Many students today must turn to student loans to afford their college education. But unfortunately, the loans available to students aren’t always sufficient to cover the full price tag. That’s when a PLUS loan can help parents fill the funding gap for their child.
These federal student loans allow you to borrow money for your child’s education. They don’t come with all the same perks as other federal loans, but they have some advantages. Here’s what you need to know about parent PLUS loans.
What is a parent PLUS loan?
A parent PLUS loan is a federal student loan available to parents of undergraduate students. They’re designed to cover any educational expenses that aren’t covered by other financial aid the student received.
Rather than being in the student’s name — as other federal loans are — parent PLUS loans are in the parent’s name, and the parent is ultimately the one responsible for repaying the debt. Like other federal student loans, parent PLUS loans have fixed interest rates that are set for each school year. Unfortunately, these loans carry the highest interest rate of all federal options.
While the amount that undergraduates can borrow in federal loans is limited, parent PLUS loans allow you to borrow up to the full cost of attendance for your child’s education. They’re often used in combination with other student loans.
Parent PLUS loan eligibility
A parent PLUS loan is one of a few types of Direct PLUS Loans available from the federal government. But these loans work differently than other federal options because of the borrowing requirements.
To qualify for a parent PLUS loan, you must:
- Be the biological or adoptive parent of a dependent undergraduate student attending an eligible school at least half-time
- Have no adverse credit history
- Meet the general federal aid eligibility requirements
Note:
Caretakers like grandparents, extended family, or legal guardians are not eligible for parent PLUS loans unless they have formally adopted the student.
PLUS loans are also the only type of federal student debt that requires a credit check. However, you don’t need to meet a minimum credit score to qualify. Instead, the check looks for “adverse credit,” such as bankruptcies, repossessions, wage garnishment, or tax liens in the past five years.
But even if you do have adverse credit, you may still be able to get a parent PLUS loan. Applicants can add an endorser (similar to a cosigner) to their application to get approved. Or, you can provide evidence of extenuating circumstances that led to your adverse credit. Acceptable documentation might include proof that the adverse mark was due to a credit reporting error or is based on outdated information.
Interest and fees
Like all federal student debt, parent PLUS loans come with a fixed interest rate and one-time origination fee. However, they are the most expensive type of federal debt. Here’s what you’ll pay for loans you borrow in the 2023-24 school year:
- Interest rate: 8.05%
- Origination fee: 4.228%
Like other federal options, a parent PLUS loan can be deferred while the student is enrolled at least half-time and for six months after they graduate or leave school. However, you must manually request this deferment, or else you will begin making payments as soon as you receive the loan money.
Tip:
If you’re not able to make full payments while your child is in school, consider interest-only payments instead. Interest accrues while your loan is deferred, so paying it off each month can prevent your debt from growing before you child graduates.
How to apply for a parent PLUS loan
If you’re considering applying for a parent PLUS loan for your child, follow these steps:
- Complete the FAFSA: Just like any other federal financial aid, a parent PLUS loan requires completion of the FAFSA. This form allows you and your child to share important information about your financial situation, which is used to determine what aid, if any, your child qualifies for.
- Fill out the parent PLUS loan application: In addition to completing the FAFSA, you’ll also have to apply specifically for a PLUS loan. On this application, you’ll provide information about your child’s school and the loan amount you need, and you’ll agree to a credit check.
- Sign the repayment agreement: Once you’ve completed the application and have been approved, you’ll sign the Master Promissory Note, just as you would with any federal student loan. By providing your signature, you agree to the terms of the loan and its repayment.
- Prepare for repayment: Even if you don’t plan to make payments on your loan while your child is in school, it’s never too early to start planning for repayment. Remember that you can also start making payments right away to reduce the amount of interest that accrues.
Advertiser DisclosureLoan Amounts
$1,000 up to 100% of the school-certified cost of attendance
Overview
College Ave offers a wide range of in-school loans for nearly every type of degree. There are a number of repayment options, and borrowers can choose a unique eight-year repayment term. Plus, graduate, dental, and medical students receive extended grace periods.
You may get easy funding for multiple years — 90% of undergraduates are approved for additional student loans when they apply with a cosigner. However, it can be difficult to remove a cosigner for your loan later on, as you must complete at least half of your repayment term before becoming eligible. That’s significantly longer than some lenders, which may only require one to two years of payments before releasing a cosigner.
Loan terms
5, 8, 10, or 15 years for most borrowers (law, dental, medical, and other health profession students have up to 20 years)
Loan amounts
$1,000 minimum up to your school’s annual cost of attendance; lifetime limits depend on your degree and credit profile
Cosigner release
After half of the scheduled repayment period has elapsed
Eligibility
Must be a U.S. citizen or permanent resident at an eligible institution. International students with a Social Security number and a qualified cosigner may also qualify. Applicants who can’t meet financial, credit, or other requirements may qualify with a cosigner.
