Everything You Need to Know About Parent PLUS Loans

Elyssa Kirkham is an expert on student loans and student loan issues. A personal finance journalist for nearly a decade, she covers consumer credit in addition to her specialization in education debt and financing. She holds a B.A. from Brigham Young University, Idaho.

Parents with a child heading to college experience a rush of emotions, which all too often can include stress over how to pay for school. One accessible source of funding for families can be parent PLUS loans, which are federal student loans for parents of undergraduates.

Taking on new debt is a decision to think through carefully. Here’s what you need to know about parent PLUS loans to decide whether they’re an affordable way to meet your college funding needs.

Key Takeaways

• Parent PLUS loans are direct loans parents can take out to fund their child's cost of attendance.
• Applicants must have relatively good credit and the child must be enrolled at least half-time.
• You'll need to fill out an application for parent PLUS loans and sign a promissory note to receive the funds.
• Parent PLUS loans offer four types of repayment plans, one of which is contingent on your income rather than a fixed repayment schedule.

What Is a Parent PLUS Loan?

A parent PLUS loan is a federal direct student loan that’s offered to parents of dependent undergrads who are enrolled at least half-time. It offers flexible borrowing limits that let parents borrow up to their student’s full cost of attendance, minus any other financial aid they receive.

Note

On Tuesday, Nov. 22, 2022, the Biden administration extended the pause on payments and interest on federal student loans for the eighth time. Borrowers with federal student loans won’t have to make payments, and loans won’t resume accumulating interest, until 60 days after court cases challenging Biden’s student loan forgiveness program are resolved or the Department of Education is allowed to move forward with the program. If the cases aren’t resolved by June 30, 2023, payments will resume two months after that.

The borrowing parent must have relatively good credit to qualify, and they (not the student) will own and repay the loan.

Grandparents (unless they've adopted the student and the student is a dependent) and guardians aren’t eligible for parent PLUS loans.

Parent PLUS Loan Rates and Fees

One key factor in identifying the best student loan is loan costs, such as student loan rates and fees. Parent PLUS loan interest rates and fees for the 2022-2023 school year equal 7.54%. That is significantly higher than the 4.99% rate offered on Direct Loans extended to undergrads for the same period.

Note

On Aug. 24, 2022, President Joe Biden announced via Twitter the cancellation of $10,000 of federal student loan debt for eligible borrowers, including borrowers with parent PLUS loans.

All federal student loans charge a one-time origination fee, which is withheld from your loan funds. The parent PLUS loan origination fee is 4.228% of the principal for loans disbursed in the school year after October 1, 2020.

Parent PLUS Loan Limits

You can borrow up to your child’s full cost of attendance each school year, minus all other student aid. Your child’s school sets the cost of attendance, which is a sum of all education-related expenses.

Student aid such as scholarships, grants, or your child’s student loans are applied to this total cost. The difference between student aid granted and remaining costs is how much you can borrow with parent PLUS loans.

Parent PLUS Loan Credit Requirements

The Department of Education requires that parent PLUS loan applicants have a relatively clean recent credit history. You cannot have the following marks on their credit report in the past five years:
Default

• Bankruptcy discharge
• Repossession
• Foreclosure
• Charge-off or write-off of federal student aid
• Wage garnishment
• Tax lien
  

Additionally, you can't have any 90-day delinquencies, charge-offs, or collections on accounts with balances of more than $2,085.

Parent PLUS Loans Pros and Cons

• Borrow up to your student’s full cost of attendance
• Fixed student loan rates
• Access to federal student loan benefits

• Non-adverse credit history required
• Higher interest rates and fees
• Not eligible for all federal student loan repayment plans

Pros Explained

• Borrow up to your student’s full cost of attendance: You have the option of covering the entire cost of your child's education.
• Fixed student loan rates: All PLUS loan borrowers get the same fixed student loan rate, set by law each school year.
• Access to federal student loan benefits: Parent PLUS borrowers can take advantage of forbearance, deferment, loan forgiveness, and other programs afforded to direct-loan borrowers ..

Cons Explained

Non-adverse credit history required: Borrowers have to have a relatively clean credit history over the past five years, such as no bankruptcies, defaults, or tax liens.

High interest rates and fees: PLUS Loan rates and origination fees are higher than federal student loans for undergraduates

Not eligible for all federal student loan repayment plans: Borrowers have three options for repayment: standard, graduated, or extended.

How to Get Parent PLUS Loans

Step 1: Fill Out the Parents Part of the Free Application for Federal Student Aid (FAFSA)

On the parent’s portion of the FAFSA, you’ll provide details about your household and financial situation, including certain income and assets. That determines your family’s ability to pay toward your child’s college education, also called the "expected family contribution" (EFC).

Step 2: Review Your Student Aid Options

Once your FAFSA is processed, you receive a student aid report outlining federal student aid. Your child’s college will also send a more complete student aid offer. Review what’s available and how to best use student aid to minimize out-of-pocket costs and borrowing.

Step 3: Check Your Parent PLUS Loan Eligibility

If you decide to use parent PLUS loans, you’ll need to meet these requirements:  

• Be the biological parent or adoptive parent of a dependent undergraduate student who is enrolled at least half-time.
• Have a non-adverse credit history. If you do, you also must be able to satisfy additional requirements.
• Meet other basic federal student aid eligibility requirements, such as being a U.S. citizen or permanent resident.

Step 4: Complete a Parent PLUS Loan Application

You can complete a parent PLUS loan application online using the FSA ID and account you created to file a FAFSA, or through your student's school's financial aid office. You’ll provide basic info on yourself as the parent, your child, their school, and your loan. You can also indicate how you want loan funds disbursed and whether you want to defer payments while your child is in college.

