As a parent, figuring out how to help your kids pay for college often requires you to determine what type of loans to take out.
Federal loans for undergraduate students generally have more favorable terms than loans for parents. But you might need to borrow money to cover expenses your child’s loans won’t cover. If you find yourself in this situation, Parent PLUS Loans are one of your options.
This six-step guide will show you how to apply for a Parent PLUS Loan so you can help your child afford a great education.
1. Research Parent PLUS Loan terms
Parents who want to help their kids afford college have two primary options: Parent PLUS Loans and private loans for parents.
There are important differences between these options. Parents should consider the terms of each type of loan to determine the best funding option for them.
|Parent PLUS Loans||Private loans for parents|
|Interest rate||7.00% for loans disbursed after July 1, 2017||Varies by lender|
|Fixed or variable rate||Fixed rate||Fixed or variable rate|
|Origination fee||4.264% for loans issued on or after Oct. 1, 2017, and before Oct. 1, 2018||Some lenders do not charge origination fees|
|Qualification requirements||Parents must not have adverse credit, such as from a delinquent debt, foreclosure, or repossession||Private lenders consider applicants’ credit history and debt-to-income ratio|
Parents should also consider repayment options when deciding between PLUS Loans and private loans. Because PLUS Loans are federal loans, parents have more flexibility in repayment options, including Income-Contingent Repayment.
2. Have your child fill out the FAFSA
Parents are eligible for a Parent PLUS Loan only after their child completes the Free Application for Federal Student Aid (FAFSA).
The FAFSA opens on Oct. 1 each year and should be completed as soon as possible; some types of aid is limited and only available on a first-come, first-served basis.
3. Create a StudentLoans.gov account and request a loan
The school your child is attending should provide instructions on obtaining a Parent PLUS Loan. Many schools ask parents to request PLUS Loans through StudentLoans.gov.
You’ll need to create your own account to request a Parent PLUS Loan; you cannot use your child’s account. To create one, click on “Create an FSA ID” on the StudentLoans.gov homepage.
To apply for an FSA ID, you’ll need to provide your email address, full name, Social Security number, and date of birth. Once you complete the necessary steps and log in to your account, you can select “Apply for a PLUS Loan” from the “Parent Borrowers” tab on StudentLoans.gov.
Not all schools require you to submit a request for a PLUS Loan through this site. Check with your child’s school to determine what to do if you can’t request a loan through StudentLoans.gov.
There are also other tools available for parent borrowers at StudentLoans.gov, including a portal for parents who need to complete credit counseling. Credit counseling is required if you need an endorser to obtain a PLUS Loan due to adverse credit.
4. Sign a Master Promissory Note
Parents must sign a Master Promissory Note (MPN) agreeing to the terms of the Parent PLUS Loan they take out. Once you’ve signed one MPN, you usually don’t have to repeat the process the following year; most schools can disburse multiple loans under a single MPN for up to 10 years.
You can see a preview of the MPN at StudentLoans.gov. But you must be logged in to complete this form. To fill out your MPN, you’ll need:
- Personal identifying information, including your Social Security number and driver’s license number
- Employer name and address
- School information
Completing your MPN takes less than 30 minutes, and the entire process must be completed in one session.
5. Wait for the school to receive the funds
Once your loan has been approved, the borrowed funds are distributed to your child’s school. The school applies Parent PLUS Loan funds to tuition, fees, room and board, and other related charges.
If you borrowed more than you needed, the school will disburse leftover funds to you. You can use these remaining loan funds to cover other educational costs.
6. Begin repaying the Parent PLUS Loan
Parent borrowers typically begin repaying Parent PLUS Loans immediately after the money is disbursed. However, you can have payments deferred while your child is enrolled in school at least half time. You can defer payments for an additional six months after your child leaves school or drops below half-time enrollment.
If you defer payments, you’ll owe more money when you finally do begin repayment. Interest accrues on PLUS Loans even when payments are deferred, and interest can be capitalized. This means the interest is added to the loan principal. You’ll end up paying interest on the interest once you start making payments.
Now you know how to apply for a Parent PLUS Loan
Once you’ve carefully researched loan options and learned how to apply for a Parent PLUS Loan, you can make an informed decision about how best to fund your child’s education.
Remember to consider how student loan debt will affect your future. You don’t want to jeopardize your retirement security, so find the most affordable loan you can and consider creating a plan for early repayment.
Need a student loan?Here are our top student loan lenders of 2018!
1 = Citizens Disclaimer.
2 = CollegeAve Autopay Disclaimer: All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
3 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
|4.12% – 11.85%*3||Undergraduate and Graduate||Visit SallieMae|
|3.69% – 12.07%2||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|4.07% – 12.19%1||Undergraduate, Graduate, and Parents||Visit Citizens|
|3.83% – 12.11%||Undergraduate and Graduate||Visit Ascent|
|4.63% – 9.71%||Undergraduate and Graduate||Visit LendKey|
|3.62% – 9.79%||Undergraduate, Graduate, and Parents||Visit CommonBond|