Parent PLUS Loans: How To Secure Financial Aid for Your Child’s Education

As parents and guardians, supporting your child’s education and higher learning is a top priority. However, education is expensive, and you may be unable to foot some of your undergraduate bills. You may be tempted to take a loan, but which ones do you take? 

The US government has provided several incentives to promote education within its borders. One of the incentives is the Parent PLUS loan. These loans provide parents with valuable financial options to foot the educational bills of their children. 

This article covers the key aspects of the Parent PLUS loans, including eligibility requirements, the application process, interest rates, and other important considerations. 

What Are Parent PLUS Loans?

Parent PLUS loans (also known as Direct PLUS loans) are federal loans offered to parents or legal guardians of undergraduate students. These loans are designed to help parents assist their children in paying for education expenses.

Parent PLUS loans are offered by the US Department of Education, which can cover tuition, fees, accommodation, textbooks, and other bills.

How Do Parent PLUS Loans Work?

Parent PLUS loans are not loans to the undergraduate student. They are provided to the parents with a fixed interest rate. This means they are different from private student loans, which a parent might co-sign. The student doesn’t co-sign Direct PLUS loans.

These loans aren’t subsidized. Thus, the interest begins to accrue on the outstanding loan balance as soon as the funds are disbursed.

Who Is Eligible?

To be eligible for the Parent PLUS loans, a parent must meet the following requirements: 

• Be a biological or adoptive parent of the dependent undergraduate student. Grandparents and legal guardians aren’t eligible to take this loan unless they legally adopt the student.
• Be a US citizen or eligible non-citizen
• Meet minimum credit standards. You are not eligible if you have a bad credit score

The student must also meet the following requirements: 

• Be a US citizen or eligible non-citizen
• Not have previous student loan defaults that have not been resolved or consolidated in a direct federal loan

Credit Requirements for a Direct PLUS Loan

As a parent seeking to get access to these loans, you must meet the following credit requirements:

• For two years before your credit is pulled, you cannot have one or more debts that are more than 90 days overdue that is more than $2,085, or a charge off
• For five years before your credit is pulled, you cannot have a loan default, foreclosure, bankruptcy, wage garnishment, or a write-off of federal student debt

How To Apply for Parent PLUS Loans

Here’s how to apply for the Parent PLUS loans:

1. Visit the FAFSA® website and complete the FAFSA form with your child.
2. Visit the Department of Education’s Federal Student Aid website.
3. Register and log in to start.
4. Provide requested information, including student information, loan amount requested, and the loan period. Ensure you crosscheck the information before submitting the application.
5. Authorize a credit check. This allows the Department of Education to assess your creditworthiness.
6. Sign the Master Promissory Note (MPN). This is a legal document dictating the terms and conditions of the loan.

It’s important to note that the application process may vary slightly depending on the loan servicer. The Direct PLUS loan application can be completed in about 20 minutes. 

Documentation Needed

You will need the following documents when applying for a Parent PLUS loan.

• Requested loan amount from the school
• School name
• Student information
• Personal employment information
• Employer’s information

What Happens Next?

You will receive a loan decision after submitting the application and signing the MPN. If approved, the parent will be notified of the loan amount and any additional instructions for the next steps.

How Much Can You Receive?

The maximum amount you can borrow through a Parent PLUS Loan is determined by the cost of attendance (COA) at the child’s school. The COA includes tuition, fees, room and board, textbooks, supplies, transportation, and other education-related expenses.

However, any other financial aid your child receives can reduce that amount. This includes grants, scholarships, and other federal student loans the student may have been awarded.

What Is the Interest Rate?

The Parent PLUS loan interest rate is 8.05%. This is a fixed interest rate for the life of the loan. 

How Will the Loan Get Disbursed?

Typically, there are two disbursement options available for Parent PLUS Loans:

• The loan amount is disbursed directly to the school. The school applies the funds to the student’s account, covering tuition, fees, and other educational expenses. Any remaining amount is refunded to the student or parent, depending on the school’s policy.
• The parent can request to receive any remaining loan funds directly. In this case, the parent must coordinate with the school’s financial aid office to arrange the disbursement.

You must stay in communication with the school’s financial aid office to ensure a smooth disbursement process and understand the next steps for loan repayment.

How Long Do You Have to Wait to Receive It?

The time it takes to receive a Parent PLUS Loan can vary depending on several factors. They include loan processing time, school certification, and disbursement schedule. 

When Do Parent PLUS Loans Repayments Start?

You are expected to begin paying once the loan money has been disbursed. However, you can request a deferral of loan payments until your child graduates or leaves school.

What If the Loan Application Gets Denied?

If your loan application is denied, contacting the school’s financial aid office for guidance may be helpful. They can provide information about other available financial aid options, such as scholarships, grants, work-study programs, or alternative loan programs for which your child may be eligible.

You can appeal the decision if the loan was denied due to a bad credit score. You can provide additional information or documentation that may help demonstrate your creditworthiness or explain extenuating circumstances that affected your credit. Contact the school’s financial aid office for guidance on the appeals process.

Taking Charge of Your Child’s Education

Parent PLUS Loans are a valuable financial resource for parents or legal guardians of undergraduate students seeking to support their child’s higher education. They provide an opportunity to bridge the financial gap and cover the costs of tuition, fees, and other educational expenses.

Remember that Parent PLUS loans aren’t offered to the undergraduate student but to the parents. Thus, your child does not co-sign these loans.

With competitive interest rates and flexible repayment options, Parent PLUS Loans offer an accessible and convenient financing option for families.