What Is A Parent PLUS Loan for 2025?

by Alex Hillsberg , MA

Student Finance & Loan Expert

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According to current data on college education in the United States, post-secondary education is becoming more expensive and is out of reach for more families. The cost of college at four-year institutions for full-time undergraduate students in the U.S. is increasing each year, with the average tuition reaching $38,270 in the Academic Year 2022-2023. Moreover, the Institute for Higher Education Policy (IHEP) reports that families with the lowest incomes would need to contribute 148% of their household income to pay for full-time attendance at a four-year college.

With the rising costs and financial challenges, many are turning to a parent PLUS loan. However, several risks are associated with this type of financial aid, and many experts say families must carefully consider if this is the best college financing method. In this guide, we dive into the pros and cons of parent PLUS loans and other helpful details so you can decide if this is a feasible option.

What are the benefits of a Parent PLUS loan?

• Allows parents to borrow up to the full cost of attendance to help their undergraduate students pay for college, filling any gaps after other financial aid.
• The parent PLUS loan application and approval process can take only a few minutes.
• Provides flexible repayment terms, such as paying the interest as you borrow and paying back earlier.

Table of Contents

1. How does a parent PLUS loan differ from a private student loan?
2. Who is eligible for a parent PLUS loan?
3. What are the risks of taking out a parent PLUS loan? 
4. How do you apply for a parent PLUS loan?
5. How are parent PLUS loan limits and interest rates determined?
6. Does a parent PLUS loan affect your credit score? 
7. What are alternative loan options if a parent PLUS loan isn’t suitable?
8. Can you get a parent PLUS loan with bad credit?
9. Can parent PLUS loans be consolidated for easier repayment?
10. Can an accelerated degree program mitigate parent PLUS loan burdens?
11. Can you refinance a parent PLUS loan?
12. Could alternative educational pathways reduce reliance on parent PLUS loans?
13. Are there any circumstances where a parent PLUS loan can be forgiven or canceled?
14. How can families plan ahead to minimize parent PLUS loan debt?
15. How do parent PLUS loans impact your overall financial planning?
16. Are parent PLUS loans enough to cover all college expenses?
17. How does pursuing a flexible master’s program influence long-term financial outcomes?
18. Are vocational training programs an effective alternative to parent PLUS loans?
19. How might evolving federal policies impact your parent PLUS loan options?
20. Which student loan lenders offer the best refinancing options for parent PLUS loans?
21. Are there any tax implications associated with parent PLUS loans?
22. Other Things You Should Know About a Parent PLUS Loan

How does a parent PLUS loan differ from a private student loan? 

Parent PLUS loans differ from private student loans in several ways:

• Lender. Parent PLUS loans are federal student loans provided by the U.S. government, while private student loans are offered by private lenders like banks, credit unions, and online lenders.
• Primary Borrower. The parent is the primary borrower for a parent PLUS loan. Meanwhile, the primary borrower for a private student loan can be either the parent or the student.
• Interest Rates. Parent PLUS loans have a fixed interest rate. Private student loan interest rates vary based on the borrower's credit and can range from around 5.09% to higher rates, with both fixed and variable options available.
• Fees. Parent PLUS loans have an upfront fee deducted from the loan amount. Private student loans typically have no application, origination, or disbursement fees.
• Repayment Options. Parent PLUS loans offer standard, extended, and graduated repayment plans. Private student loan repayment options vary by lender but may include interest-only payments while in school, deferred repayment, and flexible term lengths.

Private student loans generally offer more flexibility but require stronger credit compared to the federal parent PLUS loan program. On the other hand, the latter is eligible for forgiveness under certain conditions while the former is not. 

Overall, both of these loans come with different risks. As such, it would be wise to explore all sources of financial aid before applying for either type of loan. According to my research for this guide, more borrowers turn to federal subsidized or unsubsidized loans rather than nonfederal/private student loans and parent PLUS loans.

A 2024 Statista published report on sources of student loans in the U.S. shows that the number of people taking out a parent PLUS loan remained on the same scale in the last few academic years. For A.Y. 2022-2023 and 2021-2022, only 11% of student loans were sourced from parent PLUS loans. In comparison, that figure was 10% in A.Y. 2020-2021 and 12% in A.Y. 2019-2020. 

