Parent PLUS Loans are federal loans that parents of dependent undergraduate students can use to help pay for college or career school. These loans can cover up to the full cost of attendance minus any other financial aid received.
Features of Parent PLUS Loans
1. Credit Check Requirement
Credit History: Unlike Direct Subsidized and Unsubsidized Loans, Parent PLUS Loans require a credit check. Parents with adverse credit history may need an endorser or may qualify by documenting extenuating circumstances.
2. Fixed Interest Rates
Stable Payments: The interest rate for Parent PLUS Loans is fixed and set by the federal government. This provides stability in monthly payments and makes budgeting easier.
3. Loan Limits
Cost of Attendance: Parents can borrow up to the full cost of attendance as determined by the school, minus any other financial aid received.
4. Repayment Options
Immediate Repayment: Repayment begins once the loan is fully disbursed, but parents can request a deferment while the student is in school and for six months after graduation.
Extended and IncomeContingent Repayment Plans: Parents can opt for extended or incomecontingent repayment plans if they consolidate their PLUS Loans into a Direct Consolidation Loan.
Benefits and Drawbacks
Benefits
Support for Education Costs: Allows parents to directly support their children’s education expenses.
Access to Federal Protections: Includes access to federal repayment plans and potential deferment or forbearance options.
Fixed Interest Rate: Provides predictable monthly payments and helps with financial planning.
Drawbacks
Potential for Significant Debt: Parent PLUS Loans can add significant debt for parents, especially if they borrow for multiple children.
Higher Interest Rates: Generally have higher interest rates compared to Direct Subsidized and Unsubsidized Loans.
Fewer Repayment Options: While there are repayment options, they are more limited compared to those available to students themselves, particularly for parents who do not consolidate their loans.