Lana Oconnell
Parent PLUS loans are a type of federal loan that parents can take out to help their dependent children pay for college or trade school. These loans are meant to supplement other financial aid offered to the student, such as scholarships or grants, and can be applied for by filling out the Free Application for Federal Student Aid (FAFSA). While Parent PLUS loans offer fewer options and protections than other federal student loans, they can be a helpful way for parents to support their child's education. However, it is important to note that the parent, not the student, is legally responsible for repaying the loan. This guide will explore the options available for repaying Parent PLUS loans, including deferment, income-driven repayment plans, and loan forgiveness programs.
| Characteristics | Values |
|---|---|
| Who is responsible for repayment? | The parent is legally responsible for repaying the loan. |
| When does repayment begin? | Repayment begins immediately after the last disbursement. |
| Can repayment be deferred? | Yes, parents can request a deferment or forbearance while their student is enrolled in school or if they meet certain qualifications. The deferment period can last until six months after their child has graduated. |
| What is the interest rate? | The interest rate for Parent PLUS loans disbursed between July 1, 2025, and June 30, 2026, is 8.94%. This rate is fixed for the life of the loan. |
| Are there fees? | There is a 4.228% fee for loans disbursed on or after October 1, 2020. |
| Are there repayment plan options? | Yes, Parent PLUS loans have three repayment options: Standard, Graduated, and Extended. There is also an Income-Contingent Repayment (ICR) plan available. |
| Can the loan be transferred to the student? | No, PLUS loans cannot be transferred to anyone else, including the student. |
| Can the loan be refinanced? | Yes, depending on the private lender selected, refinancing may result in lower interest rates and improved repayment terms. |
| Are there loan forgiveness options? | Yes, there are loan forgiveness options such as Public Service Loan Forgiveness (PSLF) and Income-Contingent Repayment (ICR) forgiveness after 25 years of payments. |
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What You'll Learn
- Parent PLUS loans are the responsibility of the parent, not the student
- PLUS loans cannot be transferred to the student
- Repayment begins once the loan is fully disbursed
- PLUS loans accrue interest during deferment periods
- Consolidating Parent PLUS loans makes borrowers eligible for the Income-Contingent Repayment (ICR) plan
Parent PLUS loans are the responsibility of the parent, not the student
Parent PLUS loans are a great way to help dependent undergraduate students pay for college or trade school. However, it is important to note that these loans are the responsibility of the parent, not the student.
When applying for a Parent PLUS loan, a credit check is performed to determine any late payments and recent defaults in the applicant's credit history. The loan is then awarded for up to the total cost of attendance minus any financial aid the student has received. The money goes directly to the school, and if there is any leftover, the funds are sent to the parent or the student with the parent's permission.
Repayment for Parent PLUS loans typically begins immediately after the last disbursement is made to the school for that academic year. However, parents can request deferment, meaning no payments are required while the student is enrolled at least half-time. After the student graduates, leaves school, or drops below half-time enrollment, there is an additional six-month grace period before payments begin. During the deferment period, interest will accrue and can be added to the loan principal after this period.
Parent PLUS loans offer fewer repayment options than other federal student loans. The available repayment plans include Standard, Graduated, Extended, or Income-Contingent. The Income-Contingent Repayment (ICR) plan is the only income-driven repayment plan available for Parent PLUS loans, and it requires loan consolidation.
While refinancing a Parent PLUS loan into a new loan in the student's name is an option, it is important to note that the parent remains legally responsible for the loan until it is paid off or forgiven. Therefore, it is crucial for parents to carefully consider their financial situation and priorities when choosing a repayment plan to ensure they can meet their obligations.
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PLUS loans cannot be transferred to the student
PLUS loans are federal loans that parents can borrow to support their children's education. They are meant to supplement school, state, and other federal financial aid offered. The money from the loan is sent directly to the school, and any leftover funds are sent to the parent or the student with the parent's permission.
Before refinancing, it is important to understand the financial and legal implications of the process. By refinancing with a private lender, the borrower loses federal student loan benefits, such as access to income-driven repayment plans and loan forgiveness programs.
To refinance and transfer the PLUS loan to a child, the child must apply for a student loan in their name. The parent should include the PLUS loan on the refinancing application, noting that it is under their name. If approved, the lender will issue a new loan to the child, which can be used to pay off the PLUS loan. The new loan will have different terms and conditions and will be under the child's name and responsibility.
It is important to consider the potential downsides of transferring the loan to the child. The child's credit score may be affected if they are not ready to take on the financial responsibility of the loan.
