There are many federal aid options available for students and parents to help pay the cost of higher education and related expenses. If you’re looking for more specific college loans for parents, take a look at the Parent PLUS loan offered by the Federal Direct PLUS loan program.
This article will explain the terms and steps for parents who want to consider a Parent PLUS loan to cover college costs that other financial aid doesn’t cover for their child. For students, this can help you understand how the Parent PLUS loans work.
What Are Federal Direct PLUS Loans?
The Direct PLUS loans help parents of dependent undergraduate students and graduate or professional degree students to pay the full cost of attendance in an eligible school, minus any other financial aid received.
These are primarily two types of Direct PLUS loans:
Parent PLUS loan:
This loan is accessible to biological or adoptive parents of a dependent undergraduate student, as well as step parents who are married to the biological parent.
Grad PLUS loan:
This loan is designed for graduate or professional students who are enrolled at least half-time in an eligible graduate or professional program. This article is written aimed at the Parent PLUS loan, but most of the steps also apply to the Grad PLUS loan.
Related: 9 College Financial Planning Tips to Make Your Education More Affordable
The interest rates for both types of loans are fixed for the entirety of your tenure, with the current rate for 2023-24 being 8.05%. The interest rates change (refresh) annually, with the new rate taking effect from the 1st of July to 30th of June the next year.
Additionally, there is an origination fee of 4.228%, which is directly deducted when the loan amount is disbursement. So, you can anticipate receiving a reduced sum compared to your initial request.
The loan can be repaid over a period of up to 25 years. Payment schedules are mostly monthly. The PLUS loan is not subsidized, which means you may start accruing interest on the outstanding amount from the moment the loan is disbursed.
Related: How to Pay for College Without Loans
What is a Parent PLUS Loan?
The federal Parent PLUS loan helps parents support their dependent undergraduate students in paying for college. Parents consider using this loan when other forms of financial aid (such as grants, scholarships, financial aid, and student loans) do not fully cover the cost of attending college.
Parents are the sole borrowers of a Parent PLUS loan. The students will never be responsible for paying back the loan. Other family members, such as grandparents or legal guardians (except when they adopt), cannot apply for this type of loan. The eligibility criteria for a Parent PLUS loan includes:
- Credit Check: Parents with adverse credit can add an endorser or demonstrate extenuating circumstances including medical emergencies, job loss, or other events.
- Parent Relationship: To qualify, you must be the biological, adoptive, or step parent of the dependent undergraduate student.
- Student Enrollment: The student must be enrolled at least half-time in a participating college or university that accepts Parent PLUS aid and meet the school’s standards of satisfactory academic progress.
- General Eligibility Requirements: The student must meet the required general eligibility criteria to receive federal aid.
How to Get a Parent PLUS Loan?
Applying for a Parent PLUS loan is a simple and straightforward process. After you and your child have checked and met all the eligibility requirements, the first step is to complete the FAFSA. Here’s the chronology of your action items:
- Complete the FAFSA
- Calculate the loan amount you need to borrow
- Gather required information
- Apply for a Direct Parent PLUS loan
- Sign your Master Promissory Note
Related: How to Save Money as a College Student and Make College a Budget-Friendly Experience
Complete the FAFSA:
Ask your child to complete their FAFSA application. You can apply for a federal loan only when your child has been deemed eligible for federal financial aid. The offer letter that your child receives determines the amount you need to borrow from a Parent PLUS loan. The more aid you receive, the less you’d have to borrow.
Calculate the Loan Amount You Need to Borrow
The total amount you can borrow is the cost of attendance minus other aid. The aid that your child has received (after their FAFSA application has been submitted) will reflect in their financial aid offer letter.
| TIP: You can use the Federal Student Aid Estimator to get a fair estimate of the amount of financial aid you’re eligible to receive. |
You can either request the maximum amount that you’re eligible to receive or specify a smaller amount that you need. Since you have to repay every single dollar along with accrued interest, look for other means to pay for your child’s college expenses before choosing a Parent PLUS Loan. Don’t borrow more than necessary.
