When the amount a student can borrow isn’t enough to cover the cost of attendance, parents may decide to take out additional loans. Parents of dependent undergraduate students can apply for a Direct PLUS Loan. PLUS Loans may also be offered to graduate and professional students, these are commonly referred to as grad PLUS Loans.
Parent borrowing has steadily increased in recent decades. There are about 3.7 million borrowers of the parent PLUS loan, according to the most recent federal data from the last quarter of 2022.
What Are Parent PLUS Loans?
A Parent PLUS Loan is a type of loan that is part of the Direct Loan program administered by the U.S. Department of Education. As mentioned, PLUS Loans can be borrowed by parents of undergraduate students. Graduate and professional students may also be eligible for PLUS Loans.
Parent PLUS Loans generally have higher interest rates than other Direct Loans. For Parent PLUS loans issued in the loan year starting July 1, 2023, the interest rate is 8.05%, while the interest rate for Direct Subsidized and Unsubsidized Loans to undergraduate students is 5.50%.
Interest rates for federal student loans are fixed, meaning they stay the same over the entire term of the loan. You generally can’t transfer a Parent PLUS Loan to your child down the line, but your child may be able to apply for student loan refinancing later on and, if they qualify and it makes sense to do so, use it to pay off the loan.
How Much Can You Borrow for a Parent PLUS Loan?
Congress established the Parent PLUS Loan program in 1980 with caps on how much parents could borrow. Those limits were eliminated in 1992. Parents are now able to borrow up to the full cost of attendance at their child’s institution (which the school determines), after any other financial aid the student receives.
Parent PLUS Loan Eligibility Requirements
Credit Score Requirements
While there is not a specific credit score requirement for borrowing a Parent PLUS Loan, borrowers with an adverse credit history may not qualify to borrow this type of loan. The U.S. Department of Education defines an adverse credit history as meeting any of the following criteria:
• Having accounts with a total balance of more than $2,085 that are 90 or more days delinquent, or debts that have been placed in collections or have been charged off within two years of the date of the credit report
• Having defaulted on a loan within five years of the credit report
• Filed for bankruptcy within five years of the credit report
• Experienced repossession or foreclosure within five years of the credit report
• Having charged-off a federal student loan within five years of the credit report
• Experienced wage garnishment or a tax lien within the five years prior to the credit report
Full details on PLUS Loan eligibility and adverse credit history can be found on the StudentAid website .
Parents with an adverse credit history who are denied a Parent PLUS Loan may be able to qualify for a Parent PLUS Loan if they add an endorser or provide supporting documentation to the U.S. Department of Education that indicates there are extenuating circumstances surrounding the adverse credit history.
Who Can Apply for a Parent PLUS Loan?
To apply for a Parent PLUS Loan, potential borrowers must be the biological, adoptive, or in certain situations the stepparent, of a dependent undergraduate student. The student must be enrolled in a participating school at least half-time.
Unless a grandparent has legally adopted the student, they are unable to borrow a Parent PLUS Loan.
Other Eligibility Criteria for Parent PLUS Loans
In addition to being the parent of the student and not having an adverse credit history, parent-borrowers also must meet the basic eligibility requirements for federal student aid , such as being a U.S. citizen or eligible non-citizen.
What If You Aren’t Eligible for a Parent PLUS Loan?
If you aren’t eligible for a Parent PLUS Loan, review the student loans, scholarships, and grants available to your undergraduate students. If these options are not enough to cover the cost of tuition and other expenses, you might consider borrowing a private parent student loan to help your child pay for their education.
Private student loans are awarded by private lenders based on personal financial factors such as income and credit score, among others.
Applying for a PLUS Loan
Before applying for a Parent PLUS Loan, ensure your child has completed their Free Application for Federal Student Aid (FAFSA®). Once this has been completed, you can apply for a Parent PLUS Loan. Typically, you’ll fill out an online application at StudentLoans.gov , though some schools have a different process and require you to request a loan through the institution’s financial aid office.