Overview
Ascent offers several unique borrowing options that you don’t typically see with private lenders. In addition to traditional student loans for undergraduate, graduate, and medical programs, college juniors and seniors may qualify for its Outcomes-Based Loan — which doesn’t require established credit or a cosigner. Instead, Ascent reviews alternate factors such as your school, major, and GPA to determine your eligibility.
Ascent also offers a wide range of loan terms and repayment plans to choose from. You may even qualify for its Progressive Repayment plan, which allows you to start with small payments that gradually increase over time. Borrowers who use a cosigner can release them after as few as 12 payments, though international students don’t qualify for this option.
Loan terms
5, 7, 10, 12, 15, or 20 years
Loan amounts
$2,001 minimum up to your school’s annual cost of attendance; lifetime limits of $200,000 for undergrads and $400,000 for graduates
Eligibility
Must be a U.S. citizen or DACA student enrolled at least half time at an eligible institution. International students with a qualified cosigner may also qualify. Applicants who can’t meet financial, credit, or other requirements may qualify with a cosigner.
Loan Amounts
$1,000 to $99,999 annually ($180,000 aggregate limit)
Overview
Powered by Cognition Financial, Custom Choice offers student loans for undergraduate and graduate students starting at $1,000. You can borrow up to $99,999 per year with a total aggregate limit of $180,000.
If you apply with a cosigner, you may be able to release them from your loan after 36 on-time payments. You can also receive a 0.25 percentage point discount on your interest rate by setting up autopay, as well as a 2% reduction of your principal balance after graduating.
Custom Choice doesn’t charge application, origination, prepayment, or late fees. It also lets you pause payments through forbearance if you qualify for its natural disaster or unemployment protection programs.
Loan amounts
$1,000 to $99,999 per year (lifetime limit of $180,000)
Eligibility
Must be a U.S. citizen or permanent resident at an eligible institution. You must also meet Custom Choice’s underwriting criteria for income and credit, or apply with a cosigner who does. Eligible noncitizens such as DACA residents can also qualify by applying with a cosigner who’s a U.S. citizen or permanent resident.
Loan Amounts
$1,000 up to 100% of school-certified cost of attendance
Overview
Sallie Mae offers the Smart Option Student Loan to undergraduate and graduate students. You can borrow up to your school-certified cost of attendance and apply just once annually to get the funds you need for the entire academic year. Plus, it may be easy to get reapproved for your future years of study — undergraduates have a 97% approval rate when they return to Sallie Mae with a cosigner.
Through Sallie Mae, you can find a variety of loans designed for specific needs, including loans for MBA programs, law school, bar study, medical school, medical residency, dental programs, dental residency, and other health profession programs. However, this lender no longer offers a career training loan.
Loan terms
10 to 15 years for Smart Option Student Loan; up to 15 years for law school and bar study loans; up to 20 years for medical school, medical residency, dental school, dental residency, and health professions loans
Loan amounts
$1,000 up to school-certified cost of attendance
Eligibility
Must be a U.S. citizen or permanent resident enrolled in an eligible program. Noncitizens may qualify by applying with a cosigner who’s a U.S. citizen or permanent resident.
Loan Amounts
$1,001 up to 100% of school certified cost of attendance
Overview
INvested is an Indiana company that offers affordable student loans exclusively to state residents. Loans are available to Indiana students and parents who can meet income and credit requirements, or who have an eligible cosigner. Borrowers can borrow as little as $1,001 or as much as the school-certified cost of attendance minus other aid.
INvested provides detailed information on eligibility so borrowers can quickly determine whether to apply for a loan — however, there’s no option to prequalify with a soft credit check. Cosigner release is also available after just 12 on-time payments, considerably shorter than many other lenders.
Loan amounts
$1,001 minimum, up to the school certified cost of attendance
Eligibility
Loans are available to Indiana residents only. Borrowers must have a FICO score of 670 or higher, a 30% maximum debt-to-income ratio or minimum monthly income of $3,333, continuous employment over two years, and no major collections or defaults in recent years. Borrowers who do not meet income or credit requirements can apply with a cosigner.
Loan Amounts
$1,500 up to school’s certified cost of attendance less aid
Overview
Massachusetts Educational Financing Authority (MEFA) is a not-for-profit lender that offers low-cost undergraduate and graduate school loans to students nationwide. While only fixed-rate loans are available, interest costs may be lower than what you see with other private loans.
While you can apply with a cosigner to lock in the best rate possible, removing that cosigner later may be tough. Only one repayment plan allows cosigner release, and you must make four years of consecutive on-time payments and meet other credit and income requirements to qualify.
Loan amounts
$1,500 minimum up to school-certified cost of attendance
Eligibility
Must be a U.S. citizen or permanent resident, enrolled at least half time at a degree-granting, nonprofit institution, and must maintain satisfactory academic progress. Must have no history of default on an education loan and no history of bankruptcy or foreclosure in the past 60 months. Applicants who can’t meet the minimum credit and income requirements may apply with a cosigner.
