PLUS loans are not based on a family's income or assets and parents can borrow up to the total cost of education, minus any financial aid the student will receive.
Credit requirements for a Parent PLUS Loan
For five years before your credit is pulled: You can't have a loan default, a discharge of debts in bankruptcy, foreclosure, repossession, tax lien, wage garnishment, or a write-off of a federal student aid debt.
The Income-Contingent Repayment Plan is the only income-driven repayment plan available to parent PLUS borrowers, and to repay your parent PLUS loans under the Income-Contingent Repayment Plan, you must first consolidate the loans into a Direct Consolidation Loan.
To be eligible for a Direct PLUS Loan for parents, you must be a biological or adoptive parent (or in some cases a stepparent), not have an adverse credit history, and meet the general eligibility requirements for federal student aid (which the child must meet as well).
How to Use the Double Consolidation Loophole: The key to using the double consolidation loophole is to consolidate each of your Parent PLUS Loans twice. In this scenario, a borrower can have as few as two Parent PLUS Loans.
The Parent PLUS loan application is based on the borrower's credit history; no loan officer will look at your income or other debt or otherwise evaluate whether you can afford to make the payments. It is your responsibility to make sure you aren't borrowing more than you can afford to pay back.
Parent PLUS loans are costlier and offer less flexibility than federals loans made directly to students. Here are the details: The interest rate and origination fee are both higher than student loans. If you want to defer payments until after your student graduates, you must contact the servicer.
However, you don't need to meet a minimum credit score to qualify. Instead, the check looks for “adverse credit,” such as bankruptcies, repossessions, wage garnishment, or tax liens in the past five years. But even if you do have adverse credit, you may still be able to get a parent PLUS loan.
Parent PLUS loans can potentially be forgiven after 10 years under specific conditions, such as through the Public Service Loan Forgiveness (PSLF) program after consolidation into a direct consolidation loan. Parent borrowers must enroll in the Income-Contingent Repayment (ICR) plan to qualify for PSLF.
If you're a parent or graduate student seeking a Direct PLUS Loan, one of the requirements to qualify is that you must not have an adverse credit history. If your application is denied because of an adverse credit history, don't give up. You still have options.
To qualify, borrowers must have a dependent child enrolled at least half time in an eligible school. Unfortunately, grandparents and other relatives can't get a parent PLUS loan unless they legally adopt the student. While you don't need excellent credit to get a PLUS loan, you can't have an adverse credit history.
Yes, Parent PLUS Loans do influence your debt-to-income ratio (DTI). When a parent borrows a Parent PLUS Loan to fund their child's education, this new debt is factored into their DTI.
Unlike all other federal student loans, there are no explicit borrowing limits for parent PLUS loans. Parents may borrow up to the full cost of attendance, which is determined by the institution, not the government, and includes books, travel and living expenses.
A dependent student whose parent has been denied a PLUS loan during the current aid year may be eligible to receive Federal Direct Unsubsidized Stafford loans at the independent level with proof of PLUS loan denial from the lender.
How long does processing take? Due to the value of PLUS applications at peak times (particularly summer and the start of the Fall term), PLUS loans can take 4 weeks for processing and for the loan to be posted on the student's financial aid summary.
Does my debt-to-income ratio, credit score, or employment status count against me when I apply for a PLUS loan? These factors aren't taken into account when credit history is reviewed. A lack of credit is not considered adverse credit.
Parent PLUS Loans aren't eligible for income-driven plans, including the income-contingent repayment plan. But don't worry. There's still a way to make loan repayment more manageable. By consolidating parent loans into a Direct Consolidation Loan, you'll be able to repay the new loan under the ICR plan.
The parent, not the student, is responsible for repaying the PLUS loan. PLUS loans don't qualify for all of the income-driven repayment (IDR) plans that student loans do. PLUS loans have large borrowing limits, making it possible to take on too much debt.
Based on the information from Federal Student Aid, as of 2022, the average Parent PLUS Loan debt is $29,528. Although that might not sound like a huge amount, it depends on the parent's income.
Parent PLUS Loan Repayment Terms
Only the parent borrower is required to pay back a Parent PLUS Loan, as only the parent signed the master promissory note for the Parent PLUS Loan. The student is not responsible for repaying a Parent PLUS Loan. They're under no legal obligation to do so.
What happens to my parent's PLUS loan if my parent dies or if I die? Your parent's PLUS loan will be discharged if your parent dies or if you (the student on whose behalf your parent obtained the loan) die.
To qualify for a Direct PLUS Loan, you cannot have an adverse credit history. A credit check is conducted on all Direct PLUS Loan applicants.
Summary: The Parent PLUS Loan is a federal loan that parents of dependent undergraduate students can use to help pay for their child's education. The Direct Parent PLUS Loan offers a fixed 9.08% interest rate for the 2024 - 2025 school year and flexible loan limits.