Who is eligible for a parent PLUS loan?

Here are the key eligibility requirements for a parent PLUS loan:

• You must be the biological, adoptive, or stepparent of a dependent undergraduate student.
• Your child must be enrolled as a regular student in an eligible degree or certificate program at an eligible college or career/trade school.
• You and your child must meet the general eligibility requirements for federal student aid, such as being a U.S. citizen or eligible non-citizen and having a valid Social Security number.
• You show a demonstrated need for financial aid. 
• Grandparents and legal guardians are not eligible for parent PLUS loans unless they have legally adopted the student.

Who are parent PLUS loan borrowers?

Parent PLUS loans were originally intended for upper-middle-class families who needed more flexibility in paying for their children’s college education. However, as the program grew, more lower-income families and people of color (POC) saw this as an opportunity to send their children to schools that might otherwise have been out of reach due to high costs or gaps in generational wealth. 

Thanks to better access to loans, including parent PLUS loans and other types of financial aid, the enrollment numbers for POCs and students from low-income families have increased over the years. In turn, the latest college graduation rates by race and gender have also shown a rise in graduates from different ethnicities and racial groups.

According to the 2024 status report on race and ethnicity in higher education from the American Council on Education (ACE), 4.4% of undergraduate students in 2019-2020 took out a parent PLUS loan, amounting to an average of $16,273 per borrower. Using data from the same report, here is a breakdown of the race and ethnicity of parent PLUS loan borrowers with the average amount borrowed in 2019-2020:

• American Indian or Alaska Native - 0.7% - (average amount unavailable)
• Asian - 4.3% - $20,770
• Black or African American - 6.2% - $14,339
• Hispanic or Latino - 3.0% - $15,501
• Native Hawaiian or other Pacific Islander - 3.8% - (average amount unavailable)
• White - 4.6% - $16,204
• More than one race - 5.4% - $18,633 

While parent PLUS loans provide better access to higher education for the disadvantaged, relying on loans to finance college education comes with a lot of risks, especially for families with lower incomes. Additionally, more borrowers are finding it more difficult to keep up with repayments. 

As of the second quarter of 2024, 3.6 million received parent PLUS loans. The total outstanding debt among these borrowers is $109.8 billion, according to Federal Student Aid data. 

Meanwhile, a 2024 Education Data Initiative report indicates even higher figures, with the current debt balance for parent PLUS loans at $112.2 billion.

Furthermore, many households who belong to the lowest income brackets have to contribute even more than what they can afford to pay for college. Thus, I must emphasize the importance of carefully weighing the risks of parent PLUS loans before deciding to apply for one. 

What are the risks of taking out a parent PLUS loan?

Some of the key risks and potential drawbacks of taking out a parent PLUS loan include:

• Lack of Grace Period. Unlike student loans, parent PLUS loans do not have an automatic six-month grace period before repayment begins. Parents must request a six-month deferment after their child drops below half-time enrollment, leaves school, or graduates.
• Limited Income-Driven Repayment Options. Parent PLUS loans are only eligible for the Income-Contingent Repayment (ICR) plan, which limits payments to 20% of discretionary income over a 25-year term. They do not qualify for other income-driven plans available for student loans.
• Easy to Borrow More Than Needed. The PLUS loan amount is determined by the school's cost of attendance, which can be higher than the actual costs. This makes it easy for parents to borrow more than necessary for college expenses.
• Difficult to Discharge in Bankruptcy. A parent PLUS loan may be discharged in rare cases of undue hardship but cannot be discharged in bankruptcy. The government has strong collection powers and can garnish wages, withhold Social Security benefits, and seize tax refunds to collect unpaid loans.
• Potential for Excessive Debt. There is no aggregate borrowing limit for PLUS loans, so parents can take on significant debt over multiple years. This can lead to an unmanageable debt burden, especially for lower-income families.

With such risks, it is no surprise that more families and students seek financing options other than a parent PLUS loan.

According to a 2024 report from Statista, the most number (44%) of student loans in the U.S. in AY 2022-2023 were sourced from federal unsubsidized loans. Meanwhile, only 11% came from parent PLUS loans for the same academic year. The chart below provides a breakdown of the sources of student loans for the same period.

