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Parent student loans allow parents to help their children pay for a college education. There are two types of parent loans to choose from―federal parent PLUS loans and private parent loans—and terms can vary greatly between them. Parent PLUS loans are offered by the Department of Education, may carry a lower interest rate than private loans and can provide up to the student's full cost of attending college.
Parent PLUS loans are different from federal loans available to students and can cost more. Here's what to know before you borrow.
What Is a Parent PLUS Loan?
Parent PLUS loans are student loans offered by the U.S. Department of Education. These loans come with standardized interest rates and fees for all who qualify and allow the parent to borrow up to the child's total cost of attendance, which is determined by the school.
How Do Parent PLUS Loans Work?
After your child has submitted the Free Application for Federal Student Aid (FAFSA), you'll apply for a parent PLUS loan using a separate application process.
If approved, the Department of Education will disburse the loan proceeds directly to your child's school to cover tuition, fees, room and board and other costs. If there are remaining funds, the school will disburse them to your child to use for other eligible expenses.
You can request deferment on parent PLUS loans, which allows you to put off repayment until your child leaves school or attends less than half time. If you don't request deferment, you'll begin repayment once the loan is disbursed.
Before you apply, it's important to understand how parent PLUS loans differ from federal loans available to undergraduate students. Here's a quick summary for the 2024-25 school year:
| Parent PLUS Loans vs. Undergraduate Federal Student Loans | ||
|---|---|---|
| Parent PLUS Loans | Undergraduate Direct Loans | |
| Interest rate | 9.08% | 6.53% |
| Loan fee | 4.228% | 1.057% |
| Maximum loan amount | Total cost of attendance, minus any other financial assistance received | Up to $12,500 per year and $57,500 overall, based on year in school and dependency status |
| In-school deferment | Upon request | Automatic |
| Access to subsidized loans | No | Yes |
| Eligibility for income-driven repayment | One plan (requires consolidation) | Up to four plans |
| Eligibility for student loan forgiveness | Public Service Loan Forgiveness (PSLF) (requires consolidation) | PSLF and teacher loan forgiveness |
Parent PLUS Loan Requirements
To get approved for a parent PLUS loan, you'll need to meet three major criteria:
- Be the biological or adoptive parent of the student: In particular, the student must be an undergraduate who is attending an eligible school on at least a half-time basis. Grandparents and legal guardians are ineligible, even if they're primarily responsible for the student's care, but stepparents can qualify in certain circumstances.
- Not have an adverse credit history: You'll undergo a credit check when you apply, which is not required for most types of federal student loans. However, the Department of Education is only looking for specific negative information, such as bankruptcy, defaults, repossession and foreclosure.
- Meet the general federal financial aid requirements: Your child must complete the FAFSA and meet basic eligibility criteria.
Parent PLUS Loan vs. Private Student Loans
Parents can also obtain financing from private lenders to help their child pay for college. However, there are some key differences between federal PLUS and private parent loans:
- Eligibility requirements: While both require a credit check, private lenders have more stringent credit requirements and may deny you if your credit score or income is too low.
- Costs: Parent PLUS loans offer standardized fixed rates, while private lenders may offer both fixed and variable rates, with your loan's rate based on your creditworthiness. At the same time, Parent PLUS loans come with a relatively high origination fee, while private lenders typically don't charge one at all.
- Repayment: Both federal and private parent loans require immediate repayment. However, parent PLUS loans can be deferred if you request it, and that's generally not the case with private loans.
- Relief options: You won't get access to income-driven repayment or loan forgiveness programs with private loans. Additionally, private lenders typically offer less generous deferment and forbearance options if you can't afford your payments.
| Comparing Parent PLUS and Private Student Loans | ||
|---|---|---|
| Parent PLUS Loans | Private Parent Student Loans | |
| Credit check required | Yes, though there's no required minimum credit score | Yes |
| Interest rates | Fixed; same for everyone who qualifies | Fixed or variable; can vary based on several factors |
| Loan fee | Yes | No |
| Standard repayment terms | 10 years | 5 to 25 years |
| Access to income-driven repayment | Yes | No, generally |
| Other benefits | Access to public service loan forgiveness, generous forbearance and deferment options | Benefits can vary by lender |
| Can refinance in child's name | Yes | Yes |
If your financial situation is in excellent shape and you can get a lower interest rate with a private lender, it can make sense to go with private parent loans over parent PLUS loans. However, if your credit needs some work, you anticipate needing access to federal relief programs or you just want to play it safe, opt for federal loans.
