How Does the Parent PLUS Loan Work?

By: Gaurav Bhola, MSM, Managing Editor

As the cost of higher education rises, so does the need for student loans. College loans are now necessary to subsidize an education. In addition to students, parents can borrow money for a school to help their children with college tuition and other educational expenses. The PLUS loan is available to parents of children enrolled at least half time in an eligible school program.

Parent PLUS Loans can help parents pay up to 100% of college and university costs. Here are a few things to know about PLUS loans.

Parent PLUS loan
The PLUS loan is a non-need-based program available for college education expenses.

Loan borrower
The loan program is offered only to parents of part-time students. A parent is defined as a custodial or non-custodial parent, or a step-parent. Under federal guidelines, a parent is not defined as a legal guardian or relative.

Eligibility criteria

Parent:

• Responsible for the repayment of the loan on behalf of the dependent student.
• Must meet certain federally dictated creditworthiness standards.

Student is:

• Part-time enrollment of at least 6 credits.
• Must meet specific satisfactory academic requirements.

Parents & Student are:

• U.S. citizens or eligible legal non-U.S. residents.
• Not in default for previous higher education loans

Annual loan limits
The annual PLUS loan limits are equal to the total educational costs minus all other financial aid (Other Student Loans, Scholarships, and Grants). For example, if the cost of education is $10,000 and you receive $2,000 of financial aid, your parents finance $8,000 of educational expenses.

Loan repayment terms
Interest on the Parent PLUS loan starts to accumulate after the disbursement. The repayment of the loan commences 60 days after final payout for the loan. The repayment includes accumulated principle and interest.

If loan is denied due to Credit
If your application is denied due to creditworthiness:

• Obtain a co-signer that meets the federal creditworthiness standards

The PLUS loan is a great boon for college students who have exhausted all other avenues of additional school loan funding. Parents can use these loans to provide much needed assistance to their children.