Key Takeaways. PLUS loans are federal loans that parents can take out to cover their child's college costs. 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.
Repayment. If you receive a Direct PLUS Loan as a graduate or professional student, you don't have to make any payments while you're enrolled in school at least half-time, and for an additional six months after you graduate, leave school, or drop below half-time enrollment.
Direct PLUS loans are federal loans that graduate or professional degree students or parents of dependent undergraduate students can use to help pay for education expenses. Direct PLUS loans have a fixed interest rate and are not subsidized, which means that interest accrues while the student is enrolled in school.
Parent PLUS loans are loans taken out by the parent and the responsibility for repayment falls entirely on the parent. Even though the loan is helping pay for the child's education, the loan is fully in the parent's name. The child does not have to cosign a parent PLUS loan or share responsibility for making payments.
If you're a parent who's taken out a Parent PLUS loan to support your child's higher education expenses, you have a chance to reduce your tax bill for the tax year through this specific deduction, potentially saving up to $2,500 per year.
If the student's parents are divorced, both the custodial parent and the noncustodial parent are eligible to borrow from the PLUS loan program, provided that the combined amounts borrowed do not exceed the cost-of-attendance minus aid received cap.
With federal PLUS loans, the government will check for an adverse credit history, although there is still no minimum credit score requirement. Those who have a less-than-perfect credit history, however, may need to meet additional requirements to get approved.
Are Direct PLUS Loans eligible for Public Service Loan Forgiveness (PSLF)? Your loan's eligibility for Public Service Loan Forgiveness (PSLF) depends on whether you have a Direct PLUS Loan for graduate or professional students or a Direct PLUS Loan for parents.
When does Parent PLUS Loan repayment begin? You start repaying your loan once it's fully disbursed — or paid out — to the school for that academic year. The specific timeframe depends on the school. Generally speaking, colleges with a two-semester academic calendar will receive two loan disbursements from lenders.
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.
How much can I borrow in Direct PLUS Loans? There are no set annual or aggregate limits. You may borrow up to your full cost of attendance, minus any other financial aid you receive (including Direct Subsidized Loans, Direct Unsubsidized Loans, scholarships, and certain fellowships).
Pay Off High-Interest Loans First
With this approach, you pay off your loans from the highest interest rate to the lowest. You make the minimum payments on each balance except the highest-rate loan. You also make an extra monthly payment based on how much you can put toward the debt.
Can I cancel my Direct PLUS Loan if I decide I don't need it or the full offered amount? Before your loan money is disbursed, you may cancel all or part of your loan at any time by notifying the school.
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.
Interest begins accruing immediately after disbursement. The federal government does not pay the interest on the Federal PLUS Loan. If the borrower does not pay the interest as it accrues, it will be added to the loan balance (capitalized) when the loan enters repayment, which increases the debt.
Direct PLUS Loans have an interest rate of 8.05% for the 2023-24 school year for all borrowers, compared with 7.05% for Direct Unsubsidized Loans for grad students. They also have a loan fee equal to 4.228% of the principal, which is four times the fee for a Direct Unsubsidized Loan.
Key takeaways. To qualify for a parent Direct PLUS loan, your child must be an undergraduate student enrolled in an eligible college at least half time. You also have to pass a credit check or you may have to apply with a cosigner.
If you have a good credit history and can qualify for a lower interest rate on a private student loan, it may be a better option for you. However, there are protections and benefits of federal loans that could be beneficial in some circumstances, so in that regard a Parent PLUS loan may be the better choice.
Yes, Federal Direct Loans, including the parent PLUS loan or a private student loan are available to meet these expenses. Off-campus living expenses are included in your total budget, so loans can be borrowed to cover them.
Can the loan be transferred to the student? No, a Direct PLUS Loan made to a parent cannot be transferred to the child. You, the parent borrower, are legally responsible for repaying the loan.
Your Last Resort: Private Loans
These loans have different repayment options than federal loans and will most likely cost you more in interest. Also, they may not have the same kinds of protections in case of disability or death as do the federal loans. Private loans generally should be taken out only as a last resort.
There are no set borrowing limits for Direct PLUS Loans, but you may not borrow more than the cost of your child's education minus any other financial aid received, such as a Direct Subsidized Loan or Direct Unsubsidized Loan. The school will determine the actual amount you may borrow.