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. The student must be enrolled at least half time and be making satisfactory academic progress (Eligibility & Academic Standards).
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.
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. write-off of federal student aid debt.
Yes. Parent PLUS loans are solely the legal responsibility of the parent, so of course they are based on their income. If you double consolidate you would make the loan eligible for less expensive repayment plans than ICR.
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.
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).
Parent PLUS Loans and Credit History
Unlike some other borrowing situations, applying for PLUS loans does not consider debt-to-income ratios, credit scores or employment status. The most essential factor is not having an adverse credit history.
What Are Some Reasons to Avoid PLUS Loans? First, PLUS loans have no automatic grace period. Then there's the fact they aren't eligible for most IDR plans. Then, borrowing too much is easy to do, and finally, they're nearly impossible to get out of, even in bankruptcy.
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 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.
PLUS loans don't require good credit, making them an ideal option for low-credit borrowers. However, you can't have an adverse credit history, such as bankruptcies or loan defaults within the past five years.
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.
There is no income cut-off to qualify for federal student aid. Many factors—such as the size of your family and your year in school—are considered.
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.
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.
The maximum PLUS loan amount you can borrow is the cost of attendance at the school your child will attend minus any other financial assistance your child receives. The cost of attendance is determined by the school.
Out of all the income-driven repayment plans, Parent PLUS loans only qualify for the Income-Contingent Repayment (ICR) plan. Enrolling in ICR requires you to consolidate your Parent PLUS loans. Once you're on ICR, you can pursue Public Service Loan Forgiveness.
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.
Key takeaways. Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
Generally, you'll have from 10 to 25 years to repay your loan, depending on the repayment plan that you choose.
Average American debt payments in 2024: 11.5% of income
The Federal Reserve tracks the nation's household debt payments as a percentage of disposable income. The most recent debt payment-to-income ratio, from the second quarter of 2024, is 11.5%.
You generally must meet minimal credit standards, and the student must meet general eligibility requirements for financial aid. Grandparents and legal guardians aren't eligible to take out these loans unless they legally adopt the student.
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.