The U.S. Department of Education makes Direct PLUS Loans to eligible parents through schools participating in the Direct Loan Program. (We also offer PLUS loans for graduate or professional students.) A Direct PLUS Loan is commonly referred to as a parent PLUS loan when made to a parent borrower.
How Do Parent PLUS Loans Work? After your child has submitted the FAFSA, you'll apply for a parent PLUS loan using a separate application process. If approved, the Department of Education will disburse the loan proceeds directly to your child's school to cover tuition, fees, room and board and other costs.
Loan Terms
Maximum Loan Amount: Your child's cost of attendance minus other financial aid. For example, if your child's cost of attendance is $6,000, and he or she receives $4,000 in other financial aid, you can borrow up to $2,000 in PLUS Loans.
When the time comes to start making payments, only the student is obligated to repay these loans — not the parents. In fact, there's no co-signer. If the student defaults on a federal student loan, it will affect the student's credit and won't be reported on the parent's credit history.
There are no set income cutoffs for financial aid because of the number of factors that are included in the need-based calculation beyond income. Unless parents are in a situation where they don't need money for their child to go to school, everyone should fill out the FAFSA.
Verification doesn't necessarily check the student's or parent's bank accounts. Rather, the school will ask for documentation to clarify information provided in the form. These documents can include income tax returns, W-2 forms, and 1099 forms.
The California State Legislature enacted the Middle Class Scholarship to make college more affordable for California's middle class families. The Middle Class Scholarship reduces student fees at the California State University and University of California by up to 40 percent for middle class families.
If your parents or guardians refuse to pay for college, your best options may be to file the FAFSA as an independent. Independent filers are not required to include information about their parents' income or assets. As a result, your EFC will be very low and you will probably get a generous financial aid offer.
Most students have two main options for student loans: federal (government) loans or private loans from banks, credit unions, and other lenders. You should research all your options for federal loans, also known as Direct loans, before shopping around for private loans.
No minimum credit score is needed to get a parent PLUS loan. Federal loans aren't like private parent student loans, which use your credit score to determine whether you qualify and what interest rate you'll receive. But parent PLUS loans do have a credit check, and you won't qualify if you have adverse credit history.
Aim to have total student loan debt at graduation that is less than the student's annual starting salary. A similar rule of thumb applies to parents. Parents should borrow no more for all their children than their annual income. If so, they can afford to repay their parent loans in ten years or less.
Undergraduate third year, fourth year, and remaining years: Dependent students can take out $7,500 ($3,750 per semester), of which $5,500 ($2,750 per semester) can be subsidized loans. Independent undergraduates can take out $12,500 ($6,250 per semester), with $5,500 of that being subsidized loans.
Parent PLUS Loans typically have higher interest rates than a student's federal student loans. This means that over the life of the loan, you could end up paying significantly more in interest with a Parent PLUS Loan compared to a federal student loan taken out by a student.
Parent loans often have a higher interest rate than federal student loans. They have less flexible payment terms, and they require a credit check.
For a private student loan, lenders have income and credit qualifications that must be met either by the applicant on their own, or with a co-signer. If parents are unable or unwilling to co-sign, you will need to show stable income as well as an established credit history to qualify on your own.
Parents should "work the numbers with their child, help come up with options and explain what their future debt could be. Add up how much four years of college will cost. Then do the math on how much interest they would be paying on any loans they need.
In the 2023 Sallie Mae and Ipsos survey: 72% of families surveyed reported using parental income and savings to pay for college. 58% said they used a parent's current income to pay for college. 30% relied on funds saved in a college savings account, like a 529 plan, to pay for school.
As most middle-class families' EFCs are considered too high to qualify for aid, the amount of federal aid they receive is often minimal, leaving them vulnerable to racking up loans.
Student and parent income are big factors when colleges hand out financial aid. But only some income counts. Here's what you need to know about how your and your family's income can affect your financial aid eligibility.
Your bank account does have a minimal impact on FAFSA. If you drain the account to hide assets you are committing fraud. The FAFSA is an application and asks for asset information beyond cash. For almost all applicants the results are driven by income and requires IRS validation.
The student should keep no cash or cash equivalents saved in their name. Students are punished by the FAFSA for saving any cash. The FAFSA will specifically ask “As of today what is the cash balance of checking, savings…” accounts for the student.
Some types of information that might be verified include income, taxes, education tax credits, child support, high school completion status or number of members in your household. You can reduce the chances of a verification by importing information from your FAFSA directly from the IRS's data retrieval tool.
Students often skip filling out the FAFSA because they think their families make too much money to qualify for aid. However, there are no FAFSA income limits, so you can submit it—and potentially get valuable financial aid—regardless of your family's earnings.
Don't worry, this is a common question for many students. The good news is that the Department of Education doesn't have an official income cutoff to qualify for federal financial aid. So, even if you think your parents' income is too high, it's still worth applying (plus, it's free to apply).