Most students take out loans to help pay for the cost of their college education. It’s also becoming increasingly common for parents to take out loans to help support their children. Parent PLUS loans, part of the Federal Direct Loan program, allow parents to borrow money specifically to help pay for tuition and college expenses for their children.

More than 3.7 million families have taken out Parent PLUS loans. While they provide access to more funds, they can also create additional financial burdens. Parents who take out parent PLUS loans end up shouldering roughly $29,600 in student debt, according to the Century Foundation, with many of them still paying back their loans 20 years after their child has finished school. They also have limited repayment options compared to other Direct Loan types, so it is important to choose a repayment plan that is best for your situation to avoid undue stress on your finances.

Parent PLUS loan consolidation

  • Best for: Multiple loans
  • Biggest advantage: Simplifies payments
  • Biggest drawback: Longer repayment period

If you’ve borrowed more than one parent PLUS loan for your child over the years or taken out loans for multiple children, loan consolidation might be a useful option. This free repayment strategy streamlines your repayment plan by combining multiple parent PLUS loans into a new Direct Consolidation Loan. After you consolidate Parent PLUS Loans, you’ll have one student loan bill and payment due each month. Your fixed interest rate will be averaged based on your loans’ original rates.

This option can also help if you’re struggling with your monthly payments. A Direct Consolidation Loan has repayment terms of up to 30 years, so stretching out your repayment term will lower your monthly payments — though you will pay more interest overall.

Student loan refinancing

  • Best for: Families with good credit
  • Biggest advantage: Better interest rates
  • Biggest drawback: Will lose federal loan benefits

Student loan refinancing is a common way to potentially reduce your interest rate, gain more favorable terms and lower your monthly payment. Only private lenders offer refinancing, so interest rates, repayment options, terms and benefits vary by company. This also means you’ll no longer be eligible for federal student loan benefits, like flexible repayment plans and extended forbearance options if you’re experiencing financial hardship.

When applying for a parent PLUS loan refinance, the lender will conduct a credit check and ask you to provide information regarding your income and other financial obligations. This is to ensure that you can repay the refinance loan. Your credit score will largely determine your interest rate, so the better your credit, the cheaper your loan. If you have exceptional credit, your interest rate could be significantly lower than the federal government originally offered you.

Income-Contingent Repayment Plan

  • Best for: Lower-income households
  • Biggest advantage: Manageable repayment based on income
  • Biggest drawback: Must first consolidate loans

If you need lower parent PLUS loan payments and want to remain within the federal Direct Loan system, you can also consider pursuing an Income-Contingent Repayment (ICR) Plan.

Under an ICR Plan, your monthly payment is based on 20 percent of your discretionary income or an income-adjustment amount based on what you’d pay over 12 years under a fixed payment plan — whichever is less. You’ll need to recertify your income and family size annually, which can increase or decrease your monthly payments.

However, you can’t repay a parent PLUS loan under the ICR Plan. To be eligible for the ICR Plan, you must first consolidate parent PLUS loans into a Direct Consolidation Loan. The newly consolidated loan can then be paid back under the ICR Plan.

A unique benefit of income-driven repayment plans, like ICR, is that if there’s any remaining debt left at the end of the repayment period, it will be forgiven.

Public Service Loan Forgiveness

  • Best for: Public sector employees
  • Biggest advantage: Forgiveness of loans after 120 payments
  • Biggest drawback: Strict qualifications

Parents who work in the public sector might be eligible for Public Service Loan Forgiveness (PSLF). The PSLF program requires borrowers with eligible Direct Loans to work full time at a government or nonprofit organization during repayment.

Borrowers must make 120 payments on an income-driven repayment plan to complete Public Service Loan Forgiveness. Parents will need to consolidate their parent PLUS loans into a Direct Consolidation Loan and enroll in the Income-Contingent Repayment Plan to qualify. After 120 qualifying payments toward your loan, the remaining student loan balance can be forgiven.

Standard repayment

  • Best for: Families that can afford to repay a loan in full
  • Biggest advantage: Fixed interest over the course of the loan
  • Biggest drawback: Little flexibility

Parent PLUS loans have a standard repayment plan spread over 10 years. These plans typically have a fixed interest rate that does not change over the lifespan of the loan, even if interest rates rise over time.

These plans do not offer any form of debt forgiveness, so there is little flexibility for those who need a plan tied to their income. However, the standard repayment plan typically has favorable rates and a shorter repayment period for families that can afford it.

The bottom line

Parent PLUS loans are a way for families to access more funds to cover the growing costs of higher education. However, these loans can be burdensome on families. Consider the terms of the loan and your financial situation and determine which repayment plan will be best suited for your situation before agreeing to take out a Parent PLUS loan.

Frequently asked questions

  • You have between 10 and 25 years to pay off your parent PLUS loans, depending on your repayment plan. However, you may extend your term up to 30 years by consolidating your loans, resulting in a lower monthly payment but more interest paid over time.
  • The only way to transfer a parent PLUS loan to your child is by refinancing the loan with a private lender. Currently, parents can’t transfer their parent PLUS loan to their child within the federal loan system.
  • Yes, you can pay back a parent PLUS loan early without penalties. For example, you can decide to make multiple parent PLUS loan payments per month, make one payment per month at an increased amount or make a lump-sum payoff to get out of student debt faster.
  • If you don’t repay your parent PLUS loan, you’ll lose access to future federal student aid, deferment plans and more. Loans in default (which happens after 270 days of nonpayment) are reported to the credit bureaus, and you might also face legal consequences for nonpayment.
  • Parent PLUS loans can be useful if your child has maxed out their student aid and has no other alternative to lower the cost of their education (e.g., attending a more affordable school). However, parent PLUS loans can derail your own life goals, like saving for retirement, paying off your mortgage or living the lifestyle you’ve always imagined for yourself. Before taking out a loan, understand the extra cost you’ll pay in interest and make a plan for repayment so you’re not taken by surprise.