Parent PLUS loan: What it is, When to borrow
Parent PLUS loans can be an affordable borrowing option for parents of undergraduate students, but there are pros and cons to consider.
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Christy Bieber has spent more than 16 years in personal finance and is an expert on student loans, debt, social security, and mortgages. Her work has been published by The Motley Fool, CBS News, and USA Today.
Updated May 13, 2024, 7:39 PM EDT
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A parent PLUS loan is a type of federal student loan for parents of undergraduate students who need financial support. During the 2022-23 school year, parent PLUS loans accounted for 11% of all educational loans, according to the College Board. These loans come with many different benefits, but there are also downsides to consider before you borrow.
In most cases, taking out a parent PLUS loan might be a good idea if:
- Your child has exhausted all subsidized and unsubsidized federal loans available to them
- Your credit isn’t good enough to qualify for a low-interest private student loan
- You’re comfortable taking on the responsibility for the loan instead of your child
Key facts: Parent PLUS loans
What is a Parent PLUS loan?
A parent PLUS loan is one of several types of student loans offered by the U.S. Department of Education. Unlike most student loans, which are awarded to students pursuing a degree, parent PLUS loans are available for parents of dependent undergraduates.
PLUS loans come with similar benefits as other federal student loans, including flexible repayment options. However, the interest rate is higher than the rates for Direct Subsidized and Unsubsidized Loans, and these loans aren’t eligible for income-driven repayment if they’re not consolidated.
Related: Best parent student loans of 2024
Pros and cons of parent PLUS loans
Pros
- Parent PLUS loans are easier to access than private loans
- You can borrow up to the school’s total cost of attendance
- Consolidated parent loans have access to loan forgiveness programs
- Interest rates are fixed and not affected by your credit score
Cons
- Parents with adverse credit won’t qualify on their own
- There’s a loan disbursement fee of 4.228%
- The interest rate is higher than most other federal student loans
- Responsibility for the loan can’t be transferred to your child
Am I eligible for a parent PLUS loan?
To be eligible for a parent PLUS loan, you must be the biological or adoptive parent of a dependent undergraduate student enrolled at least half-time in an eligible school. Stepparents may also be eligible on a case-by-case basis.
You also must not have an adverse credit history, which means you don’t have delinquent debt from the past two years, or any instance of default, bankruptcy, foreclosure, tax lien, or wage garnishment in the past five years. You must also meet general federal student aid eligibility requirements, including being a U.S. citizen or eligible noncitizen.
Good to know:
Parents with adverse credit can still qualify for a parent PLUS loan if they have an endorser (similar to a cosigner), or if they provide evidence of extenuating circumstances. You’ll also need to complete credit counseling.
What do parent PLUS loans cover?
Parent PLUS loans allow you to borrow up to the total cost of attendance at your child’s school, minus any other financial aid they receive including grants, scholarships, and other federal loans. The funds can be used to cover any costs related to your child’s education such including:
- Tuition and fees
- On-campus living expenses
- Off-campus housing
- Textbooks
- Computers and software
- Transportation
- Study abroad programs
Check out: How much can I borrow in student loans?
Interest on parent PLUS loans
Interest rates for parent PLUS loans are fixed and consistent for all borrowers in the same academic year. Like other student loans, the interest on parent PLUS loans starts to accrue daily from the day the loan is disbursed.
- Interest rate: 8.05% for loans disbursed between July 1, 2023 and July 1, 2024
- Loan fee: 4.228% for loans disbursed on or after October 1, 2020
Parents can choose to defer repayment until 6 months after their child graduates, leaves school, or drops below half-time enrollment. However, interest will continue to accumulate during this deferment period and will get added to your principal loan balance once repayment starts — unless you opt for interest-only payments. You can decide whether to defer payments when you apply for the loan.
Repaying parent PLUS loans
Parent PLUS loans come with a choice of repayment plans, although some are available only if you obtain a Direct Consolidation Loan from the Department of Education. Here are your options for repaying your debt:
Note that the Income-Contingent Repayment (ICR) plan is available only to parents who consolidate their PLUS loan using a Direct Consolidation Loan. With ICR, your payments are the lesser of 20% of your discretionary income (divided by 12) or the amount you’d pay under a 12-year fixed repayment plan, adjusted to your income. This plan also allows for loan forgiveness after 25 years of payments (or after 120 payments for parents eligible for Public Service Loan Forgiveness).
