Whether you’re an undergraduate student looking to attend graduate school or a parent looking to help your child pay for college, looking for ways to fund that education can be difficult. However, parent PLUS loans could make it easy to pay for a college education.
In this article, we’ll break down what parent PLUS loans are and the process of applying for, borrowing, and paying those loans back.
What are the Two Types of PLUS Loans?
Parent PLUS loans are federal loans for students pursuing graduate or professional degrees and parents of undergraduate students. These loans have a fixed interest rate and are unsubsidized, meaning that interest accrues while you are in school.
Parent PLUS
If you are the parent of a dependent student, you could take out a parent PLUS loan to pay for your child’s undergraduate education. These loans are the responsibility of the parent and can’t be transferred over to the student after completing school.
Grad PLUS
Students pursuing graduate school or professional school can consider a grad PLUS loan. These loans are particularly focused on students considering education beyond the undergraduate level. Grad PLUS loans are the responsibility of the student that takes out the loan.
How Much Can You Borrow in PLUS Loans?
Unlike other types of loans, you can borrow as much as the total cost of attendance in PLUS loans, minus any other financial aid received.
For example, if the total cost of attendance for your program is $40,000, and you receive $20,000 in scholarships, $5,000 in grants, and $2,000 in work-study funds, you will be eligible for up to $13,000 in PLUS loans.
However, just because you can borrow that much money, it doesn’t mean that you must do so. PLUS loans should be used to cover the difference once you have exhausted all types of financial aid.
Remember to accept aid intentionally by following this order: Scholarships/Grants (free money) → Work Study (earned money) → Loans (borrowed money)
Do You Have to Pay Back PLUS Loans?
PLUS loans are, well, loans. If you take out a grad PLUS loan, you are responsible for paying that loan back. If you take out a parent PLUS loan, you are responsible for paying for that loan, not your child.
With a grad PLUS loan, you can enroll in an income-driven repayment plan.
If you have a parent PLUS loan, you qualify for a:
If you consolidate your loan, you qualify for an Income-Contingent repayment plan.
What if you cannot make payments toward your parent PLUS loan?
You can request a deferment. Graduate students have a grace period of six months after graduating before making a payment. But, since interest accrues, borrowers are responsible for that interest during that period.
If you have parent PLUS loans, you could be eligible for the Public Service Loan Forgiveness program (PSLF). The PSLF is a loan forgiveness program for those interested in public service. After 10 years’ worth of payments, your remaining balance will be forgiven. To qualify, you will need to consolidate your loan to make it eligible for PSLF forgiveness. You will also need to work for an eligible employer.
How to Apply for a PLUS Loan
There are certain criteria borrowers must meet to qualify for a PLUS loan.
Parent PLUS
In order to qualify, you must:
- Be the biological or adoptive parent of a student enrolled in school at least half-time
- Pass a credit check. If you cannot pass the credit check yourself, you can use an endorser. An endorser agrees to pay for the loan in case the borrower doesn’t repay the loan. The Department of Education can also approve you through an explanation of circumstances related to your credit history.
- Meet general eligibility requirements for federal student aid. You must be a citizen or eligible non-citizen to receive any kind of federal aid.
You will need to apply through the Direct PLUS application for parents.
On-hand, you will need:
- A verified FSA ID
- School name
- Personal information (name, address, email address, phone number)
- Student information (name, address, social security number, date of birth)
- Employer’s information
Grad PLUS
In order to qualify, you must:
- Be enrolled at least half-time in graduate or professional school.
- Pass a credit check. Just like parent PLUS loans, if you don’t pass the credit check, an endorser could help you secure a loan. The Department of Education can also approve you through an explanation of circumstances related to your credit history.
- Meet the same general eligibility requirements needed for federal student aid.
You will need to apply through the Direct PLUS application for graduate/professional students.
On-hand, you will need:
- A verified FSA ID
- School name
- Personal information (name, address, email address, phone number)
- Employer’s information
Final Thoughts
Direct PLUS loans are a great way to pay for your college education. It’s important to weigh out what your options are to pay for college before deciding if a PLUS loan is ideal for you or your child.