The Informed Parent’s Guide to Federal Parent PLUS Loans
Note: This is the fourth post in the Financial Aid Fundamentals series. Here we learn more about federal parent PLUS loans. This is a must-read if you're thinking about borrowing to help your child pay for college.
Are you a parent? Are you thinking about borrowing money to help pay for college? If so, you’re not alone. Each year more and more parents take on debt to help their children pay for school.
Many parents borrow from the federal PLUS program. We touched on the topic of PLUS loans when we looked at how student loans work in the previous installment of the Financial Aid Fundamentals Series.
We continue the series here, diving into more detail about federal parent PLUS loans.
In this post you’ll find answers to 10 commonly asked questions about parent PLUS loans. We’ll learn who’s eligible for federal parent PLUS loans as well the repayment options for these loans.
But first let’s start with an overview of the federal parent PLUS loan program.
What Is a Federal Parent PLUS Loan?
Federal parent PLUS loans are often described as student loans for parents. These loans are provided by the federal government to parents who want to help their children pay for college.
Parent PLUS loans are a growing part of the federal financial aid system. In 2013, 717,000 parents received federal PLUS loans. By 2018, that number had grown to 838,000.
The total amount of federal parent PLUS loans given out in 2018 was nearly $12 billion. The average PLUS loan for each parent borrower was $15,135.
Who Is Eligible for a Federal Parent PLUS Loan?
Parents of dependent undergraduate students enrolled in two-year or four-year colleges can qualify for federal parent PLUS loans.
Dependent means your child is under 24 years old, unmarried and is still claimed as a dependent on your income taxes. If your child is over 24, married, a veteran or in graduate school, you aren’t eligible for a federal parent PLUS loan.
Less than 24 years old
Graduate or professional student
Married and/or has dependents (children)
No dependents (children)
Active Duty Military or Veteran
Claimed on parents' income taxes
Not claimed on parents' income taxes
Unlike other types of federal student loans, parent PLUS loans require a credit check. Having a poor credit history doesn’t automatically disqualify you, but will make it harder to get a parent PLUS loan.
If parents have poor credit, they may be required to undergo credit counseling as a condition of getting a federal PLUS loan. They may also have to get an endorser (also known as a co-signer) with a good credit history who agrees to repay the loan if they do not.
And just FYI: the child for whom the money is being borrowed cannot act as an endorser for a federal parent PLUS loan.
How Do You Apply for a Federal Parent PLUS Loan?
To apply for a federal parent PLUS loan, you must first fill out the Free Application for Federal Student Aid (FAFSA). Your PLUS loan application won’t be processed until there is a FAFSA on file for your child.
Once you have filled out the FAFSA, you should contact the financial aid office at the college your child attends or plans to attend. A financial aid adviser can walk you through the parent PLUS loan application process. You’ll have to apply for the loan online, but some schools may request additional information.
Be sure you follow the school’s guidelines and provide all the information requested. This is important because the school, not the government, determines whether you’re eligible for a parent PLUS loan.
The Federal Parent PLUS Loan Promissory Note
Once you submit your federal parent PLUS loan application, you’ll be asked to sign a master promissory note. The promissory note spells out the terms and conditions of the loan. By signing the promissory note, you're legally obligating yourself to pay back any PLUS money you borrow. Usually you only have to sign one promissory note that will cover all the loans you take out under the PLUS program.
Finally, remember that federal parent PLUS loans are a form of federal financial aid. To continue receiving aid, you must reapply every year.
How Much Can You Borrow with a Federal Parent PLUS Loan?
The federal financial aid program limits the dollar amount students can borrow, but there is no dollar amount cap on how much parents can borrow.
However, the maximum amount of federal parent PLUS money you can get each year is the estimated cost of attendance minus any other financial aid received. This means parents can only borrow enough PLUS loan money to cover the gap between the cost of school and any grants, scholarships and loans their child has gotten on his/her own.
The school your child attends determines the cost of attendance and, therefore, determines the amount of PLUS loan money you can borrow.
What Are Federal Parent PLUS Loan Repayment Options?
Parents who use PLUS loans are supposed to begin repaying the loan as soon as the money is given to the school their child attends. However, parents can request that these payments be delayed. If the request approved, parents don’t have to begin repaying the PLUS loan until six months after their child has graduated or left school.
Once it is time to repay the loan, parents will have to choose a repayment plan. The repayment options for federal parent PLUS loans are very limited.
Federal Parent PLUS Loan Repayment Plans
Currently parents with federal PLUS loans are only eligible for three repayment plans: standard, graduated and extended.
- Under the standard repayment plan, you're required to pay off federal parent PLUS loans within 10 years. Your monthly payment will be the same for the length of your repayment period.
- Under the graduated plan, parents are still required to pay off federal parent PLUS loans within 10 years. However, the plan will start you on lower monthly payments that will increase over time.
- Under the extended plan, parents are given up to 25 years to pay off federal parent PLUS loans. However, they're only eligible for this plan if they borrowed more than $30,000 in PLUS loans.
You can change your repayment plan. For example, you may start out on the graduated plan then decide to switch to the standard plan. Before you switch repayment plans, make sure you understand how it will affect your monthly loan payments.
Can You Refinance a Federal Parent PLUS Loan?
Yes, you can refinance a federal parent PLUS loan. You must refinance with a private bank, though, since the federal government doesn’t refinance student loans.
If you refinance, you may get more time to pay off your PLUS loan. This could lower your monthly payments, but increase the total amount of money you repay.
