FAFSA for Parent PLUS loan
Short answer
A Parent PLUS Loan is a federal student loan parents can borrow to help pay for their child's college education after completing the FAFSA form. It requires a credit check and can cover costs not met by other financial aid. Parents apply through FAFSA and the loan is in the parent’s name, not the student’s.
What is a Parent PLUS Loan in simple terms?
A Parent PLUS Loan is a type of federal loan designed to help parents pay for their child’s college expenses. After filling out the Free Application for Federal Student Aid (FAFSA), parents can apply for this loan if federal aid and scholarships don’t cover the full cost of attendance. The loan amount can cover tuition, room and board, books, and other school-related costs. Unlike student loans the child borrows, the Parent PLUS Loan is the parent’s responsibility, meaning the parent must repay it, not the student. It is important because it provides an option beyond student loans and grants, but it requires a credit check and has different terms, including interest rates and repayment schedules.
How does a Parent PLUS Loan work after FAFSA?
Once the student and parent complete the FAFSA, the school reviews the family’s financial aid eligibility. If a funding gap exists—meaning the total cost of college minus scholarships, grants, and student loans—the parent can apply for a Parent PLUS Loan through the federal student aid website or the school’s financial aid office. Approval depends on the parent’s credit history. If approved, the parent can borrow up to the total cost of attendance minus other aid. The loan funds go directly to the school to pay bills, and any leftover money can be used for other education expenses.
Example:
Suppose the total college cost for one year is $20,000. The student receives a $5,000 scholarship and $3,000 in federal student loans. The remaining balance is $12,000. The parent can apply for a Parent PLUS Loan to cover that $12,000 gap. After approval, the school receives the loan money and applies it to tuition and fees. If there’s money left over, the parent can use it to buy textbooks or pay for housing.
Why does FAFSA matter for Parent PLUS Loans?
FAFSA is the starting point for all federal student aid, including Parent PLUS Loans. Completing FAFSA provides the financial information schools need to calculate aid eligibility. Without FAFSA, parents cannot apply for a Parent PLUS Loan. Additionally, FAFSA helps identify other financial aid options that might reduce borrowing needs. For parents supporting their child’s education, understanding FAFSA and ensuring both parent and student information is accurate is critical to accessing these loans and other aid. For guidance on setting up a FAFSA account as a parent, see resources on FAFSA account setup for parents.
What are common terms confused with Parent PLUS Loans?
Some terms are often mixed up with Parent PLUS Loans, so clarity helps:
- Federal Student Loans: These are loans the student borrows, based on their FAFSA results. Parent PLUS Loans, however, are taken out by the parent.
- Private Student Loans: These loans come from banks or private lenders and usually have higher interest rates and less flexible repayment options than Parent PLUS Loans.
- Perkins Loans: A discontinued federal loan program that some people confuse with PLUS loans. Perkins loans were awarded based on financial need, but they are no longer available.
- Subsidized vs. Unsubsidized Loans: Parent PLUS Loans are unsubsidized, meaning interest starts accruing immediately; subsidized loans do not accrue interest while the student is in school.
Understanding these differences can help parents decide the best way to finance college without unexpected surprises.
What steps should parents take after FAFSA to apply for a Parent PLUS Loan?
After completing the FAFSA, parents can follow these steps:
- Review the student’s financial aid award letter from the college, which lists loans and grants offered.
- Decide if a Parent PLUS Loan is needed to fill any funding gaps.
- Apply for the Parent PLUS Loan on the federal student aid website or through the school’s financial aid office. This requires a separate application and a credit check.
- If approved, complete any required loan counseling and sign the Master Promissory Note (MPN) to agree to loan terms.
- The school processes the loan and applies funds to the student’s account.
- Parents should keep track of loan balances and repayment expectations.
For more detailed guidance on the application, see Federal Parent PLUS Loans Explained.
What should parents know about repayment and interest?
Parent PLUS Loans usually have a higher interest rate than student loans and begin accruing interest as soon as the loan is disbursed. Repayment typically starts 60 days after the loan is fully disbursed, though parents can request to defer payments while the student is enrolled at least half-time. Understanding repayment options and planning for monthly payments can prevent surprises. Parents can also explore income-driven repayment plans or loan consolidation after the student graduates. For detailed repayment information, see Student loan repayment for Parent PLUS loans explained.
How can parents improve chances of Parent PLUS Loan approval?
Since Parent PLUS Loans require a credit check, parents with adverse credit history might face denial. To improve chances:
- Check your credit report before applying through AnnualCreditReport.com and correct any errors.
- Pay down outstanding debts and avoid new debt before applying.
- If denied, consider applying with an endorser (cosigner) who has good credit or appeal with documentation explaining adverse credit circumstances.
- Explore private loans only if federal options are unavailable or insufficient.
Parents can learn more about credit and loans at Credit scores for student loan cosigners.
What other financial aid options should parents consider?
Before borrowing a Parent PLUS Loan, parents should evaluate:
- Scholarships and grants requiring no repayment
- Student federal loans and work-study programs
- State aid programs
- Private scholarships from organizations or employers
- Family savings plans like 529 college savings plans
Borrowing a Parent PLUS Loan should be part of a broader funding strategy to minimize debt. Parents can help their child by exploring all aid options first and then using PLUS loans to cover remaining costs.
Frequently asked questions
Does a Parent PLUS Loan affect the student's financial aid eligibility?
Yes, borrowing a Parent PLUS Loan can reduce the amount of need-based aid the student qualifies for because it is considered a resource. However, it does not affect eligibility for most grants or scholarships. Schools calculate aid packages accordingly.
Can a Parent PLUS Loan be used for graduate or professional school?
Yes, Parent PLUS Loans are available for parents of undergraduate students only, not graduate students. Graduate students can apply for Grad PLUS Loans in their own names.
What happens if a parent cannot repay a Parent PLUS Loan?
Failure to repay can lead to default, damaging the parent's credit and leading to wage garnishment or tax refund seizure. Parents should contact their loan servicer immediately to discuss options like income-driven repayment or deferment.
Is a credit check required for all federal student loans?
No. Most federal student loans for students do not require a credit check. Parent PLUS Loans and Grad PLUS Loans are exceptions because they require a credit check on the parent or graduate student.
Can a Parent PLUS Loan be consolidated with the student’s loans?
Parent PLUS Loans cannot be consolidated with the student's federal loans. However, parents can consolidate multiple Parent PLUS Loans into a Direct Consolidation Loan separately from the student's loans.