Recommended: When To Apply for a Parent Plus Loan
StudentLoans.gov has a list of all schools that allow you to apply through the website. If you have any questions, contact the financial aid office at your child’s school. When the loan is disbursed, you’ll have to pay a loan fee, which is 4.228% of the loan amount, if disbursed on or after October 1, 2020.
Pros and Cons of a Parent PLUS Loan
As with most financial decisions, there are pros and cons to Parent PLUS Loans.
Pros of a PLUS Loan
One of the biggest benefits of Parent PLUS Loans is that they allow parents to borrow up to the cost of attendance to help their child pay for college.
Another pro is that there are no minimum credit score requirements. While there is a credit check, so long as parents meet the adverse credit requirements, they stand a reasonably good chance of being approved for a parent PLUS Loan.
When repaying Parent PLUS Loans, borrowers have a few different repayment options available to them, which can offer flexibility. PLUS Loans are eligible for the standard, graduated, or extended repayment plans. And if Parent PLUS Loans are consolidated into a Direct Consolidation Loan, they can be enrolled in an income-contingent repayment plan, which is one of the income-driven repayment plans available for federal student loans.
Cons of a PLUS Loan
One negative is that Parent PLUS Loans cannot be transferred to the student borrower. They are the responsibility of the parents, and they are legally responsible for repaying the loan.
Parent PLUS Loans, as mentioned, have an origination fee.
Another con is that parents are expected to begin repayment as soon as the loan is disbursed. While it is possible to apply for a deferment, interest will continue to accrue during this time.
| Pros of Parent PLUS Loans | Cons of Parent PLUS Loans |
|---|---|
| Borrowing Limits. Parents are able to borrow up to the full cost of attendance, less any financial aid received by their child. | Cannot be transferred to borrowers. Parents are legally required to repay student loans and they cannot typically be transferred to the student. |
| No Credit Score Requirements. While there is a credit check, there are no minimum score requirements. Potential borrowers just need to not have an adverse credit history. | Origination fees. In addition to interest, Parent PLUS Loans also have an origination fee. |
| Flexible Repayment Options. PLUS Loans are eligible for the standard, extended, or graduated repayment plan. | Repayment begins at disbursement. Parents can request a deferment, however, interest will continue to accrue. |
SoFi Private Student Loans
When evaluating private student loans vs. parent PLUS loans, generally, federal student loan options are a strong starting place for most borrowers. That’s because federal student loans come with many important protections and often with lower interest rates. Students and parents who have exhausted their federal aid options may want to consider taking out loans from a private lender.
Student loans with SoFi offer competitive interest rates to qualifying undergrads, graduate students, and parents. Student loans can be used to cover up to 100% of school-certified costs which typically include things like tuition, books, supplies, room and board, food, and other education expenses.
SoFi doesn’t charge any fees related to private loans, meaning no origination fees or application fees. There are no prepayment penalties, and typically the sooner you pay off your loan, the less you pay overall.
You can choose from several repayment options, and it’s quick and easy to apply online.
FAQ
Does everyone automatically get approved for Parent PLUS loans?
No, not everyone gets approved for a Parent PLUS Loan. In addition to being the parent of an undergraduate student and meeting basic eligibility requirements, the U.S. Department of Education requires that parent borrowers not have an adverse credit history in order to borrow a PLUS Loan.
Parents who are denied from borrowing a Parent PLUS Loan because of an adverse credit history may be able to add an endorser to their application or file paperwork with the Department of Education to prove there were or are extenuating circumstances related to their adverse credit history.
Are Parent PLUS loans based primarily on income?
There are no specific income requirements for borrowing a Parent PLUS Loan.
What is the maximum borrowable amount of Parent PLUS loans?
Parent borrowers can borrow up to the full cost of attendance as defined by your child’s school, less any other financial aid your child has received.
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SoFi Private Student Loans
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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