Parent PLUS loan applications: What you need to know

Searching for ways to help your child pay for college? The parent PLUS loan is a student 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. If you need financial help, the Parent PLUS loan could be a worthwhile solution — as long as you understand the parent PLUS loan interest rate and the true cost of the loan over time.

Is a parent PLUS loan right for me?

When determining the right way to finance your child’s college education, you have several options. Parent PLUS loans can be great because they have benefits specific to the federal government and may be cheaper than some private loans. However, there are questions to consider before applying:

• Has your child applied for grants and scholarships? A parent PLUS loan can be a good option if you have already exhausted all your resources. But you should encourage your child to look into all options for getting free money — including grants and scholarships — before you sign up for a loan that you will have to repay.
• Are you eligible? To qualify for a parent PLUS loan, you’ll need to be a U.S. citizen or eligible noncitizen and not have an adverse credit history. Your child will need to be enrolled at least half time at a qualifying institution as an undergraduate student.
• Can you get a better interest rate with private lenders? The current interest rate for Direct PLUS Loans (including parent PLUS loans) is a fixed rate of 7.54 percent (for all loans disbursed on or after July 1, 2022, and before July 1, 2023). If you have a good credit score, you may be able to qualify for a better interest rate with a private lender. Look into private loan options and determine where you can get the best rates before deciding to apply for a parent PLUS loan.

When is a parent PLUS loan not ideal?

A parent PLUS loan is not ideal for everyone: if you cannot repay the loan, it can have harsh financial penalties including wage garnishment.

There is no maximum amount of money that can be taken out under the parent PLUS loan program, meaning it is possible to over-borrow. These loans are also not eligible for income-based repayment plans. If you live on a fixed income or already have other debt obligations, avoid parent PLUS loans if possible.

How can you 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. Parents can apply for this type of loan through the Department of Education.

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

1. 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. 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 an 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. The borrower must be a U.S. citizen or an eligible noncitizen and have a Social Security number, and the student must be enrolled in an eligible program and school.

2. Have your child fill out the FAFSA

Though the parent will apply 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.

3. Calculate how much much you want to borrow

You can borrow the total amount of attendance costs for your child, minus any financial assistance or scholarships received. 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 also be eligible. The total amount varies by school.

Note that you can always borrow more in the future; only borrow what you need.

4. Apply for the loan through the Department of Education website

Applications for parent PLUS loans can be completed online at the Department of Education’s website. The information you enter will be sent to your child’s school, and the school will determine if you qualify for a parent PLUS loan. The application process typically takes about 20 minutes to complete.

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

5. 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 the loan’s terms.

Though you will have to apply for a new 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.

6. 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 for a parent PLUS loan 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.

FAQ about parent PLUS loan applications

• What should I do before applying for a parent PLUS loan?

  Before applying for a parent PLUS loan, get your paperwork in order. This includes your Federal Student Aid ID, your student’s information, your income and employer information and any documents you used to complete the FAFSA. You should also run the numbers with a student loan calculator to determine how much you need to borrow.
  

• When is the parent PLUS loan application due?

  The deadline for parent PLUS loan applications varies by institution. The federal deadline for the FAFSA is June 30 of each award year, but many institutions have earlier deadlines. Check with your child’s school to see when the deadline for completing a parent PLUS loan is.
  

• Can you get denied for a parent PLUS loan?

  It is possible to get denied for a parent PLUS loan if you’ve struggled with credit in the past. Since there’s a credit check on PLUS Loans, you’ll want to check your credit first to see if anything is holding you back before getting approved. If you have any old debt that needs to be repaid or bad marks that need to get removed, take care of that before completing your application. An adverse credit history could mean your application gets denied, and you’ll need to look elsewhere for additional funding.
  

The bottom line

Parent PLUS loans allow parents to help pay for their child’s tuition by taking out a loan through the federal government, often with better rates than private loans. However, these loans are not eligible for income-based repayment plans and are typically not eligible for forgiveness plans, so they are not ideal for all borrowers.