Essential Guide to Parent PLUS Loans for Families
Learn everything about Parent PLUS loans, including eligibility, benefits, and drawbacks. Discover how these loans can help cover college costs and what repayment options are available. Make informed decisions to support your child's higher education financially.
Parent PLUS loans are a type of federal loan designed for parents of students enrolled in higher education or graduate programs. These loans, also known as parent student loans, help cover education expenses that other financial aid sources can't fully meet. Making the decision to take out a Parent PLUS loan requires careful consideration, as it impacts your finances for years to come. Understanding eligibility criteria and repayment options is vital before proceeding.
Eligibility hinges on the parent having a solid credit history and being the primary supporter of the student, including biological, adopted, or sometimes stepchildren attending college. The student must demonstrate financial need through the FAFSA application.
Qualifying for a Parent PLUS loan requires a good credit score; those with adverse credit histories may face denial. The parent must provide evidence of supporting the student financially, covering more than half of their living and educational costs. When federal funding options fall short, Parent PLUS loans can bridge the gap for college expenses.
Federal Parent PLUS loans offer benefits such as flexible repayment plans, including options for deferment or forbearance during financial hardship or unemployment. Additionally, borrowers may qualify for Public Service Loan Forgiveness after ten years of timely payments, and income-contingent repayment plans can lead to forgiveness after 25 years.
However, these loans come with drawbacks. Unlike undergraduate federal loans, repayment begins immediately after the disbursement, not six months after graduation. They also tend to have higher interest rates and fees; for instance, in 2017-18, the interest rate was approximately 7%, with a loan fee around 4%.
Private lenders such as banks and credit unions also offer parent loans, which can sometimes provide more favorable terms comparable to federal loans. These private parent loans may include variable interest rates and less strict qualification criteria.
