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Parent PLUS Loans: Everything You Need to Know

Parent PLUS loans, also known as Direct PLUS Loans, are a type of student loan that the federal government offers. However, unlike Direct Stafford Loans, PLUS loans are taken out by parents to pay for their child’s postsecondary education.

In this guide, we’ll be talking about:

Overall, PLUS loans are less ideal than Direct Stafford Loans because they tend to have higher interest rates and less favorable repayment options.

Don’t miss: Scholarships360’s free scholarship search tool

Parent PLUS Loan eligibility

To be eligible for Direct PLUS Loans, students must complete and submit the FAFSA. Similar to Direct Stafford Loans, students must be attending a postsecondary college or certificate-granting program on at least a half-time basis.

Next, parents will have to complete a supplementary PLUS Loan application on the Department of Education website. One component of the application process is a credit check, as credit history is a component of PLUS Loan consideration. If a PLUS loan is denied due to a parental credit report, students might be eligible for a larger unsubsidized amount. In this case, students should reach out to their financial aid officer  for more information. 

The only other requirement is that the person taking out the PLUS Loan must be a biological or adoptive parent. In some cases, a stepparent is eligible to take out the loan, but this is determined on a case-by-case basis.

Parent PLUS Loan deadlines

Because the Parent PLUS Loan requires the FAFSA, students should follow the appropriate FAFSA deadline (which can vary depending on your college and when you apply).

The FAFSA opens on October 1st every year for the upcoming (next) school year. It closes on June 30 of the school year the FAFSA is used for. For example, the 21/22 FAFSA opened on Oct 1, 2020, and it will close on June 30, 2022. 

Remember, the Parent PLUS loan includes the extra step of the supplementary application, so keep that in mind!

Borrowing limits for PLUS Loans

Unlike subsidized and unsubsidized Federal Direct Stafford Loans, there is no borrowing limit for PLUS loans. This means that families can borrow up to the cost of attendance (minus any other financial aid and scholarships that you receive).

This can be useful if a student’s financial aid package does not completely cover everything or if you can’t meet the college’s Estimated Family Contribution.

However, students and parents should be wary of taking on too much debt. Just because you can take out loans does not mean that it is a good idea. Remember, you will have to pay back your student loans upon graduation.

The Department of Education has a useful Loan Simulation Tool to help you estimate repayment on potential student loans. This is a great way to see what your student loan debt will look like as far as future monthly payments.

Since July 1, 2023, the interest rate on a Parent PLUS Loan is 8.05%. PLUS Loans are offered at a fixed interest rate which is set by the federal government each year.  Keep in mind that there is also an origination fee of 4.228% on PLUS Loans This fee is deducted before the loan is applied to student financial accounts. 

How to repay your Parent PLUS Loans

Like other federal student loans, Parent PLUS loans are eligible for a variety of repayment plans including:

  • Standard Repayment
  • Graduated Repayment Plan
  • Extended Repayment Plan
  • Revised Pay as You Earn Repayment Plan
  • Pay As You Earn Repayment Plan
  • Income-based Repayment Plan
  • Income-sensitive Repayment Plan

Different repayment plans will have different tradeoffs depending on your goals and financial situation.

Alternatives to PLUS Loans

PLUS Loans can be a good option if you have a financial aid gap or if your family is not able to afford the Estimated Family Contribution. However, there are some alternatives that students and families can consider instead of PLUS Loans including:

If these alternatives are not enough to pay your way through college, there are additional ways that students can fill their financial aid gap in order to minimize debt. You can also check out our list of top student loans for students which is updated monthly.

Additional financial aid resources

As you make financial aid decisions, there are many factors to weigh against one another. Students who find that their financial aid isn’t enough should consider writing a financial aid appeal letter. You might also be able to make college a more tenable expense through local scholarships. You should also remember that federal loans may qualify for forgiveness through programs such as the Public Service Loan Forgiveness Program. If you’re planning to go into nursing, public schooling, or other related fields, you may be able to afford more in federal student debt than you think.

Good luck with your financial planning and be sure to check back as any additional questions arise!

Frequently asked questions about Parent PLUS loans

Who takes on the debt with a Parent PLUS Loan?

Parents will be the ones shouldering the debt if they take out a Parent PLUS Loan. So, the student will not be financially responsible for the loan. However, the child and parent can come to a formal or informal agreement that the student will contribute or be entirely responsible for the loan down the line. You also have the option of eventually transferring the Parent PLUS Loan from parent to student.

How much time do you have to pay back Parent Plus Loana?

You’ll generally have between 10 and 25 years to pay off Parent Plus Loans. How long it takes you to repay your loan depends on the repayment plan that you have set up. Your options for repayment plans include a standard plan, a graduated repayment plan, and an extended repayment plan. Keep in mind however, that should you refinance your loan, you will lose access to these payment plans and will be subject to whatever payment plan you and your private lender agree to.