parent PLUS Loan, but you will likely be required to have a cosigner with good credit.
- Cosigner: If you are denied the Parent PLUS Loan or are offered an interest rate that is too high, you can apply with a cosigner who has good credit. A cosigner is someone who agrees to repay the loan if you are unable to do so.
It is important to note that the Parent PLUS Loan is not a private loan. It is a federal loan, which means that it is backed by the U.S. government. This makes it a safer loan option for parents than a private loan, as there are more protections in place for borrowers.
Competitive interest rates
The Parent PLUS Loan offers competitive interest rates, which are set by the U.S. Department of Education each year. The interest rate for the Parent PLUS Loan is typically higher than the interest rate for Direct Loans, but it is still lower than the interest rate for many private student loans.
- Fixed interest rate: The interest rate on the Parent PLUS Loan is fixed, which means that it will not change over the life of the loan.
- Current interest rates: The current interest rates for the Parent PLUS Loan can be found on the Federal Student Aid website.
- Interest rate discounts: You may be eligible for an interest rate discount if you make automatic payments from a bank account.
- Comparison to other loans: The Parent PLUS Loan typically has a lower interest rate than private student loans, making it a more affordable option for parents.
The interest rate on the Parent PLUS Loan is an important factor to consider when deciding whether to take out the loan. A higher interest rate will result in higher monthly payments and a higher total cost of borrowing. It is important to compare the interest rate on the Parent PLUS Loan to the interest rates on other education financing options, such as Direct Loans and private student loans, before making a decision.
Flexible repayment options
The Parent PLUS Loan offers a variety of flexible repayment options, which can help you manage your monthly payments and repay your loan more easily.
Standard repayment plan: This is the most common repayment plan, and it offers a fixed monthly payment that is calculated based on the amount you borrowed and the interest rate on your loan. The standard repayment period is 10 years, but you can choose to repay your loan over a longer period of time if you need to.
Graduated repayment plan: This plan offers lower monthly payments at first, which gradually increase over time. This can be a good option if you have a limited budget now but expect to have a higher income in the future.
Extended repayment plan: This plan offers the lowest monthly payments, but it will take you longer to repay your loan. The extended repayment period is up to 25 years.
Income-driven repayment plans: These plans base your monthly payments on your income and family size. This can be a good option if you have a low income or a large family.
In addition to these repayment plans, you may also be eligible for deferment or forbearance, which can allow you to temporarily postpone or reduce your monthly payments.
Borrow up to full cost of attendance
The Parent PLUS Loan allows you to borrow up to the full cost of attendance (COA) at your child’s school, minus any other financial aid that your child receives. This includes tuition and fees, room and board, books and supplies, and other expenses related to your child’s education.
The COA is determined by the school and includes both direct and indirect costs. Direct costs are expenses that are paid directly to the school, such as tuition and fees. Indirect costs are expenses that are not paid directly to the school, such as room and board and books and supplies.
When you apply for the Parent PLUS Loan, you will need to provide the school’s COA. You can find the COA on the school’s website or by contacting the school’s financial aid office.
The Parent PLUS Loan can be a helpful way to cover the full cost of your child’s education. However, it is important to borrow only what you need and can afford to repay. You should also consider other financial aid options, such as scholarships, grants, and work-study, before taking out a Parent PLUS Loan.
If you have any questions about the Parent PLUS Loan or the COA, you should contact the school’s financial aid office.
No origination fees
Unlike some private student loans, the Parent PLUS Loan does not have an origination fee. This means that you will not have to pay a fee to take out the loan.
- What is an origination fee? An origination fee is a one-time fee that is charged by the lender when you take out a loan. The origination fee is typically a percentage of the loan amount.
- How much is the origination fee for the Parent PLUS Loan? The Parent PLUS Loan does not have an origination fee.
- How can I avoid paying an origination fee? You can avoid paying an origination fee by taking out a Parent PLUS Loan. You can also avoid paying an origination fee by taking out a Direct Loan.
- What are the benefits of taking out a loan with no origination fee? Taking out a loan with no origination fee can save you money. You will not have to pay a fee to take out the loan, which means that you will have more money to put towards repaying the loan.
The Parent PLUS Loan is a good option for parents who need to borrow money to help pay for their child’s education. The loan has no origination fee, which can save you money. The loan also has competitive interest rates and flexible repayment options.
Available to both biological and adoptive parents
The Parent PLUS Loan is available to both biological and adoptive parents. This means that if you are the legal parent of a dependent undergraduate student, you may be eligible for the loan, regardless of your marital status or your relationship to the student’s other parent.
- Biological parents: Biological parents are automatically eligible for the Parent PLUS Loan, as long as they are the legal parents of the student.
- Adoptive parents: Adoptive parents are also eligible for the Parent PLUS Loan, as long as they have legally adopted the student.
- Stepparents: Stepparents are eligible for the Parent PLUS Loan if they have legally adopted the student. Stepparents are not eligible for the loan if they have only married the student’s parent.