Related: Student Loans: How Much Should I Borrow?
Gather Required Information:
Have this information by your side while filling your loan application:
- Your verified FSA ID
- The loan amount you need to request
- The school’s name
- Your child’s personal and academic information
- Your personal information
- Your employer’s information
Apply for a Direct Parent PLUS loan
It shouldn’t take more than an hour to complete the application (although the website says 20 minutes). Just head on to the official Student Aid website. And login using your FSA ID (not your child’s). Here’s a sample preview of the application form.
Please bear in mind to complete the application in one session, meaning, don’t go back or refresh the page or stay idle for too long. Complete the application in one go or you may have to fill it back again.
| NOTE: For the academic year 2023-24, please file your application before May 1st, 2024 (by 3 pm) |
Related: College Decision Dates: What You Need to Know
| NOTE: Some schools may have a different process so please check with your prospective school to understand their federal aid application process. |
Follow the instructions on the application and make sure to fill in all the correct information. Incorrect information can do some damage and you may have to re-apply using a new application.
After filling out the application and providing your consent to perform a credit check on your background, hit submit to send the application request for a Parent PLUS loan.
You don’t necessarily need to inform the school. The school receives an official confirmation of your application. And you’ll receive the application status within the next 24 to 28 hours.
If your application is approved, go ahead and sign your Master Promissory Note. If not, you’ll receive a statement via email explaining why your application was denied. There may be a number of things that can go wrong here:
- If you have an adverse credit history
- If (by mistake) you have enlisted your child as the borrower of the loan
- If the school doesn’t have your completed FAFSA on file
- If your child has not been offered their federal aid eligibility
Speak to the counselor at the school’s financial aid office to figure out the right course of action. Don’t lose hope just yet. You can reapply for the loan with an endorser or have your child borrow additional unsubsidized federal direct student loan. There may be other options for you that the counselor can suggest.
Sign your Master Promissory Note
If this is your first time borrowing money for federal aid, you need to sign a Master Promissory Note (MPN). It’s a legal document that outlines your loan agreement in which you promise to repay the loan along with the accrued interest to the U.S. Department of Education.
Repayment Options: Federal Parent PLUS Loan
| TIP: You can use the federal loan simulator to estimate your monthly payments and choose a repayment option that works the best for you. |
After your PLUS loan application is approved, you can expect to receive the money in at least two installments. The school will generally credit the money to your child’s account for authorized educational expenses only. Any remaining funds will be paid directly to you, unless you ask the school to send it to your child.
The repayment schedule for a Parent PLUS loan begins within 60 days after you receive the last loan disbursement. However, you may be able to defer making payments by contacting your loan servicer and discussing your options.
| Who’s a loan servicer? A loan servicer manages your loan and addresses any of your questions and feedback, including payment collection and record-keeping, from disbursement to repayment. For example, EdFinancial Services, MOHELA, Aidvantage, Nelnet, and more. |
Basically, your monthly payment amount will vary with your total loan amount, the interest rate, and your choice of repayment plan. You can choose from four repayment options for a Parent PLUS loan:
- Standard Plan: With this plan, you’ll end up paying fixed monthly payments for up to ten years.
- Graduated Plan: Under this plan, you’ll start by paying only the interest, keeping your monthly payments low. Over time, the principal amount will be gradually added, typically every two years, until the loan is fully repaid within ten years.
- Extended Plan: This plan allows you to repay your loan over up to 25 years by making fixed or graduated monthly payments. There are certain eligibility requirements to use this plan.
- Income-Contingent Repayment Plan (ICR): This is an Income-Driven Repayment (IDR) plan that takes your income and family-size into consideration to determine your monthly payment amount. You either pay the lesser of:
- the monthly amount that would be required over a 12-year repayment period with fixed payments, multiplied by an income percentage factor OR
- 20% of your discretionary income, meaning the part of your income left after paying your necessities.
You pay the least interest on a Standard Repayment plan but the monthly payment size can be daunting to some. On the other hand, the ICR plan can significantly lower your monthly installments but it can be expensive in the long run.