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Repayment begins once the loan is fully disbursed
Repayment of a Parent PLUS loan begins once the loan is fully disbursed to the school for that academic year. The specific timeframe depends on the school. For instance, colleges with a two-semester academic calendar will receive two loan disbursements from lenders: the first in August or September for the fall semester, and the second in January or February for the spring semester. Repayment would then begin after the second disbursement in January or February. However, parents can request deferment, which means payments are not required while their child is enrolled at least half-time in school. After graduation, there is an additional six-month grace period before payments begin. During deferment, interest will accrue and can be added to the loan principal after this period.
There are several repayment plan options for Parent PLUS loans, including standard, graduated, extended, or income-driven. The standard repayment plan involves fixed monthly payments over 10 years. The graduated repayment plan starts with smaller payments that gradually increase over the 10-year repayment period. The extended repayment plan offers fixed or graduated payments over a longer period, typically 25 years, resulting in lower monthly payments but higher overall interest costs.
Consolidating a Parent PLUS loan can make it eligible for the Income-Contingent Repayment (ICR) plan, which reduces monthly payments to either 20% of the borrower's income or the monthly payment on a fixed 12-year plan, whichever is cheaper. However, consolidating federal student loans with Parent PLUS loans is not advisable, as it will result in the loss of certain repayment plan options and forgiveness programs.
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PLUS loans accrue interest during deferment periods
Parent PLUS loans are typically taken out by parents or guardians to help their child with the cost of college. These loans are federal loans and are distinct from direct student loans. Parent PLUS loans are generally more expensive and offer less flexibility than federal loans made directly to students. They also offer fewer options and protections than other federal student loans. For instance, Parent PLUS loans do not qualify for all of the income-driven repayment plans and loan forgiveness programs.
Parent PLUS loans are unsubsidized, meaning they accrue interest during deferment periods. Deferment means no payments are required while the child is enrolled in school. Once the child graduates, the parent has an additional six months before payments begin. During this deferment period, interest will accrue. This interest is then added to the loan principal after the deferment period.
There are a few repayment options for Parent PLUS loans. The Standard repayment plan involves fixed monthly payments for 10 years. The Graduated repayment plan starts with smaller payments, gradually increasing over the 10-year repayment period. The Extended repayment plan offers fixed or graduated payments for 25 years. Consolidating a Parent PLUS loan makes the borrower eligible for the Income-Contingent Repayment (ICR) plan, which reduces monthly payments to either 20% of the borrower's income or a 12-year repayment plan, whichever is cheaper.
It is important to note that consolidating Parent PLUS loans with other federal student loans is not advisable, as it may result in the loss of certain benefits and repayment options.
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Consolidating Parent PLUS loans makes borrowers eligible for the Income-Contingent Repayment (ICR) plan
Parent PLUS loans are federal loans that parents can take out to help their dependent undergraduate children pay for college or trade school. They are intended to supplement other financial aid offered to the student, such as scholarships, and the money goes directly to the school.
Parent PLUS loans are unsubsidized, meaning they accrue interest during deferment periods. They also have higher interest rates and origination fees than federal student loans. They offer fewer options and protections than other federal student loans, and they do not qualify for all income-driven repayment plans and loan forgiveness programs.
However, consolidating Parent PLUS loans makes borrowers eligible for the Income-Contingent Repayment (ICR) plan. This is one of the more expensive Income-Driven Repayment plans, but it can significantly lower payments for borrowers with low incomes and/or small loan balances. The minimum payment on ICR is $5, and payments are based on the borrower's income, family size, and loan debt. The payment amount is recalculated each year and must be reapplied for. Any outstanding balance will be forgiven after 25 years, though income tax may be owed on the forgiven amount.
To consolidate Parent PLUS loans, borrowers can turn them into Direct Consolidation Loans. This will result in only one monthly payment, and the amount of time to repay the loan may be extended. However, borrowers should not consolidate Parent PLUS loans with other federal student loans, as this will cause a loss of repayment plan options and forgiveness programs for the non-Parent PLUS debt.
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Frequently asked questions
The parent is legally responsible for repaying the Parent PLUS loan.
Repayment for the Parent PLUS loan begins immediately after the final disbursement of the loan. The specific timeframe depends on the school. Generally, repayment begins in January or February for the spring semester.
There are a few options for repaying the Parent PLUS loan, including the Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plan, and Income-Contingent Repayment (ICR) plan. The Standard Repayment Plan gives you 10 years to repay the loan with fixed monthly payments. The Graduated Repayment Plan starts with smaller payments and gradually increases over the 10-year repayment period. The Extended Repayment Plan offers fixed or graduated payments for up to 25 years. The ICR plan reduces your monthly payment to either 20% of your income or the monthly payment amount on a 12-year plan, whichever is cheaper.
