Parent Plus Loan Repayment

The Parent PLUS Loan offers a fixed interest rate and flexible loan limits. Explore the various repaymnet options for parent PLUS loans, how to apply for it, how to lower your payments and much more.

Updated by Annany Sah on 3rd January 2020

When going about tackling the expenses to be made for college? One must always explore the federal student loan options available. Parents of dependent undergraduate students borrow the Parent PLUS Loan to help their children pay for college or career school. The Parent PLUS Loan offers a fixed interest rate and flexible loan limits. Before parents borrow from the Parent PLUS Loan program, it is best if their child exhausts eligibility for Direct loans first, since these student loans have lower interest rates and fees. Some parents borrow Parent PLUS Loans to make sure their children don’t take on too much student loan debt. But remember, nothing stops parents from helping their children with their student loan payments. Borrowing Direct Loans before Parent PLUS Loans will save the family money.

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 What is Parent plus Loan Repayment

Parent PLUS loans are federal student loans issued directly to parents. They take a look at your credit, offer some flexibility in repayment options, and the ability to fill funding gaps after exhausting federal student loans to students, grants, and scholarships. For the 2019-2020 school year, the Parent PLUS Loan has a 7.08% interest rate plus an origination fee of 4.236%.

How does the Parent Plus loan Works?

Here are the steps to understand the working of parent PLUS loans - 

  1. Applying for Parent PLUS loans starts by filling out the FAFSA.

  2. The next step is downloading a promissory note from the school financial aid website.

  3. The approved loan amount can be up to the full cost of attendance minus other forms of financial aid.

  4. Parent PLUS loans aren’t an all or nothing game. You can choose to borrow part of the amount offered and find other sources for the remaining cost of attendance.

How to apply for Parent Plus loan

If the parents of the student want to take a parent plus loan then they should contact the university for the loan requirements, such requirements are as follows:

  1. The same parent who will complete and sign a Master Promissory Note (MPN) should request the loan.

  2. Parents, not the student, must request the loan.

  3. The Same FSA ID that was used to sign the FAFSA must be used to request the loan.

Eligibility Criteria

The eligibility requirements for a Parent PLUS loan are fairly simple. You must be the biological or adoptive parent of a dependent undergraduate student enrolled at least half-time. You generally must meet minimum credit standards, and the student must meet general eligibility requirements for financial aid.

Student eligibility requirements are also straightforward. Students must be a U.S. citizen or eligible non-citizen, and not have previous student loan defaults that haven’t been resolved or consolidated into a federal direct loan. Male students who are citizens and age 18 to 25 need to register for the Selective Service. Parents also must be U.S. citizens or eligible non-citizens.

Credit Requirement For Parent Plus Loan

  1. Current delinquency of 90 or more days on more than $2,085 in total debt.

  2. More than $2,085 in total debt in collections or charged off in the past two years. 

  3. Default, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of federal student loan debt in the past five years.

If a parent has an adverse credit history, the parent can still borrow from the Parent PLUS Loan program if they can submit a successful appeal for an exceptional circumstance, or with an endorser (cosigner) who does not have an adverse credit history.

Other Credit  Requirement

Here are some of the other requirements to be met for your credit-

  1. Students must be enrolled in school on at least a half-time basis.

  2. Male students must have registered with the Selective Service.

  3. Students and parents must be U.S. citizens or nationals, permanent residents, or eligible noncitizens.

  4. Students and parents can’t be in default on a federal student loan.

  5. Parent PLUS Loan proceeds must be used for educational purposes.

Worried about your college tuition? Find the best student loan to help cover your expenses

How to pay off the Parent Plus Student Loan Quickly

There are 2 ways you can pay off debts quickly and very easily which are as follows:

1) Refinancing

Refinancing Parent Plus Student Loans to a lower interest rate will save you money in interest and can help you become debt-free faster. Parents can refinance PLUS loans in their name, or the child can take over the PLUS loan by refinancing it in his or her own name.

To qualify, you generally need good credit and enough income to comfortably afford all of your expenses and debt payments including housing, student loans, and credit cards, Refinancing isn’t a good option for borrowers who are pursuing student loan forgiveness or can’t afford payments on the standard, 10-year federal repayment plan.

2) Standard Repayment

Making payments on the standard, a 10-year federal repayment plan is the parent PLUS loan repayment option that will save you the most money and get you out of debt the fastest if you don’t qualify for refinancing or loan forgiveness. To become debt-free even faster, make extra payments toward the loan principal.

How to lower Parent Plus Student Loan Repayment

1) Consolidation

Consolidating parent PLUS loans won’t save you money in the long run, but it can lower your monthly payments. It’s also necessary if you want to make payments on an income-contingent repayment plan or pursue loan forgiveness. When you consolidate parent PLUS loans, they become a federal direct consolidation loan. You can consolidate even if you only have a single parent PLUS loan.

You’ll have 10 to 30 years to repay the consolidated loan, depending on the loan balance. On a longer repayment schedule, you’ll have lower monthly payments but also pay more in interest over time.

2) Income Contingent Repayment

 It reduces your monthly federal student loan payment to 20% of your income or the amount you’d pay on a fixed 12-year repayment schedule, whichever is less. It also offers forgiveness after 25 years if you’re still making payments at that time.

To be eligible for income-contingent repayment, you must first consolidate your parent PLUS loans.

Switch to income-contingent repayment only if you can’t afford payments on the standard 10-year federal repayment plan. On income-contingent repayment, you’ll pay more in interest and you’ll be required to pay income tax on any amount forgiven.

Learn more about student loan repayment

How to get a Parent Plus loan Forgiveness

Student loan forgiveness is a great option to get out of debt, it is advised for a borrower to have an in-depth understanding of what forgiveness has to offer to take advantage of it. The fastest way to get Parent Plus Loan Forgiveness is through Public Service Loan Forgiveness. Public Service Loan Forgiveness is a federal program that forgives nonprofit and government employee loans after they make 120 monthly payments or 10 years’ worth. Unlike with income-contingent repayment, the forgiven amount won’t be taxed.

Make sure you fully understand how to get Public Service Loan Forgiveness before pursuing it, because the program has very specific rules and requirements. For instance, the parent must work for a qualifying employer in order to get forgiveness on parent PLUS loans; the student’s employment doesn’t matter.