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).
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.
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 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.
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.
But during the Direct PLUS Loan Application process, you'll go through a credit check to confirm one specific requirement: not having an adverse credit history. a recent bankruptcy discharge, tax lien, wage garnishment, or foreclosure.
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.
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.
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.
According to the most recently available data from the National Center for Education Statistics (NCES), the average loan amount for Parent PLUS loans in 2019-2020 was $34,630. When adjusting for inflation, that's $37,970 in 2021-2022 constant dollars.
What income is too high for FAFSA? There is no income that is too high to file a FAFSA. No matter how much you make, you can always submit a FAFSA. Eligibility for need-based financial aid increases as the cost of attendance increases, so even a wealthy student might qualify for financial aid at a higher-cost college.
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.
Parent PLUS loans are educational loans, and the borrower can get an income tax deduction. When borrowers review their tax deductions, they can deduct up to $2,500 per year in interest paid on the Parent PLUS loan.
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.
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.
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.
Generally, you'll have from 10 to 25 years to repay your loan, depending on the repayment plan that you choose.
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).
Can more than one parent borrow a PLUS Loan? If a student's parents are divorced, both the custodial and non-custodial parent may borrow a PLUS Loan for their dependent, undergraduate student.