How to navigate the parent PLUS loan application

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Pursuing a college degree is an investment in a student’s future. But families might not always have the resources to cover all of the expenses associated with attending college. If you’re searching for a way to help your child pay for college, the parent PLUS loan could be a worthwhile solution.

The parent PLUS loan is a Direct PLUS Loan from the U.S. Department of Education designed for qualifying parents of undergraduate students. The borrower can use the loan to pay for any eligible educational expenses not covered by other sources of financial aid.

How to apply for a parent PLUS loan

When filling out the parent PLUS loan application, it is the parent who applies and is responsible for its repayment, not the student. The Department of Education is the lender. Yet this is not a typical federal student loan. For that reason, you will want to do your homework to determine if the parent PLUS loan is right for you.

Here are the steps to apply for a parent PLUS loan:

  1. Compare parent PLUS loan terms to other student loan options.
  2. Determine if you’re eligible for a parent PLUS loan.
  3. Fill out the FAFSA.
  4. Calculate how much you want to borrow.
  5. Apply for the loan through studentaid.gov.
  6. Sign the Master Promissory Note.
  7. Learn about repayment options and refinancing.

1. Compare parent PLUS loan terms to other student loan options

Before you request a parent PLUS loan, it’s good to understand the primary federal student loan options (and private student loan options) that are available to your family.

On the federal student loan side, you may apply for:

  • Direct Subsidized Loans: The Department of Education will sometimes cover the interest payments for eligible undergraduate students who demonstrate a financial need. Interest rates on Direct Subsidized Loans are currently 2.75 percent for undergraduate borrowers (for loan disbursements on or after July 1, 2020, and before July 1, 2021).
  • Direct Unsubsidized Loans: With Direct Unsubsidized Loans, eligible undergraduate, graduate and professional students accept responsibility for all interest costs. This loan is not based on the student’s financial need. Interest rates on these loans are currently 2.75 percent for undergraduate borrowers and 4.3 percent for graduate or professional student borrowers (for loan disbursements on or after July 1, 2020, and before July 1, 2021).
  • Direct PLUS Loan: Parents of dependent undergraduate students, as well as graduate and professional students, can use this loan to pay for educational expenses not covered by other financial aid. For parents, this type of loan is known as a parent PLUS loan, while for other students it’s known as a grad PLUS loan. You don’t have to demonstrate financial need to qualify. Approval is based on the condition of your credit, and you’ll need to meet additional qualification requirements if you have certain types of credit problems. Interest rates on these loans are currently 5.3 percent (for loan disbursements on or after July 1, 2020, and before July 1, 2021). You will also pay a loan fee of 4.228 percent for Direct PLUS Loans taken out between Oct. 1, 2020, and Oct. 1, 2021.
  • Direct Consolidation Loans: This type of loan combines multiple federal student loans into a single new federal loan managed by a single loan servicer. You might reduce your monthly payment by extending repayment terms up to 30 years. But it could cost you more in the form of interest to do so, since the interest rate on a consolidation loan is equal to the average interest rate on the loans you are combining (rounded up to the nearest one-eighth percent).

Parents can seek private student loan options as well, and the interest rates vary. There are fixed and variable rates available, and APRs range anywhere from 1 percent to 15 percent. Often it’s best to take advantage of scholarships and grants first, apply for federal student loans next and then look into private student loans to finance the remainder of your educational expenses.

2. Determine if you’re eligible for the parent PLUS loan

Before you (the borrower) can qualify for a parent PLUS loan, you must meet three requirements:

  • You must be a parent — biological or adoptive — of a dependent child who is enrolled at least half time as an undergraduate in a participating school. Eligible schools are known as Title IV schools because they can access federal student aid. Under certain circumstances, a stepparent can apply for this loan.
  • You cannot have an “adverse credit history.” While there’s no minimum credit score requirement, loan defaults, bankruptcies, tax liens and certain other negative marks on your credit report could disqualify you. However, you may still be eligible for a parent PLUS loan if you can add on a co-signer (called an endorser) without adverse credit history or if you can prove that extenuating circumstances led to your credit problems.
  • Both the borrower and the student must meet the general federal student financial aid requirements. These requirements include being a U.S. citizen or an eligible noncitizen, having a Social Security number and the student being enrolled in an eligible program and school.

3. Fill out the FAFSA

Though the parent will be applying for the parent PLUS loan, the student must fill out the Free Application for Federal Student Aid (FAFSA) form first. Then your school can direct you on how to proceed with the Direct PLUS Loan application. Remember: No FAFSA, no parent PLUS loan.

4. Calculate how much much you want to borrow

Your total loan amount is based on a school’s cost of attendance. This includes tuition, fees, room and board, books, supplies, transportation and loan fees. Miscellaneous expenses, including a personal computer, child care, study abroad costs and disability-related expenses, may be eligible as well. The total amount varies by school.

Because parent PLUS loans tend to have a higher interest rate and loan fee than other federal student loans, it is best to use them only for educational expenses not covered by grants, scholarships and other lower-cost loans.

5. Apply for the loan through studentaid.gov

Because the loans are handled through schools, a representative from your school’s financial aid will guide you on how to apply for a parent PLUS loan. However, most of the applications are completed online at the Department of Education’s website. The process typically takes about 20 minutes to complete.

Before you begin the online parent PLUS application process, have this information available:

  • Your verified FSA ID.
  • Your school’s name.
  • Your student’s information.
  • Your personal information.
  • Your employer’s information.

6. Sign the Master Promissory Note

Before you receive your loan, you will be required to sign the Master Promissory Note. This is a legal document. When you sign it, you agree to all of loan’s terms.

Though you will have to apply for a parent PLUS loan each year, it’s possible to receive more than one loan under the Master Promissory Note you sign. In some cases, they are good for up to 10 years.

7. Learn about repayment options and refinancing

If you receive a parent PLUS loan, repayment begins after funds are disbursed to your child’s school. Repayment is not automatically deferred while your child is in school, but you can submit a separate application asking for a deferment while your child is enrolled at least half time at an eligible school and for six months afterward.

If you need to refinance your parent PLUS loan, you can apply for a private student loan. When you refinance, you can keep the loan in your name or, in some cases, transfer the loan to your child.

The bottom line

Parent PLUS loans are a good first step for parents looking for help paying for a child’s education. While it’s always best to exhaust scholarship and grant options first, parent PLUS loans come with the benefit of federal protections, like defined forbearance policies.

With that said, if you have great credit, you may find a cheaper loan with a private lender. Before applying for any loan, compare all of the options available to you and weigh the pros and cons of federal versus private financial aid.

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Written by
Michelle Black
Contributing writer
Michelle Lambright Black, founder of CreditWriter.com and HerCreditMatters.com, is a leading credit expert with nearly two decades of experience in the credit industry. She specializes in credit reporting, credit scoring, financing (business, mortgages, credit cards, loans), debt eradication, budgeting and identity theft. Michelle is also a certified credit expert witness and personal finance writer who has been published by numerous outlets including Experian, Forbes, U.S. News & World Report, and Reader’s Digest, among others.
Edited by
Student loans editor