Federal Parent PLUS Loan Introduction
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Summary: The Parent PLUS Loan is a federal direct student loan available to the parents of dependent undergraduate students. The Direct Parent PLUS Loan offers a fixed 7.08% interest rate for the 2019-2020 school year and flexible loan limits. To be eligible, a parent can’t have an adverse credit history. Parent PLUS Loans have a 4.236% origination fee for loans first disbursed on or after Oct. 1, 2019 and before Oct. 1, 2020.
Parents of dependent undergraduate students borrow the Parent PLUS Loan to help their children pay for college or career school. The Parent PLUS Loan offers a fixed interest rate and flexible loan limits.
Before parents borrow from the Parent PLUS Loan program, it is best if their child exhausts eligibility for Direct Loans first, since these student loans have lower interest rates and fees.
Some parents borrow Parent PLUS Loans to make sure their children don’t take on too much student loan debt. But remember, nothing stops parents from helping their children with their student loan payments. Borrowing Direct Loans before Parent PLUS Loans will save the family money.
How to Apply for a Parent PLUS Loan
The first step in the application process is to file the Free Application for Federal Student Aid (FAFSA®) at FAFSA.ed.gov. The FAFSA is a requirement to borrow from the Parent PLUS Loan program.
To obtain a Parent PLUS Loan, parents should request a PLUS Loan at StudentLoans.gov or contact the financial aid office at the student’s college or university.
Guidelines for requesting a Parent PLUS Loan:
- Same parent who will complete and sign the Master Promissory Note (MPN) should request the loan.
- Parent, not the student, must request the loan.
- Same FSA ID that was used to sign the FAFSA must be used to request the loan.
Parent PLUS Loan Eligibility
Parent PLUS Loans are available only to the parents of dependent undergraduate students. The parents of independent undergraduate students are not eligible for the Parent PLUS Loan.
If a dependent student’s parents are divorced, both parents can take out separate Parent PLUS Loans with separate Master Promissory Notes (MPNs). But the combined Parent PLUS Loans cannot exceed the loan limits.
Who can borrow from the Parent PLUS Loan program
| Biological or Adoptive Parent |
Yes |
| Stepparent |
Yes, but only for as long as the stepparent is married to the student’s parent
|
| Grandparents, Aunts, Uncles, Other Relatives |
No, unless they have legally adopted the student |
| Legal Guardians or Foster Parents |
No |
Eligibility for the Parent PLUS Loan does not depend on demonstrated financial need.
Sallie Mae student loans offer competitive fixed and variable rates for undergraduates, graduate students and parents.
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Credit Requirements for a Parent PLUS Loan
Eligibility for a Parent PLUS Loan does not depend on the borrower’s credit scores or debt-to-income ratios.
However, the borrower of a Parent PLUS Loan must not have an adverse credit history.
What is considered an adverse credit history:
- A current delinquency of 90 or more days on more than $2,085 in total debt; or
- More than $2,085 in total debt in collections or charged off in the past two years (before the date of the credit report); or
- Default, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of federal student loan debt in the past five years (before the date of the credit report)
If a parent has an adverse credit history, the parent can still borrow from the Parent PLUS Loan program if they can submit a successful appeal for an exceptional circumstance, or with an endorser (cosigner) who does not have an adverse credit history.
Increased Loan Limits with a PLUS Denial
If a dependent student’s parent is denied a Parent PLUS Loan, the student becomes eligible for the same Direct Unsubsidized Loan limits available to independent students.
| Year 1 and 2 |
$4,000 higher |
| Year 3 and beyond |
$5,000 higher
|
| Aggregate (cumulative) limit |
$26,500 higher |
If either parent later qualifies for a Parent PLUS Loan, the student’s loan limits return to the dependent student level. (Loan amounts already received under the additional Direct Unsubsidized Loan limits will not count against the lower loan limits.)
Other Requirements for a Parent PLUS Loan
The parent and dependent student must also satisfy the general eligibility requirements for federal student aid and federal student loans.
- Students must be enrolled in school on at least a half-time basis
- Male students must have registered with the Selective Service (not required for father)
- Students and parents must be U.S. citizens or nationals, permanent residents, or eligible noncitizens
- Students and parents can’t be in default on a federal student loan
- Parent PLUS Loan proceeds must be used for educational purposes
Parent PLUS Loan Interest Rates and Fees
The interest rates on Parent PLUS Loans are fixed and do not change over the life of the loan. The interest rate for the 2019-2020 academic year is 7.08%.
