What is a parent PLUS loan?

You can borrow up to your child's total cost of attendance minus any financial aid they will receive. To qualify, borrowers must have a dependent child enrolled at least half time in an eligible school. Unfortunately, grandparents and other relatives can't get a parent PLUS loan unless they legally adopt the student.

What does a parent PLUS loan mean?

This loan (also known as a Direct PLUS Loan), issued by the federal government, lets parents of dependent students borrow funds to help pay for a student's college or career school. (Note: Grandparents and legal guardians are not eligible to take out a Parent PLUS Loan unless they've legally adopted the student.)

Who is responsible for paying back a parent PLUS loan?

As a parent PLUS loan borrower, can I transfer responsibility for repaying the loan to my child? No, a Direct PLUS Loan made to a parent cannot be transferred to the child. You, the parent borrower, are legally responsible for repaying the loan.

Do I have to pay my parents PLUS loan?

A Direct PLUS Loan made to you as a parent cannot be transferred to your child. You are responsible for repaying the loan. Can I ever postpone making loan payments? Yes, under certain circumstances you may receive a deferment or forbearance, which allows you to temporarily stop or lower your payments.

Is parent PLUS loan better?

Parent PLUS loans can be a good alternative to private student loans because they offer more flexible repayment options. But Parent PLUS loans can be costlier than other options, and consequences are harsh for default, including the potential for wage and Social Security garnishment.

Parent Plus Loans: Everything You Need to Know Part 1

What are the negatives about the parent PLUS loan?

Drawbacks of the Parent PLUS Loan

Timing: Many parents face high education debt burdens at a time of life when earning power generally decreases and limited income is needed for living or medical expenses. Defaulting on a parent PLUS loan can lead to the garnishment of Social Security benefits, tax refunds and wages.

What are the disadvantages of a PLUS loan?

The parent, not the student, is responsible for repaying the PLUS loan. PLUS loans don't qualify for all of the income-driven repayment plans that student loans do. PLUS loans have large borrowing limits, making it possible to take on too much debt.

What is the max parent PLUS loan amount?

Unlike all other federal student loans, there are no explicit borrowing limits for parent PLUS loans. Parents may borrow up to the full cost of attendance, which is determined by the institution, not the government, and includes books, travel and living expenses.

What is the loophole for parent plus borrowers?

In addition, parent PLUS loans aren't eligible for some other types of federal student loan forgiveness programs. To get around this, some borrowers go through two or more federal consolidations to hide the origin of the loans, then request an IDR plan. This process is often called the double consolidation loophole.

Does everyone qualify for a parent PLUS loan?

To be eligible for a Direct PLUS Loan for parents, you must be a biological or adoptive parent (or in some cases a stepparent), not have an adverse credit history, and meet the general eligibility requirements for federal student aid (which the child must meet as well). Was this page helpful?

Why are parent PLUS loans so expensive?

Parent PLUS Loan interest rates and fees are high

Parent PLUS loans have a fixed interest rate for the entire term of the loan. The origination fee on top of the loan is a percentage of the loan amount.

What if I can't afford to pay my parent PLUS loan?

If you can't pay off the loan immediately, you have two options: rehabilitation and consolidation . Rehabilitation: After 9 months of reasonable payments (based on your income), your loan will be in good standing. Rehabilitation removes the default note from your credit report.

Do parent PLUS loans affect getting a mortgage?

Like any other loan, a Parent PLUS Loan can influence your credit score, affecting your eligibility for a mortgage. When a parent applies for this loan, it's issued under their name and reported to credit bureaus accordingly. The process includes a credit check, which can temporarily lower your score.

Are parent PLUS loans expensive?

Parent PLUS loans are issued with a fixed interest rate that remains the same for the duration of the loan repayment period. For the 2023-2024 academic year, the Parent PLUS interest rate is 8.05%. There is also an origination fee applied to Parent PLUS loans, which impacts the overall cost of the loan.

Do parent PLUS loans have to be paid back immediately?

Repayment of Parent PLUS Loans begins once the loan is fully disbursed to the school. You can request deferment on repayment, but interest will accrue during that time. Refinancing could lower your interest rate and change your repayment length.

What is the difference between a parent PLUS loan and a student loan?

A student loan is borrowed by a student, while a parent loan is borrowed by a parent. While parents can cosign a student loan, the student remains the primary borrower.

Can a parent be removed from parent PLUS loan?

There are some benefits to refinancing parent PLUS loans to the student, such as: The parent would be released from the original loan. The child could build credit by making on-time payments. The child may be given better terms on their new loan, depending on the rate environment.

Are parent PLUS Loans forgiven after 10 years?

While parent PLUS loan forgiveness isn't as widely available as forgiveness for student borrowers, a few options do exist. Some options include the Income-Contingent Repayment plan (forgiveness after 25 years of payments) and Public Service Loan Forgiveness (forgiveness after 10 years), as well as other methods.

Can you deny a parent PLUS loan?

Parent PLUS Loans are federal loans available to parents of students. There are credit-related requirements in order to qualify for a PLUS loan, so in some cases, it is possible to be denied for a Parent PLUS Loan.

How long do you have to pay back parent PLUS loans?

How long do you have to pay off parent PLUS loans? You have between 10 and 25 years to pay off your parent PLUS loans, depending on your repayment plan.

What two types of loan should you avoid?

Can I transfer my parent PLUS loan to my daughter?

No, a Direct PLUS Loan made to a parent cannot be transferred to the child. Was this page helpful? How can I lower my student loan payments? Under what circumstances can my federal student loan(s) be forgiven?

What is the 28 36 rule?

The 28/36 rule dictates that you spend no more than 28 percent of your gross monthly income on housing costs and no more than 36 percent on all of your debt combined, including those housing costs.

Which parent should take out parent PLUS loan?

Eligible parents of eligible dependent undergraduate students should apply for a parent PLUS loan with a Direct PLUS Loan Application.

What are the rules for parent PLUS loans?

To qualify, borrowers must have a dependent child enrolled at least half time in an eligible school. Unfortunately, grandparents and other relatives can't get a parent PLUS loan unless they legally adopt the student. While you don't need excellent credit to get a PLUS loan, you can't have an adverse credit history.