But there’s a good catch with the ICR plan. If you work or have worked with a government agency or a non-profit organization or are ever planning to work with one, you can then apply for the Public Service Loan forgiveness (PSLF) program that forgives any of your remaining amount after 120 qualifying monthly payments.
To qualify for the ICR plan, consolidate your Parent PLUS loan into a Direct Consolidation Loan that comes with many other benefits. You can consolidate one or more of your federal student loans into a single loan account with a lower monthly payment. Ask your loan servicer to help you do this.
| NOTE: Under the ICR plan, any remaining loan balance is forgiven if your federal student loans aren’t fully repaid at the end of the repayment period, which is 25 years. |
Please remember that you must recertify your income and family size by consulting your loan servicer. Feel free to do this even if there’s no change in your income or family size. This can help you reduce your monthly payments.
| TIP: With the help of your loan servicer, apply for automatic payments so that your monthly payments will be automatically deducted from your bank account. This helps ensure that you don’t miss even a single payment. For this initiative, you may receive an interest rate reduction on your loan as long as you remain enrolled in automatic payments. |
To Sum Up
By understanding the application process, loan terms, and repayment options, parents can confidently take the call on financing college or university expenses for their child. But while these loans are timely and useful, it’s essential to weigh the financial implications carefully before you proceed.
Related: College Planning: A Handy Guide for Students
Frequently Asked Questions (FAQs)
To create a FAFSA parent login ID, visit the FSA ID website. Select “Create Account” and fill out your personal information, including name, Social Security Number (SSN), and email or mobile phone number.
NOTE for parents:
If you have generated a FSA ID while you were a student, you don’t need to create a new one. There’s only one SSN attached to one FSA ID.
A Parent PLUS loan has a fixed interest rate (currently 8.05%) for all but the approval depends on the parent’s creditworthiness. Although, if you cannot pass the credit check, you can find an endorser who agrees to pay the loan amount in the event you fail to repay it. You can even explain your financial circumstances to the U.S. Department of Education and provide reasons for your adverse credit history. Please keep in mind that you don’t require an excellent credit score to get a PLUS loan.
There is no defined maximum; parents can borrow up to the full cost of college attendance minus other aid.
Only the parents are legally responsible for repayment. Students are not obligated to repay Parent PLUS loans. Even after completing school, parents cannot transfer the loan to their children.
Parent PLUS loan covers the entire cost of attendance beyond other aid, including tuition and fees, living expenses, transportation, books and supplies, and other similar costs.
To check your student loan balance, visit your loan servicer’s website or call them directly. You can even log in to the federal student aid website using your FSA ID to access loan details or better reach out to the counselor at your school’s financial aid office.
If your parents are married (not separated):
- Both parents’ information must be included on the FAFSA form, regardless of their gender.
- If they didn’t file taxes jointly, both parents are contributors.
- If they filed taxes jointly, only one parent needs to provide information for both.
If your parents are not married to each other and live together:
- Both parents are contributors, regardless of their gender.
If your parents are divorced, separated, or never married, and don’t live together:
- The parent who provided more financial support during the last 12 months is the contributor.
- If support was equal or neither parent financially supports you, the one with greater income and assets is the contributor.
Yes, you can apply for forbearance or deferment with help from your loan servicer to temporarily pause your repayment schedule. But please keep in mind that your loan will accrue interest during this period and you’ll end up paying more on your outstanding balance than before.
If you get on an Income-Driven Repayment (IDR) monthly plan by consolidating your federal loans together, any remaining balance left after you pay a certain number of payments over the period of 20 to 25 years may be forgiven. Moreover, you can even apply for the Public Service Loan forgiveness (PSLF) program if you work with the government or any listed non-profit organization to be forgiven for any remaining amount after 120 qualifying monthly payments. And there are other scenarios where your PLUS loan may be forgiven, including, if your school has closed or has misled you, disability, bankruptcy, and others. You can refer to the official guide here.
