What is a Parent PLUS loan?

Parents of undergraduate students can provide their children with additional help through federal Parent PLUS Loans.

The PLUS stands for Parent Loan for Undergrad Students (which makes referring to it as a Parent PLUS Loan a little redundant, we know). It’s determined by the cost of attending the school, less any other financial aid that is applied first.

Since most grants and loans have limits on the amount of money awarded, the Parent PLUS Loan can be an excellent way to make sure students have what it takes to finish their degree programs.

For a parent to receive a PLUS Loan, his or her child must be a dependent undergraduate student with at least half-time status at an eligible school.

Things To Know Before You Apply For A Parent PLUS Loan

Your child will need to fill out the Free Application for Federal Student Aid (FAFSA®) to start the process and provide insights into available need-based and non-need-based financial assistance. The more the student can gain from grants, scholarships, and lower-interest student loans, the less debt you will incur in your PLUS loan. File the FAFSA® early to take advantage of timely opportunities.

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Both you and your son or daughter can search for financial aid opportunities, whether from Pell Grants, federal Stafford Loans, or scholarships that can come from countless sources.

Keep in mind, too, that interest starts to accrue immediately with the Parent PLUS Loan. You can save money over the course of the loan by paying the interest while your child goes to school. At 7 percent interest, the PLUS Loan’s current rate is the highest among federal student loans. Compare it to the need-based Federal Perkins Loan, which is currently at 5 percent interest.

Qualifications for PLUS Loans

The U.S. Department of Education is the lender for Parent PLUS Loans. Parents who seek to secure student financial aid for their children must not have adverse credit histories, but poor credit scores are not necessarily deal-breakers for parents. An endorser who has good credit can help. A parent can also provide documentation to the U.S. Department of Education of extenuating circumstances that caused the problems with credit history.

If you’re determined to be eligible for a PLUS Loan, you’ll have to sign a Direct Plus Loan Master Promissory Note agreeing to the loan terms. If the student has not had a PLUS Loan in the past, he or she must complete entrance counseling.

After the loan has been received, you will be contacted by your loan servicer, to whom you will repay the loan. The loan servicer will give you continued updates on the status of the loan.

The school will receive the funds and place them in your child’s school account for tuition, fees, room and board, and other charges incurred at the school. The student will receive any remaining funds to go toward other educational expenses.

Parent PLUS Loan Interest Rates And Repayment

The Parent PLUS Loan provides a fixed interest rate of 7 percent on loans opened between now and July 1, 2018. There is also a loan fee of around 4.3 percent (if the first disbursement happens before Oct. 1, 2018). Loan payments won’t begin until six months after your child graduates, leaves school, or goes below half-time enrollment.

Repayment plans are usually between 10 and 25 years. Several plans are available and can be explained by the loan servicer.

Interest will accrue on the loan while your child is going to school and payments are not being made. Borrowers may pay off interest as it accrues, or they may start paying it along with the principal balance when the loan payments become due.

A Parent PLUS Loan is an opportunity for parents to contribute toward their children’s futures following their college education by helping fund the upper amounts of students’ financial obligations. But remember it all starts with FAFSA® — why not file with FRANK to get it out of the way?