- Other legal guardians: Other legal guardians, such as grandparents or legal guardians, may also be eligible for the Parent PLUS Loan. However, they must be able to demonstrate that they have legal responsibility for the student.
The Parent PLUS Loan is a valuable resource for parents who need to borrow money to help pay for their child’s education. The loan is available to both biological and adoptive parents, as well as other legal guardians. This makes it a good option for a wide range of families.
Stepparents eligible if they legally adopted the student
Stepparents are eligible for the Parent PLUS Loan if they have legally adopted the student. This means that they have a legal obligation to support the student financially. Stepparents who have not legally adopted the student are not eligible for the loan.
- What is legal adoption? Legal adoption is the process by which a person becomes the legal parent of a child who is not their biological child. Adoption creates a permanent and legal relationship between the parent and the child.
- How can a stepparent legally adopt a child? The process for legal adoption varies from state to state. In general, stepparents must file a petition with the court to adopt the child. The court will then hold a hearing to determine if the adoption is in the best interests of the child.
- What are the benefits of legal adoption for stepparents? Legal adoption gives stepparents the same rights and responsibilities as biological parents. This includes the right to make decisions about the child’s education, health care, and welfare. Legal adoption also allows stepparents to inherit from the child and to pass on their property to the child.
- What are the benefits of legal adoption for children? Legal adoption gives children the same rights and benefits as children who are born to their parents. This includes the right to inherit from their parents and to receive child support. Legal adoption also provides children with a sense of permanence and belonging.
If you are a stepparent who is considering adopting your stepchild, you should talk to an attorney to learn more about the process and the benefits of adoption.
Repayment begins after six months of grace period
Once you have received your Parent PLUS Loan, you will have a six-month grace period before you are required to begin repaying the loan. This grace period begins the day after the student ceases to be enrolled at least half-time. During the grace period, you will not be required to make any payments on the loan, but interest will continue to accrue.
After the grace period ends, you will be required to begin repaying the loan. You will have a variety of repayment options to choose from, including:
- Standard repayment plan: This is the most common repayment plan, and it offers a fixed monthly payment that is calculated based on the amount you borrowed and the interest rate on your loan. The standard repayment period is 10 years, but you can choose to repay your loan over a longer period of time if you need to.
- Graduated repayment plan: This plan offers lower monthly payments at first, which gradually increase over time. This can be a good option if you have a limited budget now but expect to have a higher income in the future.
- Extended repayment plan: This plan offers the lowest monthly payments, but it will take you longer to repay your loan. The extended repayment period is up to 25 years.
- Income-driven repayment plans: These plans base your monthly payments on your income and family size. This can be a good option if you have a low income or a large family.
You can choose your repayment plan when you apply for the Parent PLUS Loan. You can also change your repayment plan later if you need to.
It is important to start repaying your Parent PLUS Loan on time and in full each month. If you miss payments or make late payments, you may be charged late fees and your credit score may be damaged.
Loan forgiveness available under certain circumstances
The Parent PLUS Loan is a federal loan, which means that it is backed by the U.S. government. This makes it eligible for a number of loan forgiveness programs, including:
- Public Service Loan Forgiveness (PSLF): This program forgives the remaining balance of your Parent PLUS Loan after you have made 120 qualifying payments while working full-time in a public service job. Public service jobs include teaching, nursing, social work, and government service.
- Teacher Loan Forgiveness: This program forgives up to $17,500 of your Parent PLUS Loan if you teach full-time for five consecutive years in a low-income school or educational service agency.
- Perkins Loan Cancellation: This program cancels all or a portion of your Parent PLUS Loan if you are employed in certain public service jobs, such as teaching, nursing, or social work. The amount of cancellation depends on the length of time you work in a public service job.
- Disability Discharge: This program discharges your Parent PLUS Loan if you become totally and permanently disabled.
In addition to these federal loan forgiveness programs, some states and employers offer their own loan forgiveness programs for Parent PLUS Loans. You can contact your state’s department of education or your employer to learn more about these programs.
Can be consolidated with other federal student loans
If you have multiple federal student loans, you may be able to consolidate them into a single loan. This can simplify your repayment process and potentially save you money on interest. To consolidate your loans, you will need to apply for a Direct Consolidation Loan.
The Direct Consolidation Loan is a federal loan that allows you to combine all of your eligible federal student loans into a single loan with a single interest rate. The interest rate on your Direct Consolidation Loan will be a weighted average of the interest rates on your original loans. You can apply for a Direct Consolidation Loan online or by contacting your loan servicer.
There are several benefits to consolidating your federal student loans:
- Simplified repayment: You will only have to make one monthly payment instead of multiple payments.
- Potentially lower interest rate: The interest rate on your Direct Consolidation Loan may be lower than the interest rates on your original loans.
- More repayment options: You will have access to a variety of repayment plans, including income-driven repayment plans.