Every year on July 1, interest rates are reset based on current market rates. The interest rates are based on the 10-year Treasury Note (determined each year by the final auction prior to June 1) plus a fix margin (see table).
Federal Parent PLUS Loan Interest Rates
| Loan Program |
Interest Rate Formula |
Interest Rate Cap |
Current Interest Rate (2019-2020) |
| Parent PLUS Loan |
10-Year Treasury + 4.60% |
10.5% |
7.08% |
The interest on a Parent PLUS Loan starts to add up (accrue) from the date the loan is first disbursed. (Generally, federal student loans are sent to schools in two or more disbursements, except at colleges and universities that have a low default rate.) If the borrower does not pay the interest as it accrues, it will be capitalized (added to the loan balance), increasing the size of the loan.
The current origination fee on Parent PLUS Loans is 4.236%. Fees are deducted from each loan disbursement. Borrowers can ask the college financial aid office to increase the amount borrowed to cover the fees, up to the annual loan limit.
Parents may be able to deduct up to $2,500 per year in interest paid on the Parent PLUS Loan through the student loan interest deduction. This deduction is implemented as an above-the-line exclusion from income, and, thus, may be claimed even if the parent doesn’t itemize on his or her federal income tax return.
Parents should compare the costs and benefits of PLUS Loans and private student loans. Parents with excellent credit may qualify for private student loan interest rates that are lower than the current PLUS Loan rate.
Parent PLUS Loan Limits: How Much You Can Borrow
The annual loan limit on a Parent PLUS Loan is the full annual cost of attendance minus other financial aid received by the student. There is no aggregate (cumulative) loan limit.
The cost of attendance includes:
- Tuition and fees
- Room and board
- Books
- Supplies
- Equipment
- Transportation
- Miscellaneous personal expenses
In-School Deferment and Grace Period
Repayment on a Parent PLUS Loan normally begins no later than 60 days after the loan is fully disbursed. However, borrowers can defer repayment of a Parent PLUS Loan first disbursed on or after July 1, 2008, while the student is in school and during a six-month grace period after the student graduates or drops below half-time enrollment status. Parent PLUS Loans can also be deferred while the parent borrower is enrolled on at least a half-time basis in an eligible program and during the 6-month grace period. However, interest continues to accrue during these deferment periods.
Parent PLUS Loan Repayment
The standard repayment term on Parent PLUS Loans is 10 years. However, borrowers may qualify for a longer repayment term if they consolidate the loans or have more than $30,000 in federal student loans.
Parent PLUS Loans are not eligible for public service loan forgiveness, unless the loans are consolidated and repaid under an ICR plan.
A parent’s Parent PLUS Loans cannot be consolidated with the student’s federal student loans, since the borrowers are different. However, a parent can consolidate their own federal student loans with Parent PLUS Loans, since these loans have the same borrower.
A Parent PLUS Loan is discharged (cancelled) if:
- Borrower becomes totally and permanently disabled
- Borrower dies
- Student dies
Recommendations
- File the FAFSA every year to maintain eligibility for student aid.
- Dependent students should take out Direct Subsidized Loans (if eligible), Direct Unsubsidized Loans, and Perkins Loans before parents consider taking out a Parent PLUS Loan.
- Compare the costs and benefits of Parent PLUS Loans vs. private student loans. Parents with excellent credit may qualify for private student loan interest rates that are lower than the current PLUS Loan rate.
- If a parent is denied for a PLUS Loan due to an adverse credit history, the student should contact the school’s financial aid office to request a higher limit on the Direct Unsubsidized Loan.
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College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
1Rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
2This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
3As certified by your school and less any other financial aid you might receive. Minimum $1,000.
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Sallie Mae Student Loan Full Terms and Information
We encourage students and families to start with savings, grants, scholarships, and federal student loans to pay for college. Students and families should evaluate all anticipated monthly loan payments, and how much the student expects to earn in the future, before considering a private student loan.
