Parent PLUS Loans are a type of federal student loan that parents can use to help pay for their child’s education. These loans are available to parents of dependent undergraduate students who are enrolled at least half-time in an eligible program at a participating school.
Unlike other federal student loans, Parent PLUS Loans are taken out by the parent rather than the student. This means that the parent is responsible for repaying the loan, not the student. Parent PLUS Loans offer several benefits, including flexible repayment options and the ability to defer payments while the student is in school.
One of the key advantages of Parent PLUS Loans is the flexibility they offer in terms of repayment options. Parents have the choice of several repayment plans, including standard, graduated, and income-contingent plans. The standard plan involves fixed monthly payments over a period of up to 10 years. The graduated plan starts with lower monthly payments that increase over time. The income-contingent plan adjusts the monthly payments based on the parent’s income, family size, and loan balance.
In addition to the various repayment plans, Parent PLUS Loans also provide the option for loan forgiveness. Under the Public Service Loan Forgiveness (PSLF) program, parents who work in certain public service fields, such as government or non-profit organizations, may be eligible to have their remaining loan balance forgiven after making 120 qualifying monthly payments.
Another benefit of Parent PLUS Loans is the ability to defer payments while the student is in school. This means that parents do not have to start making loan payments immediately after the loan is disbursed. Instead, they can choose to defer the payments until the student graduates or drops below half-time enrollment. During the deferment period, the interest on the loan may still accrue, but the parent is not required to make any payments.
It’s important to note that Parent PLUS Loans do have some drawbacks. One of the main disadvantages is that they have higher interest rates compared to other federal student loans. Additionally, parents who take out these loans are not eligible for certain income-driven repayment plans that are available to students. This means that the monthly payments on Parent PLUS Loans may be higher than what the student would have to pay on their own loans.
As a reminder, Parent PLUS Loans can be a helpful tool for parents looking to support their child’s education. They offer flexible repayment options, the possibility of loan forgiveness, and the ability to defer payments while the student is in school. However, it’s important for parents to carefully consider the interest rates and repayment terms before taking out these loans.
When to Apply for a Parent PLUS Loan
Applying for a Parent PLUS Loan can be a crucial step in financing your child’s education. It’s important to understand the timeline and requirements for applying to ensure that you receive the funds in a timely manner.
1. Apply as Early as Possible
When it comes to applying for a Parent PLUS Loan, the general rule of thumb is to apply as early as possible. The application process can take some time, so it’s best to start early to avoid any delays in funding.
It’s recommended to submit your application at least three months before the funds are needed. This will give you ample time to complete the necessary paperwork, undergo a credit check, and receive the loan disbursement before the start of the academic year.
2. Consider the School’s Financial Aid Deadlines
In addition to applying early, it’s important to consider the financial aid deadlines set by your child’s school. Each school may have different deadlines for submitting the Free Application for Federal Student Aid (FAFSA) and the Parent PLUS Loan application.
These deadlines are typically set to ensure that students receive their financial aid packages in a timely manner. Missing the deadline could result in a delay in receiving the Parent PLUS Loan funds. Therefore, it’s crucial to be aware of the school’s financial aid deadlines and plan accordingly.
3. Evaluate Your Financial Situation
Before applying for a Parent PLUS Loan, it’s essential to evaluate your financial situation. Parent PLUS Loans require a credit check, and your credit history will be taken into consideration during the application process.
If you have a good credit history, you are more likely to be approved for the loan. However, if you have a history of delinquencies, defaults, or bankruptcy, your application may be denied or require an endorser.
Take the time to review your credit report and address any issues that may negatively impact your creditworthiness. This will increase your chances of being approved for the loan and receiving favorable interest rates.
4. Coordinate with Other Financial Aid Options
When considering a Parent PLUS Loan, it’s important to coordinate with other financial aid options that may be available to your child. This includes scholarships, grants, and other types of student loans.
Completing the FAFSA is a crucial step in determining your child’s eligibility for federal student aid, including grants and work-study programs. These options should be explored before taking on a Parent PLUS Loan, as they may offer more favorable terms and repayment options.
By coordinating with other financial aid options, you can reduce the overall amount of the Parent PLUS Loan and potentially minimize the financial burden on both you and your child.
5. Understand the Repayment Terms
Before finalizing your decision to apply for a Parent PLUS Loan, it’s important to thoroughly understand the repayment terms. Parent PLUS Loans have a fixed interest rate and typically require repayment to begin within 60 days after the loan is fully disbursed.
Repayment plans include standard, graduated, and income-contingent options, allowing you to choose the plan that best fits your financial situation. It’s crucial to calculate the monthly payment amount and consider how it will impact your overall financial well-being.
Additionally, it’s important to note that Parent PLUS Loans are in the parent’s name and cannot be transferred to the student. This means that you, as the parent borrower, are solely responsible for repaying the loan.
Considering the repayment terms and understanding your financial obligations will help you make an informed decision about applying for a Parent PLUS Loan and ensure that you can comfortably manage the loan payments.
