If your child’s struggling to qualify for enough federal Direct Subsidized and Unsubsidized Loans, a Direct Parent PLUS Loan might be the next best choice. Rather than signing on to a private loan with potentially higher rates and fewer repayment options, a Parent PLUS Loan offers some of the benefits — though not all — of federal loans.
How do Parent PLUS Loans work?
Parent PLUS Loans are federal student loans in the parent’s name, rather than the student’s. These loans are available to parents of dependent undergraduate students and could be a good option if applicants can’t qualify for enough funding through the less-expensive Direct Subsidized and Unsubsidized Loan programs.
All borrowers get the same rates and fees, which Congress sets each year. And the credit requirements are generally less strict than private student loan providers, making it a potentially better deal than cosigning a private loan with your child.
How much can I borrow?
You can borrow up to 100% of your child’s cost of attendance (COA) — after all other loans and financial aid have been subtracted.
Your child’s financial aid award should include information about the COA and financial aid. If your child has yet to apply to school, you can often get an idea of the cost by visiting the school’s financial aid office website.
How much does it cost?
Fixed interest rate: 6.08%
Origination fee: 4.236%
The two main costs to consider are interest and fees. All parents get the same fixed rate, which changes on July 1 each year. The Department of Education (DoE) also deducts an origination fee from the loan before the school receives the funds.
Am I eligible for a Parent PLUS Loan?
To qualify for a Parent PLUS Loan, you need to meet the following criteria:
Biological or adoptive parent of an undergraduate student
Child qualifies as a dependent — according to the DoE
The DoE and IRS have two different definitions of what qualifies as a dependent child.
According to the DoE, your child is not a dependent if they meet one of the following criteria:
Over 23 years old — as of January 1 of this year
Active-duty member of the US Armed Forces
Parent or will become a parent of a child that depends on them for more than half of their financial support in the coming academic year
Other tax dependents live with them and receive more than half of their financial support from them — aside from a spouse
Former emancipated minor
Someone other than a parent or stepparent has legal guardianship over them
Former homeless youth or at risk of becoming a homeless youth
Adverse credit history is a negative mark on your credit report — not necessarily a low credit score. These include:
Delinquencies of more than 90 days
Defaults — even if the claim is paid
Can I get a Parent PLUS Loan with bad credit?
You can. Even if you have adverse marks on your credit report, you may still be able to qualify if you:
Add an endorser. An endorser is like a cosigner — someone with good credit who promises to repay the loan if you can’t.
Provide proof the negative mark is incorrect. Have an error on your credit report? You can still qualify if you send documentation proving that it’s a mistake.
Demonstrate you were going through extenuating circumstances. If you went through a divorce or faced an unexpected financial disaster, you could be approved if you provide a statement explaining the situation along with documents to back it up.
What are my repayment options with a Parent PLUS Loan?
Make repayments that increase over time — usually every two years.
Extended Repayment Plan
Make either fixed repayments or repayments that increase over time — usually every two years.
Parents might be eligible for the Income-Contingent Repayment (ICR) Plan if they consolidate their debt with a federal Direct Consolidation Loan. This program requires you to make monthly payments of 20% of your income or what you’d pay on a 12-year plan with fixed repayments — whichever is less. The government forgives any remaining balance after 25 years of ICR repayments.
Parents who want to hold off on repayments can apply for Parent PLUS Borrower Deferment, which postpones payments until six months after the student leaves school or drops below half time. Otherwise, there are several other ways to put your repayments on hold during temporary financial setbacks like unemployment or rehabilitation.
It is. Interest starts adding up as soon as the school receives the funds. If you apply for Parent PLUS deferment — or any other program — all unpaid interest is capitalized and added to your loan balance. This means you’re effectively paying interest on interest. You can avoid this by making repayments right away or requesting to make interest-only repayments through your servicer, if it’s an option.
Can I qualify for forgiveness with a Parent PLUS Loan?
If you’re interested in forgiveness as a parent borrower, you might want to consider consolidating your federal debts with a Direct Consolidation Loan. This allows you to sign up for the ICR Plan, which makes you eligible for Public Service Loan Forgiveness or ICR forgiveness after 25 years of repayments.
Otherwise, you are ineligible for any federal forgiveness programs.
A Parent PLUS Loan might be a good alternative to private student loans if your child is unable to qualify for enough unsubsidized federal funding. However, it’s one of the most expensive federal loan options. You might be able to find a better deal with private lenders if you have strong enough credit and a high income.
Contact the financial aid office at your child’s school. Some schools have different procedures: You’ll likely be required to complete an online application through the DoE’s Federal Student Aid (FSA) website. However, you could also be asked to submit additional information.
Contact the financial aid office at your child’s school for deadlines. The federal deadline to complete the FAFSA is June 30, 2019. However, your school may have separate deadlines for submitting the Parent PLUS application.
You can reach out to the financial aid office at your child’s school to either add an endorser or appeal your rejection. An endorser needs to fill out an application, which takes about 30 minutes to complete. You might need to provide documents and a statement in order to have your decision appealed.
Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 1,000 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
A business line of credit is a useful tool. But as a startup, you may not qualify for the best interest rates with most lenders. Explore your options — and alternatives — for flexible funding as a new business.
How likely would you be to recommend finder to a friend or colleague?
Very UnlikelyExtremely Likely
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.