Parent PLUS loans vs. private parent loans
If you’re a parent looking to fund your child’s education, you have a couple of parent loan options available to you:
- Federal parent PLUS loans: Parent PLUS loans can be a good option if you can take advantage of federal protections that private loans don’t offer. Federal benefits include deferment and forbearance options for those experiencing financial hardship, and forgiveness programs like Public Service Loan Forgiveness (PSLF).
- Private parent loans: Private student loans for parents can be beneficial for parents with excellent credit who are looking for the lowest possible interest rate on their loan.
Here’s a quick comparison of your parent student loan options for the 2023-24 school year:
How do I apply for a parent PLUS loan?
To apply for a parent PLUS loan, the first step is to complete the Free Application for Federal Student Aid (FAFSA). Students are responsible for completing the FAFSA, which can be done online, but parents of dependent undergraduates will need to provide their financial information as well. A Federal Student Aid (FSA) ID is necessary to complete these forms.
Once the FAFSA is submitted, parents must use a Direct PLUS Loan application to apply for a PLUS loan. The Direct PLUS Loan application takes around 20 minutes to finish. You’ll need to make sure your credit isn’t frozen with the major credit bureaus before applying so the Department of Education can run a credit check.
After completing your application, you must also submit a Direct PLUS Loan Master Promissory Note (MPN) before funds can be distributed. The MPN explains the loan terms and conditions and creates a legally binding obligation to pay back the debt you're taking on.
Good to know:
Your child’s school may follow a different application process. The FSA website will inform you if this is the case. Contact the school’s financial aid office for steps on how to apply.
Alternatives to parent PLUS loans
Parent PLUS loans are just one of several different options available to parents who want to help their children afford school. Other options include:
- Scholarships and grants: Be sure your child has taken advantage of as many scholarships and grants as possible. This financial aid is ideal because it typically doesn’t need to be repaid.
- Savings: Parents who have savings may want to use it to help their children cover their educational costs in order to avoid interest charges.
- Home equity loans and lines of credit: Parents with equity in their homes can consider borrowing against their home to help fund a college degree. Just make sure you understand the risks involved, as this type of borrowing puts your home on the line if you can’t make your payments.
- Private student loans for parents: The best private student loans may have lower interest rates or rates that are competitive with parent PLUS loans. Most private loans also don’t have upfront origination fees. However, they don't offer federal benefits like income-driven repayment plans. Parents who won't take advantage of federal borrower benefits may find that private loans are a more affordable choice.
- Private student loans for students: Students often do not qualify for private loans on their own, but they may be able to qualify with a parent cosigner. The big difference is that the student will be primarily responsible for a private loan taken in their own name, with a parent just guaranteeing the loan.
Parent PLUS loans FAQ
Is it a good idea to get a parent PLUS loan?
Getting a parent PLUS loan may be a good idea if you want to help your child pay for their degree and take advantage of federal student loan benefits, such as fixed interest rates and generous forbearance and deferment options. However, parents should make sure they understand the interest rate and origination fee they will pay. It’s also a good idea to compare parent PLUS loans against private student loan rates and terms to weigh your options.
Can parent PLUS loans be forgiven?
Parent PLUS loans can be consolidated using a Direct Consolidation Loan, which enables you to qualify for the Income-Contingent Repayment plan. You can qualify for forgiveness while on this plan if you participate in the Public Service Loan Forgiveness program or if you make 25 years of qualifying on-time payments on the ICR plan.
What if I can’t pay back my parent PLUS loan?
If you’re struggling to pay back your parent PLUS loan, consider looking into options such as consolidating your loan and signing up for the Income-Contingent Repayment plan. This plan will allow you to make monthly payments that are the lesser of 20% of your discretionary income (divided by 12) or what you would pay on a 12-year fixed repayment plan (adjusted for your income). You may also have your remaining loan balance forgiven after 25 years of payments.
Can I transfer a parent PLUS loan to a student?
There is no federal process that allows a parent PLUS loan to be transferred to the student, and parents are legally responsible for paying back the loan.
However, there is a workaround if you refinance your parent loan. Some private lenders allow parents to refinance their debt into their child's name. Note that privately refinancing a PLUS loan means you'll permanently lose access to all federal benefits.