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Parent PLUS College Loan

Receiving a college education may be the single most important accomplishment that one may achieve in their entire life time.

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A Parent PLUS college loan helps parents pay for the education of their child by acting as a cosigner for federally backed loans. Unlike other types of federally backed student loans, a Parent PLUS college loan does not depend on demonstrable financial need, but rather, depends on a parent’s credit history. Also, the cap placed on the amount of PLUS loans available on a yearly basis remains higher than other types of federal funding, $40,000 yearly, which makes them useful for parents who cannot pay for the entire Expected Family Contribution (EFC) that the government delineated after processing their child’s Free Application for Federal Student Aid (FAFSA).

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PLUS loans help parents pay for tuition after deducting the total amount rewarded through FAFSA. For instance, if tuition costs $20,000, and a student receives $5,000 in federal backed aid, a parent could contribute up to $15,000 with a Parent PLUS college loan, but no more than $15,000.

Benefits to Parent PLUS college loans:

• No collateral required
• 8.5% fixed interest rate
• Interest may be tax deductable
• Large yearly allowance
• Not need based

A Parent PLUS college loan carries a fixed interest rate of 8.5% and a ten year repayment period that can be adjusted due to excessive financial hardship. These loans do not require collateral, and help students build good credit because the parent acts as cosigner and pays for down the loan. One highly attractive aspect to financially keen parent is the fact that some of these loans may carry tax-deductible interest as well.

Two types of Parent PLUS college loans exist. Direct PLUS loans originate with the federal government through the William D. Ford Federal Direct Loan Program (FDLP). The second type, FFELP PLUS loans, originate with the parent’s lender through the Federal Family Education Loan Program (FFELP). Both of these types of loans require modest credit history and both remain with the parent after graduation. Unlike other types of federal loans, the parent must begin to repay these loans within 60 days of the loan’s disbursement, rather than after the child graduates from college. The government also charges a 3% origination fee and 1% guarantee. Though a school may not require a FAFSA for parents to receive these loans, lenders urge parents to fill out this form in order to insure that the school certifies their Parent PLUS college loan.

Graduate students can also take advantage of Grad PLUS loans. These loans do not require a parent cosigner. Lenders grant these loans based on the individual student’s credit history. Grad PLUS loans also carry an interest rate of 8.5%, but students must fill out a FAFSA to receive this type of loan.

Ultimately, a Parent PLUS college loan can help parents struggling to pay for a student’s college education. With 65% of full-time students leaving college with student debt and private loan debt rising by 734% in the last decade, parents may fear that their child will leave college with an insurmountable level of debt. Parents can lower student debt by taking some of these loans out themselves, and the federal government offers parents the option of a Parent PLUS college loan to help them do just that.

In an age where individual tax payers pay nearly $400 a year to fund litigation regarding student loans, and where bankruptcy no longer relinquishes student loan debt, parents can help college grads by taking advantage of PLUS loans, especially if students do not receive large financial aid packages through FAFSA due to their parent’s financial status.

Are you interested in a Parent PLUS College Loan?
Apply for a Parent PLUS College Loan today.