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The Facts on Parent PLUS Loans

Parent PLUS loans are a practical and affordable way to finance children’s education. We’ll tell you what you need to know about these government-guaranteed loans here.

What Parent PLUS Loans Are

Federal Parent PLUS loans are funds borrowed by parents to finance children’s education expenses at a qualifying university or college. For the student to be eligible to receive Parent PLUS loan funds, he/she must be enrolled at least half-time at an approved learning institution. Parents do not have to meet any income requirements, but they do have to pass a credit check prior to approval. The main benefit of financing a child’s education with a Parent PLUS loan is the low interest rate they can provide because they are federally guaranteed. With a Parent PLUS loan, parents can borrow up to the entire cost of their child’s undergraduate education minus any financial aid the student is awarded.

Important Information about Parent PLUS Loans

If you are considering using a Parent PLUS loan to finance children’s education, here is what you should know:

  • Interest is sometimes tax-deductible
  • PLUS loans for parents do not require any collateral
  • The funds are non-need based. To qualify for a Parent PLUS loan, you will need to pass a credit check, but you do not have to demonstrate a need for the funds. Compared to that of private loans, the credit check is fairly modest; it is basically just a precaution to make sure that you don’t have bad credit. The issuers of Parent PLUS loans define bad credit as being more than ninety days delinquent on any loan or having a Title IV loan in the last five years that went into default, foreclosure, bankruptcy discharge, wage garnishment, or write-off.
  • Your child’s school might require you to complete the FAFSA (Free Application for Federal Student Aid) before you can qualify for a Parent PLUS loan. Contact the financial aid office at your child’s school for additional information.
  • Parent PLUS loans have fixed interest rates of 8.5%
  • The loans require an origination fee of 3%
  • No guarantor of premature repayment penalties
  • If you sign up for automatic payments from your checking or savings account, you can save 0.25% on your loan’s interest rate

Visit FAQ for answers to common questions regarding student loans.