Parent Plus Loans For Students

Parent Plus Loans For Students

7 min read


Parents and students have been using Parent PLUS loans (PLUS stands for Perkins Loan) since the late 1990s to help pay for college costs. Parents borrow money for their children’s education, and then those loans are passed down to the student upon graduation.

While these loans may seem like a good idea at first, they can be problematic if not handled properly. A PLUS loan is a type of federal direct student loan designed primarily for parents who need to finance the cost of postsecondary education for their undergraduate child. PLUS loans carry variable interest rates based on certain factors, including the borrower’s credit history, school attended, and expected family contribution (EFC). As a result, borrowers often find themselves paying higher-than-normal interest rates when compared to conventional student loans.

Parents who receive PLUS loans are encouraged to repay them over a maximum period of 10 years. However, many borrowers take out longer term loans than this, accumulating debt at interest rates substantially higher than what they would pay with a traditional private lender. And even though the government guarantees payments on PLUS loans, this guarantee does not apply to private lenders. This means that even if a parent’s PLUS loan defaults, the government won’t cover any losses.

In order to avoid these problems, some states require colleges and universities to offer programs to help parents understand the risks associated with PLUS loans. These state-run programs provide information about the different types of loans available, repayment options, how to manage finances, and where to go for financial aid. If your child attends a school that doesn’t offer such a program, consider finding a local bank or credit union that offers financial counseling services.

A PLUS loan is a great option for parents, but if you think you might qualify for a private student loan instead, check out our guide to student loans for more details.

Parent Plus Loans For Students

Parent PLUS Loans Are Available To Parents Of Undergraduate And Graduate Students Who Have An Expected Family Income Less Than $65,000 Per Year.

You Need A Federal Stafford Loan Or Direct Subsidized Student Loan To Obtain Your Parent PLUS loan.

If You Pay Back Your Parent PLUS Loan On Time, You Will Not Be Required To Repay Any Balance.

After You Complete Your Education At The End of 2 Years, You Can Refinance Your Parent PLUS Loan Without Payment.

Parent Plus Loans For Students

Parent plus loans for students are designed to help parents who want to help their kids pay for school expenses without asking them to sacrifice their own financial situation. These loans are specifically aimed at helping families who are looking to take advantage of the rising cost of college education. Parents are able to borrow money based on their income, assets, and credit score. There are no prepayment fees and interest rates depend on each individual’s circumstances and repayment plan.

Student loans are considered to be the second largest debt owed in the U.S., behind mortgages. According to the Federal Reserve Bank of New York, student loan debt currently stands at $1.1 trillion. While tuition costs continue to rise, many schools do not offer scholarships to assist students with paying for tuition costs. In addition to tuition, many colleges charge additional fees including room and board which makes it difficult for some students to balance finances while attending school. Unfortunately, even if students do receive aid, they may still have trouble covering their entire tuition bill. This is where parent plus loans can help.

What are parent plus loans?

Are you considering borrowing funds for your child’s higher education? If so, then perhaps parental PLUS (PLUS refers to the “plus” side of the PLUS Loan) could be right for you!

PLUS Loans are private educational loans offered exclusively to parents and legal guardians.

Parents can borrow up to the total amount of student loans already taken out and paid back by their children.

Interest rate varies depending on family size, income, and credit history.

No prepayment penalty.

Can be combined with federal assistance programs like Stafford Loans, Perkins Loans, or FFELP Loans.

How does it work?

You begin by completing a short application online.

After applying, you will be contacted by a representative to discuss your application.

Once approved, you will be notified via email and text message regarding the terms of the loan.

Repayments begin after graduation.

Parent Plus Loans For Students

How do you think the economy should deal with the student-loan crisis?

Students who want a college education but lack the funds often turn to private loans known as Parent PLUS Student Loans. But these loans have high interest rates and low credit limits. So students could wind up paying tens of thousands of dollars to get a degree that would help them pay off their debt years later.