Consolidating a Federal Parent PLUS Loan
If you have more than one federal parent PLUS loan, you could consolidate them into one loan. While the federal government doesn’t refinance student loans, it does consolidate student loans under the Direct Consolidation Loan program.
Consolidating your federal parent PLUS loans combines all of your loans into one. That means you will only have one monthly payment instead of paying separately on each loan every month.
Consolidating your loans will also make things easier if you decide to refinance later. The process will move a lot faster if you’re trying to refinance one big loan instead of several smaller ones.
Can You Transfer a Federal Parent PLUS Loan to Your Child?
No. Parents cannot transfer federal parent PLUS loans to their child.
Many parents mistakenly believe that since they are borrowing money for their child, they can transfer PLUS loans to their child once it is time to pay back the loans. But parents are the ones who obtain the loans and sign the promissory note, so they are legally responsible for repaying the loans.
You also can’t transfer PLUS loans to your child through loan consolidation. For example, if your child consolidates student loans she borrowed in her own name, you can’t roll your federal parent PLUS loans into her consolidation loan.
Are Federal Parent PLUS Loans Eligible for Loan Forgiveness?
There are some situations in which your federal parent PLUS loans may be forgiven. When this happens, your loan is considered discharged and you're no longer legally obligated to pay back the money.
Federal parent PLUS loans can be discharged if you die or become totally disabled during the loan repayment period. The loans may also be discharged if the child for whom the money was borrowed dies during the repayment period.
You can also qualify for partial PLUS loan forgiveness under certain circumstances, such as bankruptcy or if the school your child attended closed before he graduated.
As you can see, there are very few reasons a PLUS loan will be forgiven, and most of them are dire. So if you take out a federal parent PLUS loan, you should just plan on paying it back.
What If You Can't Repay Your Federal Parent PLUS Loans?
If you’re having trouble making payments on your federal parent PLUS loan, you can apply for a deferment or a forbearance.
Deferment of Federal Parent PLUS Loans
During a deferment, you don’t have to make monthly payments on your loan. There are several ways you can qualify for a deferment.
As mentioned earlier, you can ask that your federal parent PLUS loan payments be delayed until your child has graduated from school. That is one type of loan deferment.
Parents can also qualify for a deferment of PLUS loan payments if they are students. If you are enrolled at least half-time in an undergraduate program or full-time in a graduate program, you can ask for a deferment of PLUS loans borrowed for your child.
If you're serving on active duty in the military you can qualify for a deferment of your parent PLUS loan payments too.
Finally, you can qualify for a deferment if you become unemployed, but you must meet specific criteria to claim economic hardship.
Forbearance of Federal Parent PLUS Loans
If you're having trouble repaying your loans and don’t qualify for a deferment, you might qualify for loan forbearance.
Under loan forbearance, you’re given temporary permission to make smaller payments on your loan or to stop making payments altogether.
It’s usually harder to qualify for loan forbearance than loan deferment. Forbearance typically requires that you suffer extreme financial hardship or illness.
How to Apply for Deferment/Forbearance of Federal Parent PLUS Loans
To apply for a PLUS loan deferment or forbearance, you’ll need to contact your loan servicer. This is the agency that oversees your loans. You’ll learn your loan servicer when you take out the loan. Once you begin repaying your loans, you’ll send your monthly payment to the servicer, not the federal government.
After you apply for a deferment or forbearance, keep making payments until your request is approved. If you stop making payments, your loans will go into default. That may disqualify you from a deferment or forbearance, since both require you to be caught up on your loan payments.
If your deferment or forbearance is approved, make sure you understand the terms and conditions. Under both deferments and forbearances, you’re still responsible for paying interest on the loan, even if you aren’t making monthly payments.
Also, both deferments and forbearances have time limits. Make sure you know when yours expires and what you need to do if you want to renew it.
What If My Federal Parent PLUS Loan Application Is Denied?
There are several reasons why your application for a federal parent PLUS loan may be denied. The most common reason is poor credit history. As mentioned earlier, if your parent PLUS loan application is denied due to poor credit, you can try to find an endorser to co-sign the loan for you.
If you don’t want or can’t find an endorser, then you can write an appeal letter outlining extenuating circumstances (such as long-term illness or unemployment) that led to your poor credit history. If this appeal is approved, you’ll be eligible for a PLUS loan.
What If My Federal Parent PLUS Loan Appeal Is Denied?
If your PLUS loan appeal is denied, your child may be able to borrow more student loan money under his or her own name. In this case, the government would increase the amount of federal unsubsidized student loans available to your child.
Another option is to look at private education loans but the truth is, if your PLUS loan application is denied due to poor credit, it will be hard to qualify for private student loans. However, you can check with private lenders and see what kinds of student loans they offer. If you’re eligible, you may still need a co-signer for the loan.
A final option to consider is having your child attend a cheaper school. If your child can’t cover tuition and living expenses without you also going into debt, then the best decision is to go to a more affordable college.
A Final Word About Federal Parent PLUS Loans
I strongly discourage the use of federal parent PLUS loans. If you’re thinking about taking out a federal PLUS loan to help pay for your child’s college, I urge you to reconsider. You will have to pay back these loans, which can put your own financial goals (like retirement) at risk. I’m glad the option exists for families that really need it, but my recommendation to parents considering PLUS loans is to look for more affordable schools instead.
What do you think about federal parent PLUS loans? Have you used one? Would you consider using one? Let me hear your stories.