This information is for undergraduate students attending participating degree-granting schools. Borrowers must be U.S. citizens or U.S. permanent residents if the school is located outside of the United States. Non-U.S. citizen borrowers who reside in the U.S. are eligible with a creditworthy cosigner (who must be a U.S. citizen or U.S. permanent resident) and are required to provide an unexpired government-issued photo ID to verify identity. Applications are subject to a requested minimum loan amount of $1,000. Current credit and other eligibility criteria apply.
1Interest is charged starting at disbursement, during school and the separation/grace period, and until the loan is paid in full. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan's Current Principal at the end of the grace/separation period. Payments may be required during the grace/separation period depending on the repayment option selected. Variable rates may increase over the life of the loan. Advertised variable rates reflect the starting range of rates and may vary outside of that range over the life of the loan. Advertised APRs assume a $10,000 loan to a freshman with no other Sallie Mae loans.
2Although we do not charge you a penalty or fee if you prepay your loan, any prepayment will be applied as provided in your promissory note: First to Unpaid Fees and costs, then to Unpaid Interest, and then to Current Principal.
3Borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month and may be suspended during periods of forbearance or deferment, if available for the loan.
4Loan amount cannot exceed the cost of attendance less financial aid received as certified by the school. Sallie Mae reserves the right to approve a lower loan amount than the school-certified amount. [Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half time.]
5Only the borrower may apply for cosigner release. Borrowers who meet the age of majority in their state may apply for cosigner release by providing proof of graduation (or completion of certification program), income, and U.S. citizenship or permanent residency (if your status has changed since you applied). In the last 12 months, the borrower must be current on all Sallie Mae serviced loans (including no hardship forbearances or modified repayment programs) and have paid ahead or made 12 on-time principal and interest payments on each loan requested for release. When the cosigner release application is processed, the borrower must demonstrate the ability to assume full responsibility of the loan(s) individually, and pass a credit review that demonstrates a satisfactory credit history including but not limited to no: open bankruptcy, open foreclosure, student loan(s) in default or 90 day delinquencies in the last 24 months. Requirements are subject to change.
6This promotional benefit is provided at no cost to borrowers with loans that first disburse between July 1, 2018 and April 20, 2020. Borrowers who reside in, attend school in, or borrow for a student attending school in Maine are not eligible for this benefit. No cash value. Terms and
Conditions apply. Please visit Chegg.com/studystarter/termsandconditions for complete details. This offer expires one year after issuance
Information advertised valid as of 12/26/2019
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1Aggregate loan limits apply.
2 Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Terms and Conditions Apply.
3Lowest rates shown are for undergraduate loans and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest interest rate offered on the Discover undergraduate loan and highest interest rates offered on Discover student loans, including Undergraduate, Graduate, Health Professions, Law and MBA Loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable Margin percentage. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 2.00% as of January 1, 2020. Discover Student Loans will adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the "interest rate change date"), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Please visit https://www.discover.com/student-loans/interest-rates.html for more information about interest rates.
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Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate (ACH discount) by agreeing to automatic payment withdrawals once in repayment, which is reflected in the APR shown for Full Principal and Interest Repayment Plan loans. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 0.99 as of April 25, 2017.
Under the Full Deferment Repayment Plan option, interest and principal may be deferred while a borrower is enrolled in school on at least a half time basis, and for an additional six month grace period (up to a maximum of 60 consecutive months) following (i) graduation, (ii) termination of enrollment, or (iii) if a borrower ceases enrollment on at least a half-time basis, at which time interest is capitalized and a 60-month repayment period (5-year term), a 120-month repayment period (10-year term) or a 180-month repayment period (15-year term) begins. There are three other Repayment Plan options available, an Interest Only Repayment plan, in which principal will be deferred and payments made on interest only during the same period described above after which payments will increase to full principal and interest payments, a Flat Repayment plan, in which payments of $25 will be made during the same period described above after which payments will increase to full principal and interest payments, and a Full Principal and Interest Repayment plan, in which payments will begin immediately after disbursement. A borrower's actual APR may vary depending on the repayment option selected by the borrower. The dollar amount of the origination fee is based on the amount borrowed and will be added to the outstanding loan balance upon disbursement. Loans are not offered or endorsed by the educational institution that you are attending. CommonBond is not affiliated with any educational institution.
For more information, visit https://commonbond.co/disclaimers#note3.