To fix this problem, President Obama proposed last year to make two federal loan programs more generous to poor families whose children attend school. One program covers undergraduate education; the other, graduate studies. But just months after he signed his proposal into law, Congress rejected an extension of both programs, saying it did not want to spend money on the proposal while cutting government spending elsewhere.

Now, though, some lawmakers seem ready to revive the idea. Members of the House Education and Labor Committee say they plan to hold a hearing Wednesday to examine how to improve access to higher education for parents struggling to afford it. And Democratic leaders have signaled support for giving parents a chance at a second shot.

“We need to find ways to increase access to Pell Grants — we know they work,” said Representative George Miller (D-Calif.), chairman of the committee and ranking member of the panel’s Subcommittee on Postsecondary Education, Lifelong Learning and Employment. “But what about parents who don’t qualify for those grants, but still want to send their kids to college? We need to address that issue.”

The House bill introduced last year would have given parents in households earning less than $125,000 a year up to $5,500 to pay tuition for their child each year. Families making between $125,000 and $150,000 annually would have been eligible for $10,000.

Representative Virginia Foxx (R-N.C.) says she plans to introduce legislation today that would extend the same program to graduate students. In addition, Ms. Foxx says, some lawmakers are considering extending the program to cover the cost of room and board.

Ms. Foxx says she wants to ensure that no family is turned away from higher education because they cannot afford financial aid. She notes that many graduates struggle financially once they leave school. A recent study by Moody’s Analytics Inc., a data firm, showed that 25 percent of borrowers entering repayment under the federal Income Based Repayment program had defaulted on their loans by the third year.

Most Republican members of Congress oppose using existing taxpayer dollars to provide additional assistance to students. “The president’s proposal last session was a big mistake,” Senator Lamar Alexander (Tenn.), the ranking Republican on the Senate Health, Education, Labor and Pensions Committee, said in an interview Monday. He added, “I think it makes sense to have a discussion about changing the whole system.”

One option being considered is to allow parents to take out private loans with lower rates if their income exceeds certain limits, similar to the way private banks offer mortgages. Such an approach would eliminate the need for direct public subsidies, Republicans argue, since the loans would come directly from lenders willing to lend to people with bad credit.

Democrats counter that the private market for student loans does not adequately serve needy families, especially when compared with the ease with which Americans obtain home loans. Democrats also note that the private sector already offers some financing options for students who otherwise might not be able to pursue a college degree.

And some economists question whether any subsidy for students would create incentives for schools to raise tuition in order to attract the extra business.

In fact, the share of undergraduates who receive federal financial aid has risen sharply over the past decade, even as total enrollment has declined, according to data provided by the College Board. Over the past five years, the number of students receiving Pell Grants increased by about 80 percent, even as the total population of full-time, first-year undergraduates fell by 20 percent.

Some critics of the current system also worry that the federal government could end up subsidizing inefficient colleges and universities, which some say charge too much for tuition.

Parent Plus Loans For Students

Parent PLUS Loans

The Parent PLUS Loan is a Federal Direct Unsubsidized loan available to parents and legal guardians who wish to help pay their dependents’ educational expenses at least half time while they attend school. Parents may borrow money (up to $23,500) to cover eligible tuition, fees and books for their dependent students attending any public, private, non-profit or vocational institution of higher education in the United States.

Eligibility Requirements

Parents must have been married to the student’s parent for at least two years; be U.S. citizens or permanent residents; not be behind on payments on previously borrowed amounts; and not owe delinquent student loans or have had previous bankruptcies.

Terms and Conditions

Repayment begins six months after graduation or dropout date, whichever comes first. Repayment period ranges from 6 to 10 years depending on lender options. Interest accrues at variable rates from 2.9% to 5.51%. There is no grace period before interest starts accruing. Lenders may charge collection costs plus reasonable attorney’s fees if borrowers default. Borrowers must repay all debt before graduating from college.

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