How do you apply for a parent PLUS loan? 

These are the key steps to apply for a parent PLUS loan:

1. Complete the Free Application for Federal Student Aid (FAFSA) for your child. This is required before you can apply for a parent PLUS loan.
2. Gather the necessary documents, including your verified Federal Student Aid (FSA) ID, the requested loan amount, your child's school and student information, and your personal and employment details.
3. Go to the Federal Student Aid website and start the Direct PLUS Loan application for parents. This online application must be completed in a single session.
4. During the application, you will undergo a credit check. There is no minimum credit score required to get a parent PLUS loan, but applicants can qualify only if they have no "adverse credit history". If applicable, you also need to remove or lift any security freeze on your credit file at each credit bureau before you continue your application. 
5. If approved, you will need to sign a Direct PLUS loan Master Promissory Note (MPN) before the loan funds can be disbursed to your child's school.

Are all parent PLUS loan applications online?

The application process for a parent PLUS loan for most schools is usually done online, but some institutions may have different processes. Check the updated Federal School Code (FSC) List of Participating Schools and select your child’s college or university from the list so you can see if the school has a different application process. 

How are parent PLUS loan limits and interest rates determined?

Here is how parent PLUS loan limits and interest rates are determined.

Loan Limits

There is no set maximum amount for a parent PLUS loan. Parents can borrow up to the full cost of attendance at their child's school, minus any other financial aid the student receives. This allows parents to fill the gap between the school's costs and the student's aid package.

The loan will usually be split evenly between the fall and spring semesters unless you specify a different term period. 

Interest Rates

Parent PLUS loans have a fixed interest rate set by Congress each year. For loans disbursed on or after July 1, 2024, and before July 1, 2025, the interest rate is 9.08%. 

The interest rate is fixed for the life of the loan, meaning it will not change. This provides certainty for borrowers but also means they cannot take advantage of lower rates if market rates decline.

Parent PLUS loans also have an upfront disbursement fee of 4.228% for loans disbursed on or after October 1, 2020. This fee is deducted from the loan amount, so borrowers receive slightly less than the full amount they are approved for. This means if you borrow $10,000, you will receive $9,577.20 after the fee is deducted. 

How much should you borrow in parent PLUS loans?

While parent PLUS loans allow families to borrow the full cost of attendance, they come with a fixed interest rate set by the government regardless of income level or credit score. Borrowers should carefully consider the total cost of the loans and their ability to repay before taking them out. It is important to note that you can choose to borrow the full amount given or a lower amount. 

Does a parent PLUS loan affect your credit score? 

The application for a parent PLUS loan does not directly impact your credit score. The credit check performed as part of the application process may result in a hard inquiry on your credit report, which can temporarily lower your score by a few points. 

However, the parent PLUS loan itself is reported to the credit bureaus under the parent's name. This new account and loan balance can impact your credit utilization ratio and credit mix, which are factors that influence your credit score. 

As long as you make your parent PLUS loan payments on time, the loan can actually help build your credit over time through the addition of a positive payment history. On the other hand, missed or late payments will be reported and can hurt your credit score. 

The parent who takes out the PLUS loan is solely responsible for repaying it. Even if you have an informal agreement for your child to make the payments, the loan will only be reported on the parent's credit. This is an important consideration when taking on a parent PLUS loan. 

What are alternative loan options if a parent PLUS loan isn’t suitable?

Exploring alternative loan choices can provide a more manageable solution for families who find that a parent PLUS loan may not be the most viable option due to financial constraints or repayment challenges. One such alternative is private student loans, typically borrowed by students but may require a creditworthy co-signer, such as a parent. Private loans often offer competitive interest rates and flexible repayment plans, though eligibility usually depends on the borrower’s credit history.

Additionally, family members can consider financing options offered by credit unions, community organizations, or state-based loan programs that cater specifically to education funding. Some borrowers also turn to home equity loans or personal lines of credit, though these options should be approached cautiously due to the risk of asset forfeiture.

To broaden financial planning options, families should evaluate what banks offer student loans to compare costs and benefits across various lenders. This ensures an informed decision when considering financing for higher education.

Can you get a parent PLUS loan with bad credit?

