College is expensive and costs continue to rise. In 1989, the average cost of a 4-year degree school term was $1,730. As of 2023, the average annual cost increased to an average of $9,377 for in-state students at a public four-year college.
With college costs continuing to skyrocket, many parents apply for federal Parent PLUS loans. Since these loans are issued in the parent’s name, it is important that parents understand the details of what these loans entail and how often you have to apply to ensure students receive proper funding.
So, to avoid missing an application deadline, here’s some helpful information about Parent PLUS loans and their application process.
Parent PLUS Loan Recap
A Parent PLUS loan is a type of Direct PLUS loan, which is offered to parents who have a student enrolled at least part-time in an eligible education program.
Borrowers may be able to borrow an amount that equals but does not exceed the full cost of attendance, minus any other financial aid such as scholarships and grants that your child has received.
These loans are federally-funded and not subsidized. This means that the loan will accrue interest while the student is in school. Parent PLUS loans offer fixed interest rates and won’t change throughout the life of the loan.
The interest rate for Parent PLUS loans disbursed for the 2023-24 academic year is 8.05%. It’s also important to note that as of October 1, 2019, Direct PLUS Loans have a fee of about 4.228% of the loan amount (which is deducted from each loan disbursement proportionately).
Qualifying For a Parent Plus Loan
To qualify for a Parent PLUS loan, borrowers must:
• Be the biological or adoptive parent, or in some cases, the stepparent, of an undergraduate student enrolled part-time at an eligible school
• Have poor credit history (unless the parent meets additional criteria). More information on what is considered an adverse credit history can be found on the Student Aid website .
• Meet general eligibility requirements for federally-funded student aid
Keep in mind that even if a grandparent is primarily responsible for a student they are not eligible for a Parent PLUS loan, unless, grandparents have legally adopted their grandchildren and are legal guardians.
Applying for a Parent PLUS Loan
The first step to apply for a Parent PLUS Loan is to complete the FAFSA® form with the student. Then, parents can log in at StudentLoans.gov , choose the Parent Borrowers tab, and the “Apply for a PLUS Loan” link.
Most schools require you to apply for Direct PLUS Loans online, however, some may have different application processes that you must follow. Studentaid.gov provides a list of schools that allow you to apply online. If your school is not on this list, check with the school’s financial aid office to verify the application process you must follow.
Those who qualify for a Parent PLUS loan, will have to sign a Direct PLUS Loan Master Promissory Note (MPN) . This document verifies that the borrower agrees to the terms of the loan. Each school may have a different process, double check with the financial aid office to ensure you understand the specific process for your student’s school of choice.
Keep in mind, those borrowing more than one parent PLUS loan for separate children, will need to sign multiple MPNs.
Apply for A Parent Plus Loan Every Year
When you complete the FAFSA form , you are applying for financial aid for one school year. Therefore, to receive financial aid for the next year, you will have to submit a new FAFSA form to get new aid.
However, the website allows you to select a Renewal FAFSA form that remembers your information from the previous years, making it earlier to submit a new financial aid application.
Additionally, it’s important to pay attention to the FAFSA deadlines to avoid missing out on any financial aid opportunities. General recommendations suggest submitting the FAFSA form by the earliest financial aid deadline of the schools to which you are applying, usually by early February.
Each state may have their own deadlines, so it can help to verify your state’s specific date.
Pros of Parent PLUS Loans
First, eligible borrowers can take out a generous Parent PLUS loan, as long as it doesn’t exceed the total cost of attendance at the student’s school of choosing (minus other financial aid they qualify for).
Another advantage of the Parent PLUS loan is that the interest rates are fixed. This means that even if rates increase nationally, the interest rate on the loan is locked in at the rate determined at the time the loan was disbursed.
Having a fixed interest rate can make it easier to budget for the monthly payments when they become due since borrowers know exactly what to expect.
Additionally, when it comes to loan repayment, there are several flexible repayment options . For example, you could select a standard repayment plan with fixed monthly payments for 10 years or an extended repayment plan with either a fixed or graduated payment schedule over a 25-year term.
Parent PLUS loans are not eligible for income-driven repayment plans, unless they have been consolidated with a Direct Consolidation Loan . This is when multiple federal loans are consolidated into one single Direct Consolidation Loans. These loans are still federal loans and the new interest rate is the weighted average of the existing loans.
Borrowers can select the best repayment option based on the plans they qualify for and their goals for repayment. Whether the goal is to keep payments low or pay off the loan balance as soon as possible, borrowers can select a plan that best fits their needs. Generally, selecting a repayment plan that helps pay off the loan quickly will result in paying less interest over the term of the loan.
Cons of Parent PLUS Loans
Not everyone qualifies for a Parent PLUS loan. Although this isn’t necessarily a disadvantage to a Parent PLUS loan, it’s important to understand that you will have to meet all eligibility requirements to qualify. This includes passing a credit check.
Adverse credit indicators include defaults of debt, foreclosures, repossessions, debts discharged through bankruptcy, tax liens, wage garnishments, or previous write-offs of federal student debt.
However, you might be able to qualify if you apply with an endorser or a cosigner. Keep in mind, you also need to be a United States citizen or national.
Alternative Financing Options
If your application is denied due to poor or “adverse credit history,” there are still other financing options. Here are a few to consider:
Enlisting an Endorser
If a parent doesn’t qualify based on their own credit history, they can try to enlist a co-signer , called an endorser, on the Parent PLUS loan. The endorser agrees to take responsibility for the loan if the borrower fails to repay, and the loan will show up on the endorser’s credit report as his or her own debt. If you apply with an endorser, you will be required to complete PLUS credit counseling .
Looking for Free Money
It can be wise to continue to apply and look for scholarships, work-study, or grant rewards. There’s a myriad of ways to find reward opportunities such as contacting the school’s federal aid office, federal agencies , state grant agencies , or other organizations a student or parent is involved with.
New opportunities may become available every year, so it can be wise to continue to stay out on the look for funding opportunities.
Applying for Unsubsidized Federal Loans
If a parent is ineligible for a Parent PLUS loan, the student may be eligible to receive additional Direct Unsubsidized Loan funds up to the loan limits for independent students.
Federal student loans can be reliable borrowing options because they often have lower interest rates and could have better repayment terms than other loans available to students. However, it’s worth making sure that a student isn’t taking out more debt than they can handle after graduation.
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Considering Private Loans
Lastly, if all other options fail, some families may want to consider private loans. These loans are offered through financial institutions such as banks, credit unions, and online lenders.
Keep in mind, private student loans tend to have less flexible repayment terms and higher interest rates than federal student loans.
For example, private lenders may require you to begin making payments before your child graduates. Conversely, with a Parent PLUS loan, parents can wait to make repayments until after their child has graduated.
Additionally, when applying for a private loan, the interest rate is generally based on factors like the borrower’s income and credit score.
If you think you may need to use private loans, don’t be discouraged, and instead, be informed about your options. First, it’s worth shopping around and comparing lenders for private loans.
Lenders’ terms will vary, so it can be helpful to get several quotes and ask about the interest rate (and whether it’s fixed or variable), the loan’s repayment terms, and what happens in the event there are financial difficulties that make it difficult to stick to the repayment plan.
If you do determine a private student loan is right for you, check out SoFi, where parent student loans are built to help you pay for your child’s education. SoFi loans have no fees, and qualifying borrowers can secure a competitive interest rate.
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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
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