A Complete Guide to Parent PLUS Loans

These days, it’s not uncommon for students and their parents to borrow money for school through student loans. When weighing your options for paying your child’s tuition, don’t overlook parent PLUS loans. Parent PLUS loans are federal loans offered to parents of undergraduate students to help cover education-related expenses.

This guide explains what parents need to know about Parent PLUS Loans, from who qualifies to how to apply.

The federal government distributes different types of loans, including:

A parent PLUS loan is a direct PLUS loan where the borrower is the student’s parent.

With a parent PLUS loan, the parent is fully responsible for paying back the loan. With that in mind, here are some basics about how these loans work.

There is no defined maximum parent PLUS loan amount. Rather, parents can borrow up to the entire college tuition for their child minus any financial aid their child is already receiving.

All federal loans have fixed interest rates, meaning the rate won’t change unless you refinance your loan with a private lender.

Parent PLUS loans disbursed (i.e., released by the government) between July 2021 and July 2022 had an interest rate of 6.28%.

Parents pay a processing fee for the loan. This fee is included at every disbursement and is subject to change every year. Loans disbursed between October 2020 and October 2022 charged a fee of 4.228%.

The government sends the money to your child’s school, typically in installments at the start of the semester or quarter. The school will use these funds to cover the cost of tuition, room and board, and other fees. If there’s any money left, the school will send you a check with the remaining balance.

As soon as your school receives the government’s money, you must start making monthly payments on the loan. The federal government works with student loan servicers to collect payments on its behalf. You’ll receive bills and send payments to this loan servicer.

Parents can request to delay their PLUS loan payments until after their child graduates by contacting their loan servicer. However, interest still accrues during this period.

Due to the pandemic, the federal government paused student loan payments until August 31, 2022. This pause applies to parent PLUS loans, too. So, parents with current PLUS loans don’t need to pay until fall.

There are two main eligibility requirements for parent PLUS loans.

You must be the biological or adoptive parent of an undergraduate student who attends an eligible college at least half-time. In some cases, stepparents may be eligible for parent PLUS loans. Grandparents and legal guardians are not eligible.

Unlike other federal student loans, PLUS loans require a credit check.

You may still qualify for a loan if you have poor credit history. However, you may need a co-signer who promises to pay the loan if you cannot. Alternatively, you can provide documentation of special circumstances that led to your poor credit history. In either case, you will need to take a credit counseling course to qualify for a parent PLUS loan.

Applying for a parent PLUS loan starts the same way as applying for federal student aid, but there are some additional steps for parents.

The Free Application for Federal Student Aid (FAFSA) is an online form you and your child complete with information about your income and assets. This information helps the government and schools determine your financial need.

After completing the FAFSA, apply for a parent PLUS loan online. You’ll use the same Federal Student Aid ID you created when submitting the FAFSA.

It takes about 20 minutes to apply. When you apply, you should also be prepared to give:

A Master Promissory Note (MPN) is a contract in which you promise to pay back the loan you owe. It also includes all the terms and conditions of the loan. You can complete an MPN for Parent PLUS loans online. You should also find out if your child’s school has additional steps to complete an MPN.

The federal government offers options for how you can pay loans when the moratorium ends. These options include:

You may have the option to refinance your parent PLUS loan with a private lender. In loan refinancing, you replace your existing loan with a new one, usually because it has a lower interest rate or more affordable monthly payments.

Typically to refinance, you need good credit history and proof of income.

Refinancing your parent PLUS loan for a private loan with a lower interest rate could save you long term. However, this isn’t always the case. Make sure to consider the following costs:

In some cases, parent PLUS loans can be forgiven or canceled.

Parents who work for a nonprofit or eligible field may qualify for public service loan forgiveness. To qualify, these parents must make at least 120 monthly payments. They also must consolidate their loans in a Direct Consolidation Loan.

There are other cases when your loan would be canceled, including:

In rare cases, your loans can be canceled or partially canceled if you declare bankruptcy. However, a court must determine that you can’t repay the loan and you tried in good faith to repay it.

Remember to work only with the federal government on these issues to avoid loan forgiveness scams. Do not give out any personal information to an unknown person or company who tells you they can cancel or forgive your debt.

Like any loan, taking out a parent PLUS loan has benefits and drawbacks. Consider these Parent PLUS student loan pros and cons when you’re applying.