The key eligibility requirement for a parent PLUS loan is not having an "adverse credit history", which is defined by Federal Student Aid as:

• Having one or more debts with a combined total outstanding balance of $2,085+ that are 90 or more days delinquent as of the date of the credit report, sent to collections, or written off in the past two years.
• Experiencing certain financial events in the past five years preceding the date of the credit report. This includes bankruptcy, default determination, foreclosure, repossession, tax lien, wage garnishment, or write-off of federal student aid debt.

If you have an adverse credit history, you have a few options to still qualify for a parent PLUS loan:

• Repair your credit by bringing delinquent accounts current and resolving any negative items on your credit report. This can help you pass the credit check.
• Apply with an endorser (co-signer) who does not have an adverse credit history. The co-signer must also not be the child on whose behalf you are borrowing. The endorser agrees to repay the loan if you cannot. 
• Appeal the adverse credit determination if there were errors on your credit report.
• Document to the satisfaction of the U.S. Department of Education that there are extenuating circumstances relating to your adverse credit history. You need to provide a statement and undergo counseling for parent PLUS loan borrowers. 

Ultimately, you want to make sure that a parent PLUS loan is a debt you can manage to pay on time and one that will not negatively affect your credit score and current financial situation. Note that many borrowers are finding it more difficult to keep up with college loan payments, as shown in the “Economic Well-Being of U.S. Households in 2023” report from the Federal Reserve. The data shows that 24% of households with a family income of less than $25,000 are behind on their student loan payments. 

The report also highlights that 5% of all adults had an outstanding median debt of $15,000 for a child’s education and $19,000 for a grandchild’s. 

Can parent PLUS loans be consolidated for easier repayment?

Yes, parent PLUS loans can be consolidated to make repayment easier in a few key ways:

Consolidation Eligibility

Parent PLUS loans are eligible for consolidation into a Direct Consolidation Loan. This allows you to combine multiple parent PLUS loans or other types of loans specified by Federal Student Aid into a single new loan with a fixed interest rate based on the average of your previous loans. However, you cannot consolidate a parent PLUS loan with a federal student loan that your child received. 

Extended Repayment Plan

This is one of the repayment plans for Direct PLUS loans. You must have more than $30,000 in Direct Loan debt and no outstanding balance for any Direct Loan received on or after October 07, 1998. This plan lets you make fixed or graduated monthly payments for up to 25 years. 

Income-Driven Repayment Access

Parent PLUS loans are not directly eligible for income-driven repayment plans, but there is a loophole – consolidating twice. 

You need to request for two different consolidations from two student loan service providers. The final consolidated loan can then be placed on the Saving on a Valuable Education (SAVE) income-driven plan. The SAVE plan cuts payments on undergraduate loans from 10% to 5% of discretionary income. 

SAVE also forgives any remaining balance after 20-25 years of qualifying payments, and some may even get forgiveness after only 10 years. 

This provides much-needed relief for parent PLUS borrowers struggling with high debt burdens. However, this loophole will reportedly only be available until July 2025.

Consolidating parent PLUS loans can extend repayment, lower monthly costs, and open up income-driven repayment and forgiveness options that are not available for the original parent PLUS loans. It is a valuable tool for managing this often burdensome debt.

If you do opt to take out a parent PLUS loan, I strongly suggest exploring all possible methods to make repayments easier and faster. Ultimately, you do not want to end up with debt that will take many decades to repay, as many families struggle to do today. 

A 2024 report on student debt loan statistics from Education Data Initiative reveals that 6.2% of federal borrowers are 62 years of age or older. Moreover, the average 62-year-old federal borrower owes $41,780 in educational debt, including parent PLUS loans. This means that many who are set to retire cannot do so because they still have to repay college loans for their dependents. 

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By opting for alternative educational pathways such as a fast track associates degree, families may shorten the duration of their child’s academic program and reduce overall debt accumulation. This strategy can help limit the reliance on high-cost borrowing while still ensuring quality education and faster workforce entry. It is essential to assess program outcomes and accreditation standards alongside potential career benefits before transitioning to an accelerated degree program.

Can you refinance a parent PLUS loan?

