7 Things You Might Not Know About the FAFSA and Parent PLUS Loans

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You did everything you could as a parent to help get your child into college: ensured they got good grades, gave advice on their college essays, and took them on university tours. Now comes the hard part: figuring out how to pay for it.

You likely know that one of the first steps in this process is having your child fill out the Free Application for Federal Student Aid (FAFSA) and that it could unlock access to a federal loan for parents called a Parent PLUS Loan. In fact, over 3 million government-issued Parent PLUS Loans were taken out last year. But there are a lot of details about the FAFSA and Parent PLUS Loans you might not know.

Here are seven key things to be aware of with the FAFSA to get a Parent PLUS Loan.

1. You and your child need to fill out paperwork

Although your child can fill out the FAFSA, if they’re claiming themselves as a dependent and you are looking to get a Parent PLUS Loan, you will need to fill out some paperwork as well.

After your child has done the initial legwork, you can complete the FAFSA to get a Parent PLUS Loan by logging in to StudentLoans.gov. You will then follow a set of directions that vary slightly depending on the school to which you are applying. You will be asked to provide such information as your income, assets, and agree to a credit check.

If you are eligible for the Parent PLUS Loan through the FAFSA, you will have to sign a Master Promissory Note agreeing to the loan terms.

Only biological and adoptive parents of a dependent student can request a Parent PLUS Loan, as well as a stepparent so long as they’re married to the student’s parent. Divorced parents are also each eligible to request Parent PLUS loans as long as the loans don’t exceed the total borrowing limit.

2. You can’t have an adverse credit history to be eligible

When filling out the FAFSA to get a Parent PLUS Loan, you will have to agree to a credit check. The government is not looking at your credit score or debt-to-income ratio, but rather if you have an adverse credit history since your eligibility for the loan is not determined by financial need.

You might not be eligible for a Parent PLUS Loan through the FAFSA if you have any of the following in your recent credit history:

  • You have $2,085 in total debt or more that is 90 or more days delinquent or that has been placed in collection in the last two years.

  • You’ve faced “default, foreclosure, repossession, bankruptcy discharge, a tax lien, wage garnishment, or write-off of federal student loan debt” in the last five years before the credit report, according to Studentaid.ed.gov.

3. But you still have options if you have an adverse credit history

If you do have an adverse credit history as stipulated by the government, don’t freak out. You still have options:

  • You can get an endorser who doesn’t have an adverse credit history to cosign the loan. The cosigner can’t be the student for which you are requesting the loan.

  • You can prove to the U.S. Department of Education that there are “extenuating circumstances” leading to your adverse credit history.

  • If you just have the 90-day delinquency, you can resolve the issue by bringing that account up to date and reapplying for the Parent PLUS Loan.

  • Your child might be able to receive more money through a Direct Unsubsidized Loan.

4. You might be eligible to borrow more than you can afford

There’s a reason there was over $80 billion worth of Parent PLUS Loan debt last year. Even if you are eligible to receive a Parent PLUS Loan through the FAFSA, it doesn’t necessarily mean you can afford it.

The government could offer you a substantial loan, so you should look at your finances to ensure you can pay it back on the required schedule. Since you, not your child, are on the hook to pay it back, it’s best not to borrow more than you can afford to pay back in 10 years (the standard federal loan repayment terms). A good rule of thumb is not to borrow more than your annual income, and a lot less if possible.

5. You’re not eligible for IDR plans

Although your child might have income-driven repayment options for their federal loans, you do not. You must stick to the standard 10-year repayment plan, but you do have some other repayment options if you consolidate your loans or if you’ve borrowed more than $30,000 in federal student loans.

  • Extended Repayment plan: With this plan, you would have a longer time to pay off the loan (up to 25 years) and it would reduce your monthly payments. But this would increase the overall total amount of the loan as you would pay more in interest due to the longer repayment period.

  • Graduated Repayment plan: With this plan, your first monthly payments would be slightly more than the monthly interest amount. The monthly payment would then increase every two years, but you still have to pay the loan back in 10 years.

6. Payments can be deferred, but interest will accrue

Under the standard FAFSA and Parent PLUS Loan rules, you will be required to start paying back the loan 60 days after it’s fully disbursed. This would happen while your child is still in school. If that’s not possible, you can defer repayment for six months after your child graduates or drops below half-time enrollment status.

Forbearance is also an option in extenuating circumstances such as being in a rehabilitation facility full-time, facing unemployment, or serving in the active military. Just remember, if you defer any payments, interest will accrue meaning you will pay more in the long run.

7. Parent PLUS Loans can’t be transferred to the student

A Parent PLUS Loan is always in the parent’s name and not the child’s, so it is your responsibility to pay it back. It is never possible to later transfer the loan to your child.

Your only option would be to consolidate the federal loan into a private student loan, but then you would lose any protections (standard interest rates, deferments, etc.) offered by the government. Also, your child would likely need a cosigner anyway for a private student loan, and they might turn to you, which would affect your credit report.

Knowing the basics of a FAFSA to get a Parent PLUS Loan is key

Figuring out the ins and outs of student loans can be difficult. There are a lot of moving parts, paperwork, requirements, and more. If you know a few important basics, you’ll be able to confidently decide whether it’s in your financial best interest to take out a Parent PLUS Loan.

Review these tips above, and if you’re still unsure how this will affect your bottom line, speak to the college’s financial aid department.

Interested in refinancing your Parent PLUS loans?

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1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on ourstudent loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.899% APR to 8.179% APR (with AutoPay). Variable rates from 2.570% APR to 6.980% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. SoFi rate ranges are current as of September 14, 2018 and are subject to change without notice. See APR examples and terms. Lowest variable rate of 2.570% APR assumes the current index rate derived from the 1-month LIBOR of 2.08% plus 0.740% margin minus 0.25% AutoPay discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

4 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

5 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.57%-8.17% (2.57%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.75%-8.69% (3.75%-8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Estimated average savings amount is based on 14,659 Education Refinance Loan customers who saved on loans between August 1, 2017 and July 31, 2018. The calculation is derived by averaging monthly savings across Education Refinance Loan customers whose payment amounts decreased after refinancing, calculated by taking the monthly payment prior to refinancing minus the monthly payment after refinancing. We excluded monthly savings from customers that exceeded $4,375 and were lower than $20 to minimize risk of data error skewing the savings amounts. Savings will vary based on interest rates, balances and remaining repayment term of loans to be refinanced. Borrower’s overall repayment amount may be higher than the loans they are refinancing even if monthly payments are lower.
2.57% – 6.98%3Visit SoFi
2.47% – 5.87%1Visit Earnest
2.80% – 6.22%2Visit Laurel Road
2.48% – 6.25%4Visit CommonBond
2.57% – 8.17%5Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.