Parent PLUS Loans are one of several options for parents who need help covering the costs of college. Consider these tips on applying for and managing Parent PLUS Loans.
1. Determine if a Parent PLUS Loan is the right choice
Parent PLUS Loans are borrowed solely in the name of the parent, and cannot be transferred to the student. Only the parent borrower is legally obligated to repay the loan. Some parents prefer a private student loan, even though they will have to cosign the loan, because the student is also responsible for repaying the debt. But, keep in mind that a cosigner is a co-borrower, equally obligated to repay the debt. Parents should never borrow or cosign a loan unless they are capable of repaying the debt on their own, without assistance. Another option worth considering is tuition installment plans, which breaks up the college bills into equal installments.
2. Don’t stress about credit
PLUS Loans have minimal credit underwriting requirements when compared with private student loans. Eligibility does not take credit scores or debt-to-income ratios into account, and only looks back 5 years to determine if there are any adverse credit issues during that time.
If a parent does have an adverse credit history, he or she may still be able to qualify for a Parent PLUS Loan. Prospective borrowers can appeal a PLUS Loan denial if they have extenuating circumstances. They may also qualify for a Parent PLUS Loan with a creditworthy endorser who does not have an adverse credit history.
If a dependent student’s parent is still denied a Parent PLUS Loan, the student becomes eligible for increased Direct Unsubsidized Loan limits, the same limits as are available to independent students.
3. Utilize the college financial aid office
Questions about qualifying for a Parent PLUS Loan or how to obtain a loan can be directed to the college’s financial aid office. They can explain how to apply for a Parent PLUS Loan and answer questions about the process.
Questions may also be directed to the U.S. Department of Education’s Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243). But, since the Parent PLUS Loan is disbursed through the school, the financial aid office is typically a good first step.
4. Choose repayment wisely
Borrowers of a Parent PLUS Loan may defer repaying the loan while the student is in school and for six months after the student graduates or drops below half-time enrollment. Interest, however, which begins to accrue from the date the loan is first disbursed, will continue to accrue during this deferment and will be added to the loan balance at the end of the deferment.
Parent PLUS Loan borrowers can also choose to begin repayment immediately (within 60 days of full disbursement of the loan) to cut down on interest capitalization.
5. Know who to contact to manage the loans
While most of the process of obtaining a Parent PLUS Loan is completed through the school, once the loan is disbursed, responsibility for managing the loans switches to one of several federal loan servicers. To find the servicer, along with current loan balances, visit NSLDS.ed.gov and log in using an FSA ID.