Step 5: Sign a Master Promissory Note and Receive Loan Funds

Finally, you’ll sign a Master Promissory Note through the school’s financial aid office—the loan agreement that outlines the terms of your parent PLUS loan, which includes your promsite to repay your loans, interest, and fees.

Loan funds are then disbursed to your child’s school and applied to outstanding charges for room, board, tuition, and fees. The school pays out remaining funds to you or the student, per your selection on the loan application.

Options if Your Parent PLUS Loan Is Denied

Not everyone will qualify for a parent PLUS loan, but if you’re denied you can try these alternatives:

• Get an endorser for your parent PLUS loan. This is equivalent to a co-signer—someone with non-adverse credit who agrees to repay the loan if you don’t.
• Document extenuating circumstances. Some examples of extenuating circumstances include adverse information that’s incorrect, older than reported, or accounts that are part of a bankruptcy settlement or otherwise resolved. Start the credit appeal process to provide proof of your extenuating circumstances. You’ll also need to complete PLUS credit counseling.

If these steps don’t work, and your parent PLUS loan is denied, even that can have an upside. Students whose parents can’t get PLUS loans can gain access to more federal student loans.

A dependent first-year student can only borrow up to $5,500 in federal student loans per school year, for example. But that limit goes up to $9,500 if the student’s parents were denied PLUS Loans.

Repaying Parent PLUS Loans

A parent PLUS loan is the sole responsibility of the parent borrowing it. You, not your child, will pay back this loan, so it’s wise to learn more about parent PLUS loan repayment.

Parent PLUS Loan Deferment, Forbearance, and Forgiveness

On the loan application, you can choose to defer parent PLUS loan payments during your student’s enrollment or begin making immediate full payments.

You can defer or seek forbearance for parent PLUS loans in other situations, too: if you lose a job, return to school, or encounter financial hardship or other qualifying circumstances. These loans are eligible for many other federal benefits and protections as well, such as forgiveness through the Public Service Loan Forgiveness program or other avenues, such as closure of your student’s school, or a death of the borrower or student.

Parent PLUS Repayment Plans

Parent PLUS loans are eligible for four federal student loan repayment plans that can be used by parents:

• Standard repayment: Fixed monthly installments over 10 years
• Extended repayment: Fixed monthly installments over 25 years
• Graduated repayment: Lower initial monthly installments that increase every two years, repaid over 10 years
• Income-contingent repayment (ICR): Income-based monthly installments are the lesser of 20% of discretionary income divided by 12 or fixed payments over 12 years; the remaining balance is forgiven after 25 years.

Note

The ICR repayment option is only available if you consolidate your parent PLUS loan into a direct consolidation loan.

Should You Get Parent PLUS Loans?

Parent PLUS loans can help some families pay for college, but they won’t be right for everyone. First, consider whether you should borrow for your child’s education at all.

Consider how adding new student loan payments will affect your finances. If they’d stretch your budget too thin or detract from other important financial goals like retirement, that might be a sign that it’s wise to reconsider.

If you can afford this new debt, also investigate alternatives to parent PLUS loans. Max out other sources of college funds, such as scholarships, savings, and lower-cost undergraduate federal loans, first.

Private student loans might be a better fit for some borrowers, too. Parents who don’t want to shoulder this debt alone, for example, could co-sign a private student loan with their child—making both family members legally responsible for this debt.

Whom Are Parent PLUS Loans Best For?

You’re probably suited for one if you’re a parent who:

• Has a student who’s borrowed up to the maximum undergrad loan limits
• Wants to be responsible for the debt rather than having it burden their child
• Has compared parent PLUS loans with private student loans, and has found that the federal option offers lower interest rates and total costs
• Can’t qualify for private student loans
• Wants access to federal student loan benefits, such as deferment and forbearance, federal repayment plans, or even forgiveness

The Bottom Line

Parent PLUS loans can be an accessible way for families to get more money for college, allowing them to borrow beyond federal student loan limits for undergraduates.

Be aware, though, that parent PLUS loan rates and fees are higher, compared with what’s offered on undergraduate federal student loans. But this type of loan does come with federal benefits like deferment, forbearance, and even forgiveness—though access to federal repayment plans is somewhat more limited than for other government loans.

Frequently Asked Questions (FAQs)

What are parent PLUS loans?

Parent PLUS loans are federal direct loans that the Department of Education offers to parents of students attending college. The loans have higher interest rates than federal student loans for students, and you have fewer repayment-plan options.

How do parent PLUS loans work?

Parents who want to take out parent PLUS loans have to fill out a PLUS-loan application on top of the FAFSA the student and parent fill out. If the Department of Education approves the parent, it will disburse the money to the school the student attends or to the parent based on which option the parent chose during the application process. From there, the parent has four options for repayment: standard, graduated, extended, or income-contingent.

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. Department of Education. “Biden-Harris Administration Continues Fight for Student Debt Relief for Millions of Borrowers, Extends Student Loan Repayment Pause.”
2. Federal Student Aid. "Parent PLUS Loans."
3. Federal Student Aid Office. "Parent PLUS Loans."
4. Twitter. “@POTUS, Aug. 24, 2022 at 11:32 a.m.”
5. Federal Student Aid. "Federal Interest Rates and Fees."
6. Federal Student Aid. "Parent PLUS Loans," Click on "adverse credit history" in the "Am I eligible for a parent PLUS loan?" section.
7. Federal Student Aid. "Reporting Parent Information."
8. Federal Student Aid. "Master Promissory Note."
9. Federal Student Aid. "Document Extenuating Circumstances (Appeal)."
10. Federal Student Aid. "2022-2023 Federal Student Aid Handbook," Volume 3, Chapter 5.
11. Federal Student Aid. "What Is the Income-Contingent Repayment Plan."

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