The Basics of Parent PLUS Loans
If you’re a parent considering a Parent PLUS loan, there are a few things you need to know to make an informed decision. Parent PLUS loans are a type of federal loan available to parents of dependent undergraduate students. These loans allow parents to borrow the difference between their child’s financial aid package and the cost of attendance.
1. Qualification Requirements
To qualify for a Parent PLUS loan, you must be a parent or legal guardian of a dependent undergraduate student enrolled at least half-time in an eligible program at a school that participates in the Direct Loan Program. Additionally, you must not have an adverse credit history.
2. Interest Rates and Fees
Parent PLUS loans have a fixed interest rate, which is currently set at 6.28% for loans disbursed after July 1, 2021. This interest rate is higher than other federal student loans, such as Direct Subsidized and Unsubsidized Loans. Parent PLUS loans also have an origination fee, which is deducted from the loan before disbursement and is currently set at 4.228% for loans disbursed after October 1, 2020.
3. Repayment Options
Repayment on a Parent PLUS loan begins as soon as the loan is disbursed. However, you can choose to defer payments while your child is enrolled in school at least half-time, and for an additional six months after they graduate or drop below half-time enrollment. Parent PLUS loans have several repayment options available, including standard, extended, and income-contingent repayment plans.
4. Parent PLUS Loan Limits
The maximum amount you can borrow through a Parent PLUS loan is the cost of attendance minus any other financial aid received by your child. There is no aggregate borrowing limit for Parent PLUS loans, but each year’s loan is subject to a credit check.
5. Parent PLUS Loan Consolidation
If you have multiple federal student loans, including Parent PLUS loans, you may be able to consolidate them into a single Direct Consolidation Loan. Consolidation can simplify repayment by combining multiple loans into one, potentially lowering your monthly payment and extending your repayment term. However, consolidation may result in a higher overall interest rate due to the weighted average of the interest rates on the loans being consolidated.
Conclusion
Parent PLUS loans can be a useful tool for parents of dependent undergraduate students to cover the cost of attendance. However, it’s important to fully understand the qualification requirements, interest rates and fees, repayment options, loan limits, and consolidation options before applying. By doing so, you can make an informed decision about whether a Parent PLUS loan is right for you and your child’s college education.
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