Got a kid heading off to college this fall? With that first tuition payment staring you down, it\u2019s time to make sure the finances are in place.<\/p>\n\n\n\n
Over the last two decades, the average cost of tuition at a four-year private institution in the U.S. has more than doubled<\/a>. With the price of admittance for both private and public institutions rising every year, it\u2019s no wonder more and more parents are looking at parent student loans to help their children pay for college. <\/p>\n\n\n\n One popular choice is the Parent PLUS loan, a federally funded loan available through the U.S Department of Education\u2019s Direct Loan program. Parent PLUS loans are a great option for many families, but they\u2019re not suitable for every situation and you do have to meet certain requirements to qualify. <\/p>\n\n\n\n Before you fill out a Parent PLUS loan application<\/a>, take a look at our list of seven essential things every parent should know. <\/p>\n\n\n\n The main aspect of a Parent PLUS loan that distinguishes it from other types of college loans is that a parent or legal guardian takes out the loan and is responsible for repayment. In other words, this is a loan to the parent<\/a>, not the student. <\/p>\n\n\n\n Once you\u2019ve taken out a Parent PLUS loan, the onus is on you to repay it even if your child doesn\u2019t finish college or is unable to find a job after graduation. Parent PLUS loans are non-transferrable and require payment to begin immediately after disbursement.<\/p>\n\n\n\n These loans also differ from other student loans in that there are no limits to how much you can borrow<\/a>. <\/p>\n\n\n\n \u201cUnlike some types of federal student loans which limit how much you can borrow each year, or aggregate, parent PLUS loans don\u2019t have a preset limit,\u201d says personal finance writer Louis DiNicola. \u201cHowever, you\u2019re still limited to the school-determined cost of attendance for the student, minus other financial aid that the student received.\u201d <\/p>\n\n\n\n The absence of a cap on borrowing limits can be attractive at the outset, but beware: it can get you into trouble if you borrow more than you can afford. <\/p>\n\n\n\n The interest rate for a Parent PLUS loan is usually higher than that of a private student loan<\/a>. However, the interest rate is fixed and will remain that way throughout the life of your loan, which means you won\u2019t have to worry about your interest rate fluctuating with the market. For the 2018-2019 school year, the interest rate for a Parent PLUS loan is 7.6%<\/a> (the rate will change July 2019). Here are the standard requirements for a Parent PLUS loan: <\/p>\n\n\n\n Even if you\u2019re certain you won\u2019t meet the credit requirements, you might still consider applying for a Parent PLUS loan. Why? Because federal student loan limits are actually higher for students whose parents have been denied the loan. Ironically, if you are denied a Parent PLUS loan<\/a>, it could trigger greater access to federal student loans for your child. <\/p>\n\n\n\n One key advantage of Parent PLUS loans is that they offer several repayment options:<\/p>\n\n\n\n \tYou may also want to find if you qualify for Public Service Loan Forgiveness<\/a>. With the ICR plan, applicants for this option must be employed full-time in an eligible federal, state, or local public service or nonprofit job and have already made 120 qualifying loan payments while employed. Be advised that Public Service Loan Forgiveness is difficult to qualify for, so make sure you meet all the requirements before you apply. <\/p>\n<\/li> Before taking out a Parent PLUS loan, it\u2019s important to make sure your personal finances are in order, namely that you\u2019re saving for retirement<\/a> and have little-to-no high-interest debt. You should also ensure that your child has exhausted all other funding options before you apply, including financial aid<\/a>, scholarships, and grants. <\/p>\n\n\n\n In general, Parent PLUS loans are most beneficial when there\u2019s still a gap in funding that needs to be covered once all other options have been explored. <\/p>\n\n\n\n As with any type of loan, it\u2019s essential to do your due diligence and make sure it\u2019s the right loan for your unique situation. For some, the pros will outweigh the cons; for others, the reverse is true. Got a kid heading off to college this fall? With that first tuition payment staring you down, it\u2019s time to make sure the finances are in place.