Refinancing a parent PLUS loan with a private lender may offer lower interest rates and reduced monthly payments. However, borrowers should carefully consider that refinancing a federal loan can result in the loss of federal benefits such as income-driven repayment options, loan forgiveness provisions, and flexible repayment terms. It is imperative to assess current creditworthiness, compare refinancing offers, and evaluate long-term financial goals before proceeding. Additionally, understanding alternative career pathways can sometimes improve repayment capacity; for example, exploring high paying medical jobs with little schooling may provide supplementary income strategies.

Could alternative educational pathways reduce reliance on parent PLUS loans?

Accelerated and alternative education models offer a viable route to reduce extended borrowing periods and the overall debt burden. By selecting programs that deliver focused curricula over a shorter timeframe, families can lower cumulative tuition and related expenses, thereby limiting the need for extensive parent PLUS loans. Evaluating factors such as program duration, accreditation standards, and direct job placement outcomes is critical to ensuring that the chosen educational path meets both academic and financial goals. For example, exploring a degree in 6 months online can present a cost-effective solution while accelerating entry into the workforce.

Are there any circumstances where a parent PLUS loan can be forgiven or canceled?

There are a few circumstances where a parent PLUS loan can be forgiven or canceled.

• Public Service Loan Forgiveness (PSLF). Parents who work in public service with Direct PLUS loans are eligible for PSLF if they consolidate the loans into a Direct Consolidation Loan and repay them using the Income-Contingent Repayment plan. To qualify, you must make 120 qualifying monthly payments while working full-time for a government or non-profit organization. 
• Disability Discharge. If you become totally and permanently disabled, your parent PLUS loans may be eligible for discharge. You must provide documentation from the Social Security Administration, the U.S. Department of Veterans Affairs, or an authorized medical professional certifying your disability.
• Death Discharge. If you or the child for whom you borrowed dies, your parent PLUS loans will be discharged. Your child's school must provide documentation of your death, such as a death certificate.
• Closed School Discharge. If your child's school closes while they are enrolled or soon after they withdraw, you may be eligible for a discharge of your parent PLUS loans.
• Student Withdraws from School. You can also ask for a loan discharge if your child withdrew from school and the college or university did not refund your loan money that it was required to pay. 

Other circumstances under which a parent PLUS loan can be canceled or discharged are if the school falsely certified your eligibility to receive the loan and if you have reached 25 years in repayment on the Income-Contingent Repayment Plan or a Direct Consolidation Loan Plan. 

At a time when college education loans are becoming a bigger burden for most households, student loan forgiveness programs can help ease the load on low-income families and the disadvantaged. 

Student loan forgiveness initiatives can also have a big impact on leveling the field for access to quality education and giving graduates and their families a fresh start. Here are some statistics from Education Data Initiative on student loan forgiveness that are worth mentioning: 

• 18.4% of eligible student borrowers apply for loan forgiveness.
• Before 2021, 476,631 students had their loans forgiven, in part or in full, through federal forgiveness programs.
• 323,000 student loan borrowers received loan forgiveness due to total and permanent disability.
• 190,000 students who attended defunct schools or institutions that defrauded their matriculants received an average of $20,410 in loan forgiveness.
• The Federal Student Loan Forgiveness program has distributed $17.5 billion in total. The chart at the bottom of this section provides a breakdown of the distribution of student loan forgiveness dollars. 

In my many years of research on academic and career advising, I have found it extremely helpful if families understand and access all available options to make college education more affordable and less of a financial burden. It is also beneficial to stay updated on the latest federal programs for loan repayments and student financial aid. This way, you can reassess your plans and better prepare for your future. 

In the chart below, I've illustrated the distribution of federal student loan forgiveness as of 2023, according to the Education Data Initiative. 

How can families plan ahead to minimize parent PLUS loan debt?

Families can plan ahead to minimize parent PLUS loan debt using the following methods:

• Borrow Only What's Needed. The maximum parent PLUS loan amount is the full cost of attendance minus other aid. Just because you can borrow that much does not mean you should. Carefully evaluate your family's budget and only take out loans for essential expenses. Avoid borrowing for discretionary costs.
• Consider Cheaper Options First. Before taking out parent PLUS loans, exhaust other more affordable options like:
  • Saving in a 529 college savings plan
  • Having the student work part-time
  • Attending a less expensive school like a community college for the first two years
• Limit Borrowing Per Year. There is no aggregate limit on parent PLUS loans, but you can limit how much you borrow each year. Spread out costs over all four years and have the student take on some federal student loans in their own name, which have lower interest rates and more repayment options.
• Negotiate Financial Aid. Do not be afraid to appeal your financial aid package if your family's financial situation has changed or the cost of attendance is too high. Provide documentation to the school's financial aid office to make your case for more aid.
• Explore Loan Repayment Options. If you do end up with parent PLUS loans, know your repayment options. Refinancing with a private lender can also lower your interest rate if you have good credit.

