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Parent PLUS Loans; Everything You Should Know
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Paying college fees is at an all-time high, with the average 4-year graduate spending at least $38,270. The figure is higher for students opting for out-of-state college or private institutions.
Financing degrees that take longer also means pouring more money. Luckily, several viable options exist to help families get a college education. Scholarships, student loans, and parent loans make education accessible. Parent-plus loans are a great way to plan a child's future.
This article teaches you everything you need to know about parent plus loans. Read more to find out if they are an option for you.
What is a Parent PLUS loan?
A parent plus loan is awarded to a child's parent to help cover their education. It is available for biological parents, and adoptive parents for a dependent undergraduate student. Parent plus loans are not made to grandparents unless they are adoptive parents of a child.
Parent plus loans allow parents to borrow money up to a child's attendance each year minus any financial assistance awarded. There is no limit to the amount borrowed. Parents can also refinance parent plus loan whenever necessary to cater for their child's study expenses.
Parents can refinance PLUS loans if:
● You have excellent credit scores that can get you lower interest rates.
● You don't work for an employer that can qualify you for Public Service Loan Forgiveness, PSLF.
● You have a consistent income and do not foresee a need to postpone or reduce payments.
How do Parent PLUS Loans Work?
Parent PLUS loans have a fixed interest rate. They also come with an origination fee which a borrower must pay with each loan. Parent loans are not subsidized, meaning they accrue interest when you receive the funds.
They still accrue even when the loan is in deferment. Parent loans are made to the parent alone. They differ sharply from private student loans that students can make alone or get their parents to co-sign.
Parents need a loan payment plan before they take these credit-based loans. They must start making payments to avoid penalties and getting deeper into debt.
What are the Parent PLUS Loan Requirements?
For loan approval, you'll need to meet the following criteria:
● Be the biological or adoptive parent of the student. The student must be an undergraduate attending an eligible school at least on a half-time basis. Legal guardians or grandparents are not eligible for these loans.
● Have a good credit history. For these loans, you will be checked for an adverse credit history. The Department of Education will check if you have filed for bankruptcy, foreclosure, defaults, or repossession in your file.
● Meet the general federal financial aid requirements. Your child should complete FAFSA and meet the eligibility criteria.
Parent PLUS loans Vs. Private Student Loans
Parents can get funding from private lenders to finance their children's education. Here are the key differences between federal parent plus loans and private student loans:
● Eligibility requirements: While both check your credit history, private lenders have stricter credit requirements.
● Costs: Parent PLUS loans offer standardized rates. Private lenders offer both fixed and variable rates based on your credit score. Parent PLUS loans come with a high origination fee while private student loans don't have one.
● Repayments: You are required to start repayments after the funds have been disbursed. However, you can ask for deferment for parent PLUS loans.
● Relief options: Private student loans do not offer relief options for borrowers. Parent PLUS loans offer income-driven repayment and forgiveness programs.
Are Parent PLUS Loans right for me?
Yes. Parent PLUS loans are ideal for anyone looking for college education funding. They are reliable if you have a low credit score and anticipate you will need relief options. If you have exhausted all scholarships and forms of financial aid, try parent PLUS loans.
You should approach loans with caution as they are a long-term commitment. Student loans in your child's name could be the other best option. Federal loans offer students lower interest rates than parents.
