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 30th August 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.

Table of Contents:

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

Are you 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 two 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 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 reduce 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 more extended 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 compensation, 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 ten years’ worth. Unlike with income-contingent repayment, the discounted amount won’t be taxed.

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