The key is to plan ahead, borrow strategically, and explore all options to minimize the amount of parent PLUS loans needed to finance your child's education. This will make repayment more manageable in the long run.

I would also suggest finding colleges or universities that are known to value exceptional talent and provide extra assistance to disadvantaged students. Just like how the government introduced reforms to identify what is a Title 1 school and how to improve the education of low-income students who attended these institutions, more colleges and universities today are also working on initiatives to give more opportunities to disadvantaged populations. 

How do parent PLUS loans impact your overall financial planning?

Parent PLUS loans can have a significant influence on a family's overall financial planning by creating a long-term financial obligation that affects savings, retirement, and other goals. Borrowers should weigh the following considerations:

1. Balancing Loan Repayment vs. Retirement Savings

Parent PLUS loans often extend into the borrower’s retirement years, as the repayment period can last decades. This can limit the ability to build a robust retirement fund. A 2024 report highlights that 6.2% of federal borrowers are aged 62 or older, with an average debt of $41,780, primarily from parent PLUS loans. Families should avoid taking on debts that compromise future financial stability.

2. Borrowing Within Your Means

While Parent PLUS loans allow borrowing up to the total cost of attendance, over-borrowing can lead to severe financial strain. Conduct a thorough budget analysis to ensure you borrow an amount that aligns with your repayment capacity. Consider your long-term financial commitments and your child’s expected post-graduation earning potential.

3. Exploring Cost-Saving Measures

One strategy to reduce dependency on loans is to minimize college expenses from the outset. Encourage your child to apply for scholarships, work-study programs, or part-time jobs that can offset tuition and living costs. For example, families often ask questions like, "Can I use student loans to pay for rent?" Understanding how different expenses can be financed helps make more calculated decisions.

4. Evaluating Income-Driven Repayment and Forgiveness Options

For families already burdened with parent PLUS loans, strategies like consolidation may open doors to repayment plans such as the Saving on a Valuable Education (SAVE) Plan. This plan offers reduced payments and potential forgiveness after a set period, but it requires careful navigation of the consolidation process.

5. Open Communication with Your Child

Discuss the financial implications of parent PLUS loans with your child. Setting expectations about shared responsibility in loan repayment can foster accountability and reduce the likelihood of one party shouldering the burden entirely.

By taking a proactive approach to financial planning and exploring all available options, families can mitigate the risks associated with parent PLUS loans while still supporting their child's educational journey.

Are parent PLUS loans enough to cover all college expenses?

While parent PLUS loans primarily target tuition, fees, and related educational costs, they might not fully cover ancillary expenses such as housing, meals, and transportation. Families should assess their complete cost structure and explore complementary financing options for supplemental costs. For instance, reviewing detailed guidelines on whether can you take out a student loan for living expenses can help determine if additional federal student loan options are needed to bridge the gap.

How does pursuing a flexible master’s program influence long-term financial outcomes?

Evaluating advanced degree options can be a strategic component in mitigating long-term debt pressures. By choosing programs that offer accelerated curricula, robust career services, and competitive job placement outcomes, families can improve income potential and shorten the repayment horizon. This approach not only offsets the financial burden incurred from parent PLUS loans but also complements a broader financial planning strategy. For instance, exploring our article What is the easiest masters degree? may reveal accessible graduate options that align with immediate career goals while supporting a sustainable repayment plan.

Are vocational training programs an effective alternative to parent PLUS loans?

Vocational and technical education offer accelerated pathways to gain market-ready skills while significantly reducing the financial burden associated with traditional college loans. Compared to parent PLUS loans, career-focused programs often feature lower tuition costs, shorter program durations, and faster entry into the workforce. Evaluating factors such as program accreditation, job placement rates, and total educational expenses is critical when considering these alternatives. For a detailed comparison of cost-effective options, consider reviewing online trade school programs to assess how these can align with your family’s financial goals.

