What are Parent PLUS Loans?

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Parent PLUS loans are federal loans that you can use to help pay for your dependent undergraduate student’s college education. (Shutterstock)

If you are the parent of a dependent undergraduate student and want to help pay for college, you have options, including a Parent PLUS loan from the US Department of Education.

These loans offer more flexible payment plans than many private student loan options, but also have some major drawbacks. For example, they may be more expensive over time. And you, not your child, will be responsible for repaying your Parent PLUS loan.

You should always exhaust federal student loan options before turning to a private student loan. If you decide that a private student loan is right for you, it pays to research the best deal available to you. Credible allows you compare private student loan rates from multiple lenders, all in one place.

What is a Federal Parent PLUS Loan?

The federal government limits the amount that students can borrow in government loans. Thus, parents can take out a Parent PLUS federal loan to help pay for their child’s tuition.

Parent PLUS loans are a type of Direct PLUS loan given to the parent of a dependent undergraduate student. They are not available to students and cannot be transferred.

Parent PLUS loans have fixed interest rates, but usually come with origination fees.

The maximum Parent PLUS loan amount you can borrow is the cost of attending school minus any other financial assistance your child receives.

Since these loans are unsubsidized, interest begins to accrue as soon as the funds are disbursed and the borrower is responsible for paying all interest. If you defer the loan, you don’t have to make payments while your child is in school at least half-time or for six months after your child graduates, falls below mid-school. -time or left school. But interest will continue to accrue during the deferment period.


Can you claim a Parent PLUS tax loan?

Theirs student loan interest deduction allows you to deduct up to $2,500 each year from your taxable income as a Parent PLUS borrower. However, the actual amount you can deduct is based on the interest you paid in the previous tax year, your tax filing status, your income, and other factors.

If you have questions about tax deductions for student loans, consult a tax professional.

PLUS Parent Loans vs. Private Parent Loans

Both Parent PLUS loans and private parent loans can help pay for your dependent student’s college education. The federal government provides Parent PLUS loans, while banks, credit unions, and other financial organizations offer private parent loans online or in person.

Parent PLUS Loans

To receive a Parent PLUS loan, you must be the parent (in some cases, you may be the step-parent) of a dependent undergraduate student who is enrolled in college at least half-time. You must have a good credit history and meet other eligibility criteria. You can apply on the Federal Student Aid website and you will be subject to a credit check.


Private loans to parents

Private parental loans are private student loans that you can take out to finance your child’s education. You generally need good to excellent credit to qualify for the lowest interest rates.

If your credit is poor, you can choose to use a co-signer. Many federal loan programs do not require a credit check or co-signer. But they do a credit check on all Direct PLUS loan applicants. To receive a Parent PLUS loan with poor credit, you may choose to obtain an endorser with good credit or provide documentation outlining extenuating circumstances related to your adverse credit history.

Most private lenders also do a credit check, so applying with a co-signer can help you get a loan with better rates than trying to apply on your own. Remember that if you are unable or unwilling to make your loan payments, your co-signer will be responsible for any missed payments or even the entire loan balance.

Should a parent or student take out a private student loan?

To get the best rates and conditions on a private student loan, you will need good to excellent credit. If you’re a student with no credit history or your credit is weak, you might want to consider adding a parent as a co-signer.

If you need private student loans, visit Credible for compare private student loan rates from various lenders in minutes.

How to Apply for a Parent PLUS Loan

If you decide a Parent PLUS loan is right for your family, you can apply online at StudentAid.gov. Here are the basic steps:

  • If you have a security freeze on your credit report, contact the credit bureaus to have it removed so the government can process your loan application.
  • Go to the application page on StudentAid.gov.
  • Log in with your FSA ID (if you don’t have an account, you will need to create one).
  • Follow the on-screen steps to submit your application.

Keep in mind that PLUS loans require a credit check. If you have a bad credit history, you may still be able to get a Parent PLUS Loan, but additional steps will be required.


How to Apply for a Private Student Loan

It’s always a good idea to shop around with the best private student lenders to find the one that offers the best rates and terms for you. When you’ve narrowed down your search, follow these steps to apply for private loans:

  • Complete the FAFSA. If you want to apply for a private student loan, the first step should be to complete the FAFSA. That’s because it’s best to maximize scholarship and grant options first, as well as any federal school loan options. Federal loans are more flexible and offer a deferral of up to three years if you cannot make your payments (interest is also suspended during this time). They also have fixed interest rates, so your monthly payment won’t change. Many private student loans have variable rates that can change.
  • Gather personal information. The lender will likely ask you for general information, such as your social security number, address, school, income and employment information, monthly debt, and amount you are requesting.
  • Complete your application. You may be able to complete your application online or in person at your bank or credit union.
  • Accept the funds. If you agree to the terms of the loan, you can sign your loan agreement and accept the funds. If the financial institution requires confirmation of funds from the school, it may take longer to see the funds deposited into your account.

With Credible, you can compare private student loan rates without affecting your credit.

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