Learn more >> Should You Apply for a Parent PLUS Loan or Private Loan?
Pros and Cons of Parent PLUS Loans
Before applying for parent PLUS student loans, it's important to understand both the benefits and the drawbacks. Here's what to consider for your situation:
Pros
- Less stringent credit score requirements than private loans
- Standardized interest rates
- Flexible repayment options
- Eligibility for loan forgiveness
Cons
- Requires a credit check
- More expensive than federal undergraduate loans
- Fewer relief options
- In-school deferment isn't automatic
How to Apply for Parent PLUS Loans
If you're planning on getting parent PLUS loans to help your child afford college, here are the general steps you'll need to take to get started:
- Evaluate your eligibility. Review the requirements listed above to make sure you're eligible to apply for parent PLUS loans.
- Fill out the FAFSA with your child. Before you submit your own application, you'll need to provide details about your financial situation on your child's FAFSA.
- Submit your loan application. Once your child has submitted the FAFSA, you can typically apply online through the Federal Student Aid (FSA) website. Start by creating an account if you don't already have one. Then, provide your FSA ID, personal details for you and your child, your employer information, the name of the school and your desired loan amount. The process takes roughly 20 minutes to complete.
- Sign the promissory note. If you're approved, you'll need to sign the Master Promissory Note before you can receive the funds. Carefully review the loan terms before you sign to ensure you understand them fully.
It's important to note that some schools have a different process for applying for parent PLUS loans. Contact the financial aid office at your child's college or university to make sure you follow the relevant instructions.
Learn more >> How to Apply for Parent PLUS Loans
When Does Parent PLUS Loan Repayment Start?
The default for parent PLUS loans is immediate repayment. Once the loans are disbursed to the school, your loan servicer will contact you about beginning your monthly payments.
However, you may request a deferment while your child is in school. If you qualify, you won't need to start making monthly payments until six months after your child graduates, leaves school or falls below half-time enrollment.
Keep in mind, though, that interest will accrue during periods of deferment. If you don't make interest-only payments while your child is in school, the interest will be capitalized when you begin repayment and added to your loan balance.
Frequently Asked Questions
Whether federal or private, parent student loans can affect your credit in various ways. When you first apply, you may undergo a hard credit check, which has a minor temporary impact on your score.
Additionally, adding a new credit account will affect your length of credit history and your total amount owed. If you make on-time payments, your parent loans can help you build your credit score. However, if you miss even one payment by 30 days or more, it can have a significant negative impact on your credit profile and remain on your credit reports for seven years.
Paying off the loan can positively or negatively affect your score, depending on the circumstances. Note, however, that a positive payment history will remain on your credit reports for 10 years.
You may be able to obtain forgiveness after 10 years if you're eligible for the Public Service Loan Forgiveness program. This program requires you to make 120 on-time and full payments while working full time for a government agency or eligible nonprofit organization.
Even if you don't qualify for PSLF, you can achieve forgiveness after 25 years if you switch to the income-contingent repayment (ICR) plan. The ICR plan could also reduce your monthly payments based on your annual income and household size.
Remember, though, that you must consolidate your loans with the direct loan consolidation program before you can apply for PSLF or the ICR plan.
Yes, parent PLUS loans are eligible for forgiveness if either the parent or student passes away.
However, private parent loans may not have the same policy. While the debt won't be transferred to the child, it may remain a liability to the parent's estate.
Are Parent Student Loans Right for You?
Before you apply for parent PLUS loans or private parent loans, consider the potential impact on your finances, particularly if you're close to retirement age.
If your child can qualify for federal undergraduate loans with lower interest rates—especially if they can get subsidized loans—it may be better for them to apply instead of you. If you still want to help, you can even agree to make the monthly payments. That way, you may be able to save money, and the loans won't impact your credit.
It's also a good idea to encourage your child to look for other ways to pay for college, including scholarships, grants and part-time work.
But if federal loans aren't an option for your child or they need more money than they can borrow, parent loans can be a good way to supplement their efforts.