How might evolving federal policies impact your parent PLUS loan options?

Emerging federal initiatives may alter eligibility criteria, interest rates, and repayment options for parent PLUS loans. Monitoring legislative developments and updated guidance from federal agencies is key to adjusting long-term financial strategies. This includes potential modifications to disbursement fees, consolidation terms, and the availability of income-driven repayment plans. Families should consider consulting official resources and financial advisors to understand possible adjustments before commitments are made. Evaluating alternative education financing paths—such as comparing traditional college expenses to specialized programs covered in our guide How much is vet school?—can also offer valuable insights into long-term planning in a shifting policy environment.

Which student loan lenders offer the best refinancing options for parent PLUS loans?

When exploring refinancing for parent PLUS loans, it is critical to assess lenders based on transparency, competitive interest rates, and flexible repayment structures. Consider factors such as customer service, eligibility criteria, and the lender’s ability to tailor solutions to your financial profile. Leverage comprehensive comparisons from trusted resources, like student loan lenders, to make an informed decision that aligns with your long-term financial planning and risk management strategies.

Are there any tax implications associated with parent PLUS loans?

Certain interest payments on student loans may qualify for tax deductions when the loan meets IRS criteria, but parent PLUS loans involve specific eligibility factors that can influence their deductibility. Borrowers should review current IRS guidelines regarding income limits and qualification standards to determine how interest payments might affect their annual tax liability. Consulting a tax professional is advised to ensure accurate interpretation of these regulations, and to evaluate any opportunities for reducing overall education costs. For families exploring alternative cost-effective education options, consider an online college with financial aid.

Key Findings

• Parent PLUS loans have a fixed interest rate of 9.08% and an upfront disbursement fee of 4.228%. 
• 11% of student loans in AY 2022-2023 were sourced from parent PLUS loans, based on data from Statista.
• A 2024 Education Data Initiative report reveals that the current debt balance for parent PLUS loans is $112.2 billion.
• The online application for a parent PLUS loan takes only 20 minutes. 
• Parent PLUS loans are eligible for consolidation and loan discharge, but only if the borrowers meet certain criteria. 
• The average 62-year-old federal borrower owes $41,780 in educational debt, including parent PLUS loans, according to a 2024 Education Data Initiative report.

Other Things You Should Know About a Parent PLUS Loan

How long does it take to get approved for a parent PLUS loan?

The timeline for getting approved for a parent PLUS loan can vary, but here are some key points:

• The online application typically takes about 20 minutes to complete. 
• During the application, a credit check is performed. If you pass the credit check, you'll be notified immediately. The credit check is valid for 180 days.
• If approved, the next step is to complete a Master Promissory Note (MPN) if you haven't already done so for this child. The Direct Loan system will prompt you to complete an MPN if needed.
• Once the MPN is signed, the school is notified within 24 hours that you've been approved. However, the school still needs to determine if you meet all other eligibility requirements before the loan can be disbursed.
• If you are denied due to adverse credit, you have the option to appeal, add an endorser (co-signer), or not pursue the loan. This will add some time to the process.
• After the credit approval, it typically takes two to four weeks for the school to process the loan and disburse the funds, depending on their procedures.

In summary, while the application itself is quick, the full approval process can take one to two months from start to finish, especially if you need to appeal the credit decision or add an endorser. Staying in close contact with your child's financial aid office is key to ensuring a timely process.

Can you cancel a parent PLUS loan? 

You can cancel all or part of your parent PLUS loan before the loan money is disbursed. You need to notify your child’s school about your intent to cancel the loan. 

If the parent PLUS loan has already been disbursed, the parent must submit the cancellation request no later than 14 days after receiving the disbursement notification. After 14 days, the parent must contact their loan servicer directly to reduce or cancel the loan.

The parent should complete a Federal Direct Parent PLUS Adjustment Form to request the cancellation.

There are no fees for canceling a parent PLUS loan before the funds are sent to the school. The key is to submit the cancellation request as soon as possible, ideally before disbursement, to avoid complications with returning funds.

