Parent PLUS Loans

loans for parents

The cost of higher education is on the rise, and oftentimes scholarships and grants don’t offer enough relief to pay for college outright for your child. Many parents also dislike the idea of their son or daughter graduating from college burdened by large amounts of debt that they may have trouble crawling out from under. It can be a tough start to their lifetime careers. Student loans for parents, such as parent PLUS loans, may be the answer.

Benefits of a Parent PLUS Loan

A parent PLUS loan is a direct unsubsidized loan offered to parents of undergraduate students. This means that the lender is the U.S. Department of Education directly. Interest rates are competitive and market-based, and they are the responsibility of the borrower. Interest rates are generally fairly low and capped at 10.5 percent, as published by US News & World Report. Once a parent has enrolled in the program, interest rates are fixed, meaning they can’t change and increase with market fluctuations. Parent PLUS loans also include free insurance which cancels the debt if a parent or student becomes incapacitated or dies, as well as the option to defer payments if financial hardship ensues.

Disbursements are typically made directly to the school a few times a year to cover tuition, fees, room and board, and any other school charges. Parent PLUS loans are meant to cover a full academic year and often include coverage for books and other academic tools and supplies as well. Any money over the amount paid to the school will be directly disbursed either to you as a parent or, with your permission, directly to the student. If it is paid to the student, you as a parent will receive documentation that this has occurred. Direct loans can be nice in that there is no third party or outside lender to deal with. The parent deals directly with the federal government and their child’s school of choice.

Eligibility and Requirements

In order to be considered eligible for a parent PLUS loan, you cannot have adverse credit, and borrowers are subject to a credit check. The child you are borrowing for must also be a dependent, meaning that they are under age 24, they have no legal dependants themselves, and they must be unmarried. The teen must also be your child that is enrolled at least half-time in a participating school in the Direct Loan Program.

Schools generally ask that students first file for the Free Application for Federal Student Aid, or FAFSA, even if they don’t expect to receive any financial aid. The parent PLUS loan is calculated using the cost of school and subtracting any financial aid, grants or scholarships received.

How to Apply

Parent student loans are not based on your income but rather on the cost of school directly. In order to determine if you are qualified and how to apply, you must contact the financial aid office of your son or daughter’s school. A credit check will be run to determine favorable credit history.

If you are eligible for a parent PLUS loan, you will sign a Master Promissory Note (MPN) approving all the terms set forth by the loan. The U.S. Department of Education website has more detailed information on the program. Some parents prefer not to have their daughter or son’s student loan in their name. In that case, a parent PLUS loan is not ideal.

You can continue browsing SimpleTuition for more details on other programs and loan options to help fund your child’s education.

 

Types of Student Loans