About Parent Plus

Nowadays, the cost of going to college has skyrocketed with the tuition fee, boarding and living fee all multiplied, which explains why more and more people are resorting to financial aids. In the US, there are many types of financial aids to students attending colleges and their parents as well. Parents who are looking for a student loan for their dependent children should consider a parent plus loan.

Parent plus loan, or parent loan is a low interest loan for parents to help pay for the cost of their children’s post-secondary education, which includes four-year college, community college and trade school.

The loan is administered by the US Department of Education with the federal government being the real sponsor. This allows the parents to borrow money on behalf of their children to pay for the children’s tuition, boarding and any other costs related to education.

What Is the Advantage of Parent Plus Loan?

Parent loan has a few advantages over private loans owing partly to the fact that the loan comes directly from the US government. For one thing, the interest rate of the loan is fixed at 7.9% and the default fee is only 1%, which are much lower than private loans. For another, few applicants will not be declined because of their poor or good income, and the repayment terms are more reasonable and understanding.

Another advantage lies in the amount of loan the applicants can obtain. The annual limit on this loan is equal to the students’ cost of attendance minus the amount of other financial aid they have already received. ED will send the fund to the students’ school to pay tuition and other school charges and the parent will receive the remaining amount as a check for other educational use.

How to Apply for Parent Loan?

To apply for this type of financial aid, one need firstly check the following requirements to see whether he is eligible or not.

  • The dependent student must be enrolled at least half-time at a post-secondary school;
  • The parent borrower need to be the biological or adoptive parent of the student and stepparent is also eligible in some cases;
  • The parent borrower must have good credit history, since parent plus loan is granted based on parent’s credit record, instead of income. If the parent can’t pass the credit check, he/she can still apply by finding a co-signer with good credit rate;
  • The parent and student must be US citizens or eligible non-citizens.

The eligible parents then could complete a Direct PLUS Loan Application and Master Promissory Note (MPN). They can apply online at the Department of Education’s website and supply the required info according to the instruction. The whole process may take less than an hour.

An up to 4% origination fee for each disbursement will be charged along with parent loans and in most cases, the loan will be disbursed in at least two installments.

What Are the Repayment Terms?

In contrary to other student loans, parent plus holds parents (the borrower) responsible for repayment instead of their children and the loan can’t be transferred to the children either. Repayment of this loan begins 60 days after the last disbursement of the loan and it has to be paid within a period of 10 years.

For people who can’t make the monthly repayment on time, they can request to postpone or defer payment until six months after their children graduate, leave school or drop half-time. Consolidation is also possible if the parents want to extend the repayment to, say, 30 years. This indicates the monthly payment is decreased but the overall payment will be increased.

Read Also:

Parent Plus – Government Help for Higher Education

Do you have children in college or going into college? If you give a positive answer, then it’s time to prepare money for them! Nowadays, it is not that easy to get private loans, not to say they always come with high interest. How about U.S. Department of Education? If the federal government is the lender, that will be a different story!