Why would a parent PLUS loan be denied?

Aside from having an adverse credit history, here are other reasons why a parent PLUS loan application may be denied:

• Insufficient income or assets. While parent PLUS loans are not based on financial need, the lender may deny the loan if they determine the parent does not have enough income or assets to repay the debt.
• Errors on credit report. Inaccuracies or errors on the parent's credit report can lead to an adverse credit determination. In this case, the parent can appeal the decision by providing documentation to correct the errors.
• Extenuating circumstances. Parents can also appeal a PLUS loan denial if there are extenuating circumstances, such as a temporary loss of income or high medical expenses, that are not reflected in their credit history.

If a parent PLUS loan is denied, the student may be eligible for additional unsubsidized federal student loans to help cover the costs. 

Is a parent PLUS loan the best option for funding your child's education?

Here are some considerations to help you determine if a parent PLUS loan is the right choice:

• Financial Situation. Evaluate your current income, savings, and ability to contribute to your child's education expenses without taking on additional debt.
• Other Financial Obligations. Consider your other financial obligations, such as mortgage payments, retirement savings, and emergency funds, when assessing your ability to afford loan repayments.
• Eligibility for Other Financial Aid. Determine if your child is eligible for federal student aid, including grants, scholarships, and federal student loans. Explore institutional scholarships, grants, and tuition assistance programs offered by your child's school.
• Borrowing Options and Interest Rates. Compare the interest rates and terms of parent PLUS loans with other borrowing options, such as private student loans or home equity loans. You should also consider the benefits of federal student loans, such as fixed interest rates, flexible repayment options, and borrower protections, compared to private loans.
• Long-Term Financial Impact. Carefully consider the long-term financial impact of borrowing a parent PLUS loan, including the total amount of debt accrued, monthly repayment obligations, and the potential impact on your financial goals and retirement savings. Evaluate your risk tolerance and ability to manage debt repayment in various economic scenarios.
• Cost-Reduction Strategies. Explore cost-saving options, such as attending a less expensive school, completing general education requirements at a community college, or pursuing online education.

A parent PLUS loan can be a valuable tool for financing your child's education, especially if you have exhausted other financial aid options and are comfortable with the repayment terms. However, it is essential to carefully weigh the pros and cons, consider your long-term financial goals, and explore alternatives before committing to borrowing. 

Consulting with a financial advisor or college financial aid office can also provide valuable guidance in making an informed decision.

References: 

• Federal Reserve System (May 2024). Economic Well-Being of U.S. Households in 2023. https://www.federalreserve.gov/publications/files/2023-report-economic-well-being-us-households-202405.pdf
• Federal Student Aid (n.d.). Federal Student Aid Portfolio by Loan Type. https://studentaid.gov/sites/default/files/fsawg/datacenter/library/PortfoliobyLoanType.xls
• Federal Student Aid (n.d.). What is an adverse credit history? https://studentaid.gov/help-center/answers/article/what-is-adverse-credit-history
• Hanson, M. (October 2023). Student Loan Forgiveness Statistics. Education Data Initiative. https://educationdata.org/student-loan-forgiveness-statistics
• Hanson, M. (March 2024). Student Loan Debt Statistics. Education Data Initiative. https://educationdata.org/student-loan-debt-statistics
• Hanson, M. (June 2024). Total Student Loan Debt. Education Data Initiative. https://educationdata.org/total-student-loan-debt
• Korhonen V. (February 2024). Share of student loans provided in the U.S. 2001-2023, by source. Statista. https://www.statista.com/statistics/235354/share-of-student-loans-provided-in-the-us-by-source
• National Center for Education Statistics (October 2023). Table 330.40. Average total cost of attendance for first-time, full-time degree/certificate-seeking undergraduate students in degree-granting postsecondary institutions, by control and level of institution, living arrangement, and component of student costs: Selected academic years, 2010-11 through 2022-23. https://nces.ed.gov/programs/digest/d23/tables/dt23_330.40.asp
• Vargas M. & Dancy K. (August 2023). College Affordability Still Out of Reach for Students with Lowest Incomes, Students of Color. Institute for Higher Education Policy. https://www.ihep.org/college-affordability-still-out-of-reach-for-students-with-lowest-incomes-students-of-color