- Loan forgiveness: If you qualify for a loan forgiveness program, such as Public Service Loan Forgiveness or Teacher Loan Forgiveness, you will only need to make 120 qualifying payments on your Direct Consolidation Loan, instead of 120 payments on each of your original loans.
There are also some potential drawbacks to consolidating your federal student loans:
- Loss of certain benefits: If you have federal student loans that are in deferment or forbearance, you may lose those benefits if you consolidate your loans.
- Increased loan term: The repayment term for your Direct Consolidation Loan will be the weighted average of the repayment terms on your original loans. This means that your repayment term may be longer than the repayment term for your shortest original loan.
Before you decide whether to consolidate your federal student loans, you should weigh the benefits and drawbacks carefully. You should also talk to your loan servicer to learn more about the Direct Consolidation Loan program and to see if it is right for you.
FAQ
Here are some frequently asked questions about the Parent PLUS Loan:
Question 1: What is the Parent PLUS Loan?
Answer 1: The Parent PLUS Loan is a federal loan that allows parents of undergraduate students to borrow money to help pay for their child’s education.
Question 2: Who is eligible for the Parent PLUS Loan?
Answer 2: To be eligible for the 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.
Question 3: How much can I borrow with the Parent PLUS Loan?
Answer 3: The maximum amount you can borrow with the Parent PLUS Loan is the cost of attendance at your child’s school, minus any other financial aid that your child receives.
Question 4: What is the interest rate on the Parent PLUS Loan?
Answer 4: The interest rate on the Parent PLUS Loan is fixed and is set by the U.S. Department of Education each year. The current interest rate is 7.54%.
Question 5: What are the repayment options for the Parent PLUS Loan?
Answer 5: You will have a variety of repayment options to choose from, including the standard repayment plan, the graduated repayment plan, the extended repayment plan, and income-driven repayment plans.
Question 6: Can I consolidate my Parent PLUS Loan with other federal student loans?
Answer 6: Yes, you can consolidate your Parent PLUS Loan with other federal student loans into a single loan with a single interest rate. This can simplify your repayment process and potentially save you money on interest.
Question 7: Am I eligible for loan forgiveness on my Parent PLUS Loan?
Answer 7: You may be eligible for loan forgiveness on your Parent PLUS Loan if you work in certain public service jobs, such as teaching, nursing, or social work. You may also be eligible for loan forgiveness if you become totally and permanently disabled.
Closing Paragraph for FAQ:
If you have any other questions about the Parent PLUS Loan, you can contact your loan servicer or the U.S. Department of Education.
Now that you know more about the Parent PLUS Loan, here are some tips to help you decide if it is the right loan for you:
Tips
Here are some tips to help you decide if the Parent PLUS Loan is the right loan for you:
Tip 1: Compare the Parent PLUS Loan to other financial aid options.
Before you take out a Parent PLUS Loan, you should compare it to other financial aid options, such as Direct Loans, scholarships, and grants. Direct Loans are federal loans that are available to both students and parents. Scholarships and grants are free money that does not have to be repaid.
Tip 2: Be aware of your credit score.
The Parent PLUS Loan is a credit-based loan, which means that your credit score will be a factor in determining whether you are approved for the loan and the interest rate you will be offered. If you have a good credit score, you are more likely to be approved for the loan and you will likely receive a lower interest rate.
Tip 3: Consider your budget.
Before you take out a Parent PLUS Loan, you should carefully consider your budget to make sure that you can afford the monthly payments. You should also keep in mind that the interest rate on the loan may increase over time.
Tip 4: Be aware of the repayment options.
The Parent PLUS Loan offers a variety of repayment options, including the standard repayment plan, the graduated repayment plan, the extended repayment plan, and income-driven repayment plans. You should choose a repayment plan that fits your budget and your financial situation.
Closing Paragraph for Tips:
The Parent PLUS Loan can be a helpful way to help pay for your child’s education, but it is important to carefully consider all of your options before you take out the loan. By following these tips, you can make an informed decision about whether the Parent PLUS Loan is the right loan for you.
Now that you have learned about the Parent PLUS Loan and have some tips for making a decision about whether to take out the loan, you can move on to the conclusion.
Conclusion
Summary of Main Points:
The Parent PLUS Loan is a federal loan that allows parents of undergraduate students to borrow money to help pay for their child’s education. The loan has several unique features, including competitive interest rates, flexible repayment options, and the ability to borrow up to the full cost of attendance. However, it is important to note that the Parent PLUS Loan is a credit-based loan, which means that your credit score will be a factor in determining whether you are approved for the loan and the interest rate you will be offered.
Closing Message:
The Parent PLUS Loan can be a helpful way to help pay for your child’s education, but it is important to carefully consider all of your options before you take out the loan. Be sure to compare the Parent PLUS Loan to other financial aid options, such as Direct Loans, scholarships, and grants. Also, be aware of your credit score and your budget before you apply for the loan. By following these tips, you can make an informed decision about whether the Parent PLUS Loan is the right loan for you.