Parent PLUS Loans: What to Know

Every parent dreams of providing a better life for their child. And for most parents, that means setting their child up for success financially, like taking care of their college tuition.

Unfortunately, paying for college out-of-pocket can be costly. And when that first tuition bill comes due, many parents end up resorting to student loans. The worst part of this? Many don’t realize what they’re signing up for.

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  • Parent PLUS loans are different than regular federal student loans.
  • There are some forgiveness options for Parent PLUS loans.
  • Parents should consider other alternatives before choosing Parent PLUS loans.

. . .

What Are Parent PLUS Loans? 

A Parent PLUS loan is a federal student loan given to a parent whose child is an undergraduate student. Parents of graduate or professional students are not eligible for these loans.

Just like other federal loans, Parent PLUS loans do not have a specific credit score threshold or income requirement. Even if your parents have poor credit, they may still be eligible for these loans. 

The biggest difference between a Parent PLUS loan and a regular federal student loan is that the limit on a Parent PLUS loan is significantly higher. For example, the maximum loan limit for a federal student loan is between $31,000 and $57,500 for undergraduate students.

For Parent PLUS loans, the limit is 100% of the cost of attendance minus any other financial aid. There is no aggregate limit. This means that parents can borrow much more than students.

And while that can help cover the cost of tuition, it also means that parents can easily wind up with a six-figure balance — or even more. As soon as the loan funds are disbursed to the school or student, the loan will immediately enter repayment. 

However, parents can request a deferment while the student is enrolled at least part-time — although interest will still accrue during this time. There is also an extra six-month grace period after your child leaves school, drops below part-time status, or graduates from college. Once this grace period is over, repayment will begin.

If you defer payment, unpaid interest will be capitalized, which means it will be added to the principal. This means that you will end up paying more in total interest than if you had started making payments while your child was still in school.

READ MORE: Federal vs Private Student Loans

How Do Parent PLUS Loans Work?

To be eligible for a Parent PLUS loan, you must complete the Free Application for Federal Student Aid (FAFSA). The FAFSA is the form every student and parent should complete to qualify for all types of federal financial aid, including loans, grants, and work-study. 

For parents to be eligible for Parent PLUS loans, they must have a Social Security number, be a legal resident or eligible non-citizen, and meet other general financial aid requirements. Also, the parent must have a generally clean credit report. 

Interest rates on Parent Plus Loans are typically higher than rates for other federal student loans. For example, for the 2024-2025 school year, the interest rates are as follows:

  • Direct loans for undergraduate students: 6.53%
  • Direct loans for graduate students: 8.08%
  • Parent and Grad PLUS loans: 9.08%

Parent PLUS loans also have a higher origination fee than other types of student loans, at 4.228%. This fee is deducted from the disbursed loan balance.

Parent PLUS Loans vs. Private Loans

If you’re a parent of an undergraduate student and want to help pay your child’s college expenses, your two options are private student loans and federal Parent PLUS loans.

Private student loans may have lower interest rates than federal student loans. However, they are usually only available if you have a high credit score and a steady income source. Unfortunately, private loans usually don’t come with any income-driven repayment plans. 

READ MORE: Your Guide to Private Student Loans

FAQs

Are Parent PLUS loans forgiven after 10 years?

Parent PLUS loans are not automatically forgiven after a certain period.

If you’re interested in loan forgiveness, then you can choose between PSLF or IDR loan forgiveness. To qualify for either of those plans, you must consolidate your student loans into a Direct Consolidation Loan.

Are Parent PLUS loans eligible for PSLF?

PSLF, or Public Service Loan Forgiveness, is a program that forgives any remaining loan balance if you work for a non-profit or government organization for 10 years while being on a qualifying repayment plan. 

One of the biggest distinctions is that the parent must be eligible for PSLF, not the student. For example, if your child works for a non-profit and you work for a for-profit company, you will not be eligible for PSLF. Also, if you’re retired and previously worked for a non-profit, you will still not qualify for PSLF.

To be eligible for PSLF, you must consolidate your Parent PLUS loan into a Direct Consolidation Loan. Once that process is completed, you can sign up for the income-contingent repayment (ICR) plan.