Loan Amounts
$1,000 to $350,000 (depending on degree)
Overview
Citizens offers a variety of student loan types, including loans for undergraduates, graduate students, and parents. Perhaps the most unique feature of Citizens student loans is the option for multiyear approval. If you qualify, you can apply once and borrow for future years with a more streamlined process that only involves a soft credit inquiry.
Student borrowers can defer payments while in school and for six months after graduating. You can also score a 0.25 percentage point reduction on your interest rate for setting up autopay, as well as an additional 0.25 percentage point loyalty discount if you or your cosigner already have a qualifying account with Citizens.
Loan terms
5, 10, or 15 years for student loans; 5 or 10 years for parent loans
Loan amounts
$1,000 minimum, up to a maximum of $150,000 for undergraduate and graduate degrees; $250,000 for MBA and law; and $180,000 or $350,000 for health care student loans, depending on the degree type
Eligibility
Must be a U.S. citizen or permanent resident enrolled at least half-time in a degree-granting program at an eligible institution. International students can apply with a cosigner who’s a U.S. citizen or permanent resident.
Loan Amounts
$1,000 up to cost of attendance
Overview
Education Loan Finance (ELFI) is a division of Tennessee-based SouthEast Bank owned by Education Loan Finance, Inc., a non-profit whose mandate is to provide access to higher education. ELFI launched in 2015 and offers undergraduate, graduate, and parent private student loans as well as student loan refinancing.
ELFI student loans and refinance loans are available to residents in all U.S. states including Puerto Rico. Borrowers can benefit from no application, origination, or prepayment fees. ELFI also offers flexible repayment terms and competitive rates, however there’s no cosigner release option and the lender doesn’t offer any discounts.
Loan amounts
$1,000 - Cost of attendance
Cosigner release
A cosigner may not be taken off a loan, but the borrower can apply for a new loan without their cosigner.
Eligibility
All 50 states as well as Washington DC and Puerto Rico.
Parent PLUS loans vs. private student loans
Many students prefer to use Direct Subsidized and Unsubsidized Loans to cover their higher education costs. These loans come with certain benefits that aren’t offered to parent borrowers, including lower interest rates and more flexible repayment.
Unfortunately, these loans aren’t always able to cover the full cost of college. When that happens, students must resort to other loan options, such as parent PLUS loans or private student loans.
Benefits of parent PLUS and private loans
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Fixed interest rates: Your rate isn’t based on your credit score, and won’t change over the life of the loan. | Lower rates: Borrowers with excellent credit may find better rates on the private market. Variable rates are also available. |
Income-driven repayment: Eligible for Income-Contingent Repayment (if PLUS loans are combined into a Consolidation Loan). | Fewer fees: Many private lenders don’t charge origination fees. |
Forgiveness options: Eligible for Public Service Loan Forgiveness, depending on the parent’s employment. | More repayment terms: You may have more terms to choose from, some of which may give you more time to pay off the loan. |
Disadvantages of parent PLUS and private loans
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High rates: These are the most expensive federal loans, and may be costlier than some private options. | Stricter requirements: You must meet minimum credit and income requirements to get approved. Your rates are also based on your credit. |
Fees: A large origination fee is deducted from what you borrow. | Protections vary: Not all lenders offer deferment or forbearance options. |
Fewer perks than other federal loans: These loans are only eligible for one income-based repayment plan. Student borrowers can access more protections. | No forgiveness options: Private lenders don’t offer a way to get your loans forgiven. |
What happens if you don’t repay a parent PLUS loan?
The consequences of not repaying a parent PLUS loan are similar to those for failing to pay back any other type of loan. Your loan will go into delinquency on the first day after you miss a payment, and will remain that way until you catch up on your payments or make other arrangements (like deferment).
Once your parent PLUS loan has been delinquent for at least 90 days, your loan servicer will begin reporting it to the credit bureaus. At that point, it’ll appear on your credit report, which can negatively affect your credit score.
Parent PLUS loan default
Once your parent PLUS loan has been delinquent for 270 days or more, you’re in default. When you’ve defaulted on the loan, the entire unpaid balance — including interest — can immediately become due. You could also have your wages garnished, and your tax returns and other federal benefits may be withheld.
Defaulting on a loan can also have major long-term consequences for your credit. A default remains on your credit report for up to seven years, severely damaging your score and making it difficult to qualify for any other type of financing.
Some parents agree to take on parent PLUS loans for their children with the understanding that their child will make the loan payments after they graduate. Unfortunately, no matter what you and your child agreed to, it’s ultimately the parent borrower that’s responsible for paying back the loan.
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Meet the expert:
Erin Gobler
Erin Gobler is a freelance personal finance writer with more than eight years of experience writing online. She’s passionate about making the financial services industry more accessible by breaking down complicated financial topics in simple terms.