<\/p>\n","protected":false},"author":59,"featured_media":1290,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_seopress_robots_primary_cat":"","_seopress_titles_title":"Parent PLUS Loan: 7 Key Things Every Parent Should Know | Quicken","_seopress_titles_desc":"Considering a Parent PLUS loan? We\u2019ll fill you in on the requirements and costs, and how to decide if it\u2019s the right choice for your child\u2019s college education.","_seopress_robots_index":"","inline_featured_image":false,"footnotes":""},"categories":[78],"tags":[],"class_list":["post-1289","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-family-relationships"],"acf":[],"jetpack_featured_media_url":"https:\/\/www.quicken.com\/blog\/wp-content\/uploads\/2022\/08\/parentPlus_0.jpg","_links":{"self":[{"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/posts\/1289","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/comments?post=1289"}],"version-history":[{"count":2,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/posts\/1289\/revisions"}],"predecessor-version":[{"id":4617,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/posts\/1289\/revisions\/4617"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/media\/1290"}],"wp:attachment":[{"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/media?parent=1289"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/categories?post=1289"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/tags?post=1289"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}1. The parent – not the student – is on the hook.<\/h2>\n\n\n\n
2. You can borrow as much as you need.<\/h2>\n\n\n\n
3. They\u2019re more expensive than other options.<\/h2>\n\n\n\n
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\nParent PLUS loans also come with an origination fee, which is deducted from your loan just before it\u2019s disbursed (i.e., just before it\u2019s paid out). That means that the amount you receive will be less than the amount you borrow.
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\nCurrently, the origination fee for a Parent PLUS loan is 4.248%<\/a>. As an example, if you borrow $20,000, $849.60 would be deducted from your loan amount before that amount is disbursed. If you have an idea of how much you\u2019d like to borrow, you can use a Parent PLUS loan calculator<\/a> to get an estimate for your monthly payments. <\/p>\n\n\n\n4. You must meet the eligibility criteria.<\/h2>\n\n\n\n
\nFor example, if you don\u2019t qualify because of an adverse credit history, you have the option of adding an endorser (cosigner) to the account who agrees to pay the debt if you default. You may also qualify for a Parent PLUS loan if you can show you have certain extenuating circumstances, such as a divorce decree proving you\u2019re not responsible for the debt. <\/p>\n\n\n\n5. Getting denied can be a good thing.<\/h2>\n\n\n\n
6. The repayment options are flexible.<\/h2>\n\n\n\n
7. They shouldn\u2019t be your first resort.<\/h2>\n\n\n\n
Parent PLUS Loans: Pros & Cons<\/h2>\n\n\n\n
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\nIf you\u2019ve maxed out all other funding options and you\u2019re confident that you\u2019re saving enough for retirement, a Parent PLUS loan may be just the right choice to fill the gaps in funding your child\u2019s higher education. They\u2019re relatively easy to qualify for, you\u2019ll never have to worry about fluctuating interest rates, and with multiple repayment options available, you\u2019re bound to find one that\u2019s best suited to your needs.
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\nOn the other hand, Parent PLUS loans have an origination fee and higher interest rates than many private parent loans<\/a>, so the latter option is a far better deal for many parents\u2014especially those with a strong credit score and a healthy credit history<\/a>.
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\n\u201cIf student loan payments prevent fully investing in 401(k) funds and other retirement vehicles, they could have a negative long-term impact on family finances,\u201d says freelance writer Jim Akin, who specializes in consumer finance. \u201cIf that’s a concern, it’d be wise to consult with a financial expert to help determine the wisdom of taking out a parent student loan<\/a>.\u201d
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\nSo before you apply for a Parent PLUS loan, make sure to explore other ways to pay for college<\/a>, research other loan types (both private and federal), carefully analyze your income and investments, and make sure your child has applied for all applicable forms of financial aid. Choosing to take on debt for your child\u2019s education isn\u2019t a decision any parent should take lightly. A wise choice now will help both you and your child avoid financial hardship in the years to come. <\/p>\n","protected":false},"excerpt":{"rendered":"