This is the only income-driven repayment plan for which Parent PLUS loans are eligible. Parent PLUS loans do not qualify for the SAVE or IBR plan; those are only available to students.

Can you consolidate parent PLUS loans?

Federal Parent PLUS loans are eligible for the direct loan consolidation program. If you use this program, all your Parent PLUS loans will be consolidated into one Direct Consolidation Loan.

Consolidating Parent PLUS Loans will give you the option to qualify for PSLF or ICR loan forgiveness. 

Learn More: How to Consolidate Student Loans

Are Parent PLUS loans forgiven if the parent dies?

Parent PLUS Loans will be discharged if either the parent or the student passes away, according to the Department of Education. There should be no taxable event in case this happens.

This is one of the main reasons why experts recommend federal student loans instead of private loans. If you have private student loans and pass away, the lender may come after your estate for the remaining loan balance.

Can you refinance Parent PLUS loans?

If you have Parent PLUS loans, you can refinance them into a private student loan. Sometimes, private loans may have lower interest rates than Parent PLUS loans. You may also be able to refinance into a longer repayment term, which may also lower your monthly payments. 

However, this can also mean that you’ll pay more in total interest over the life of the loan. If you’re worried about your loan payments, then refinancing can immediately ease your cash flow.

And remember, you can always make extra payments on your loans. Most private loans don’t charge prepayment penalties, so you can pay them off early with no extra fees.

Can you file for bankruptcy if you have Parent PLUS loans?

If you’re struggling with your Parent PLUS loan payments, there are few options beyond consolidation, deferment, or forbearance.

If you truly can’t afford your payments anymore, you can try to discharge your loans through bankruptcy. Unfortunately, student loans are some of the most difficult to discharge in bankruptcy.

How do Parent PLUS loans affect my credit?

Having Parent PLUS loans can increase your debt-to-income ratio, one of the most important factors that lenders consider. If your DTI is too high, then you may be rejected for other financing. Plus, if you miss payments your score will be negatively impacted.

What is the double consolidation loophole for Parent PLUS loans?

In general, Parent PLUS loans are only eligible for the ICR plan, even when consolidated into a Direct Consolidation Loan. However, for a limited period, parents can take advantage of the double consolidation loophole.

This rule states that if parents consolidate their Parent PLUS loans twice, then those loans will be eligible for more types of income-driven repayment plans, including the new SAVE plan.

To qualify for double consolidation, you must follow several steps. First, you must have at least two types of federal student loans. 

For example, if you have two Parent PLUS loans, you must consolidate each of them separately. Then, you can consolidate them together to be eligible for more repayment options.

If you have one Parent PLUS loan and another type of federal student loan, you must also consolidate them separately before consolidating them together.

However, this program won’t be around forever. “It’s technically available until July 2025,” said student loan lawyer Adam S. Minsky.

What is an alternative to Parent PLUS loans?

Parents should ensure that their child maxes out all other types of financial aid, especially grants and scholarships that don’t have to be paid back after graduation. 

Students can look for scholarships on popular sites, like Fastweb, Bold.org and Schoalrships.com. And they should keep searching for scholarships even if they’re already enrolled in college. 

Also, students should always try to maximize their own student loan opportunities before parents take out any Parent PLUS loans. Rates are lower for regular student loans, so even if a parent wants to pay for their child’s education, they can save money by having their child take out a federal student loan first.

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I'm an award-winning lawyer and personal finance expert featured in Inc. Magazine, CNBC, the Today Show, Business Insider and more. My mission is to make personal finance accessible for everyone. As the largest financial influencer in the world, I'm connected to a community of over 20 million followers across TikTok, Instagram, YouTube, Facebook and Twitter. I'm also the host of the podcast Erika Taught Me. You might recognize me from my viral tagline, "I read the fine print so you don't have to!"

I'm a graduate of Georgetown Law, where I founded the Georgetown Law Entrepreneurship Club, and the University of Notre Dame. I discovered my passion for personal finance after realizing I was drowning in over $200,000 of student debt and needed to take action-ultimately paying off my student loans in under 2 years. I then spent years as a corporate lawyer representing Fortune 500 companies, but I quit because I realized I wanted to have an impact; I wanted to help real people and teach them that you can create a financial future for yourself.

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Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more.