Paying for your child's college education can be complicated and intimidating as a parent. Although tuition and other college costs may seem overwhelming, various financial aid forms can help reduce costs. One is the Parent PLUS Loan, a type of loan that enables parents to take out a loan to cover their children's college expenses. We'll review Parent PLUS Loans in this article, including what they are, how they operate, and what you should know before looking into them as a financial aid option.
Parent PLUS Loans: What Are They?
Parents can borrow federal Parent PLUS Loans to assist with paying for their children's education. These loans are offered through the Direct Loan Program of the U.S. Department of Education and can be used to pay for tuition, board, books, and other educational-related costs.
Parent PLUS Loans are not need-based like other federal student loans. Instead, they are open to any parent who needs a loan to assist in funding their child's education.
Parent PLUS Loans: How Do They Operate?
Similar to other federal student loans, parent PLUS loans function similarly. The loan amount is paid directly to the school and can be applied to the student's educational costs.
Parent PLUS Loans have a repayment period that starts as soon as they are disbursed, but parents can postpone payments until their child graduates or drops below a half-time enrollment level. During the deferment period, interest will continue to accrue; parents may choose to pay the interest as it is incurred or permit it to be added to the loan balance.
For whom are Parent PLUS Loans available?
Parent Borrower Requirements for Parent PLUS Loan Eligibility
Be the parent of a dependent undergraduate student enrolled at least half-time at an eligible institution, whether biological, adoptive, or stepparent (in some cases).
Posses a positive credit history. If they find an endorser with no bad credit history, parents with bad credit histories may still be eligible for a Parent PLUS Loan.
Meet any additional criteria for eligibility set forth by the U.S. Department of Education.
Applications for Parent PLUS Loans
A parent borrower who wants to apply for a Parent PLUS Loan must:
Visit www.fafsa.gov to complete the Free Federal Student Aid (FAFSA) application.
Users should use their own FSA ID and password to access studentloans.gov.
Under the "Parent Borrowers" tab, click "Apply for a PLUS Loan".
Apply fully, and put your signature on the Master Promissory Note (MPN).
Parent PLUS Loan fees and interest rates
The U.S. Department of Education sets the fixed annual interest rate for Parent PLUS Loans, which was 6.28% as of 2023.
Parent PLUS Loans include a loan fee that is a percentage of the loan amount in addition to interest. As of 2023, the loan fee for Parent PLUS Loans is 4.228%. This fee reduces the amount of the loan disbursement.
How much money can you get a Parent PLUS Loan for?
The total cost of attendance, less any other financial aid the student receives, is the most that parents can borrow through a Parent PLUS Loan. Scholarships, grants, and other federal student loans fall under this category.
Parent PLUS Loans come with interest and fees that can add up over time, so it's important to note that parents should only borrow what they need to pay for their child's educational costs.
Parent PLUS Loan Repayment
Parent PLUS Loan repayment starts once funds are disbursed, but parents can delay payments until their child graduates or drops below a half-time enrollment level. Parent PLUS Loans have a standard repayment period of 10 years, but other options allow repayment terms up to 25 years.
Additionally, parents can combine their Parent PLUS Loans into a Direct Consolidation Loan, which streamlines repayment by combining several loans into one.
Parent PLUS Loans: Pros and Cons
Parent PLUS Loans have pros and cons, just like any other financial aid option. Parent PLUS Loans have both benefits and drawbacks, including:
Pros:
Obtainable to all parents, regardless of means
Can pay the total cost of attendance up to
Flexible options for repayment
Cons:
High fees and interest rates
Parents, not the student, are liable for a refund.
Parents might have to take out more debt than they can handle.
Additional ways to pay for your child's education
Parent PLUS Loans are one option for paying for your child's education, but they are not the only one. Other alternatives to think about are:
Scholarships and grants are excellent ways to lower college costs because they don't have to be paid back.
Federal student loans: Students can obtain federal loans independently to help pay for their education. These loans may have lower interest rates and costs than Parent PLUS Loans.
Private student loans can be used to pay educational costs but may have higher interest rates and fees than federal loans.
Answers to Frequently Asked Questions
Parent PLUS Loans: Are they forgivable?
Unlike other federal student loans, Parent PLUS Loans are not eligible for loan forgiveness programs.
Can my child receive my Parent PLUS Loan?
Parent PLUS Loans cannot be transferred to a student; they are the responsibility of the parent borrower.
What occurs if I am unable to pay my Parent PLUS Loan installments?
If you are having trouble making your Parent PLUS Loan payments, you may be qualified for deferment or forbearance, which can temporarily delay or lower your payments.
Can I repay my Parent PLUS Loan early?
You can repay your Parent PLUS Loan anytime without incurring any fees.
Do Parent PLUS Loans qualify for bankruptcy discharge?
If the borrower can demonstrate that repaying the loan would result in excessive hardship, Parent PLUS Loans are typically not bankruptcy-dischargeable.
Conclusion
Parent PLUS Loans can help parents pay for their child's education, but they have benefits and drawbacks. Before considering applying for one, it's critical to comprehend its workings, maximum borrowing capacity, and available repayment options. It's also crucial to think about all available financial aid options and choose the one that will be most useful.
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