College is expensive and as tuition costs continue to rise, more and more parents are unable to save up enough money for their children’s education funds, especially if there is more than one child in the family entering college.
When parents are unable to pay for college for their children, they can take out a federal Parent PLUS loan through the government to help offset some of the financial costs their child will incur. Loans such as the Parent PLUS are designed to provide parents with a way to help their children in financing their educations.
Below, we will go through what exactly a Parent PLUS loan is and what you should know about it.
How Do I Qualify for a Parent PLUS Loan?
You will need to qualify to receive a Parent PLUS loan and in order to receive one, you will have to apply for it. Another thing to keep in mind is that a Parent PLUS loan is in your name and cannot be transferred to the student besides through refinancing it with a private lender. You can learn more about how you can refinance student loans here.
To be eligible to receive the loan, you must be either the biological or adoptive parent(s) of the student. Stepparent’s also qualify as a parent in the case of eligibility for the loan. The student must be a dependent student and attend school at least half-time, which is typically six credit hours. The school that the child attends must offer the Direct Loan, also called Stafford, Program as well.
In addition, all parent borrowers MUST have good credit histories and there cannot be any adverse marks on their credit reports. The loan provider will run a credit check on the parent borrower, so it is important to know whether or not you meet the credit requirements.
Some adverse credit disqualifiers are as follows:
- Seriously delinquent accounts
- Liens, judgements, and wage garnishments
If for some reason you do have adverse credit and you are denied the loan because of it, you can qualify with a cosigner who has good credit history. Also, keep in mind that it is not always impossible to obtain a Parent PLUS loan with adverse credit, and sometimes, loan providers will accept your application if the adverse history is old enough or if there are circumstances that warrant the situation.
How Much Can I Borrow?
You can borrow the cost of your child’s education. For example, if the cost of your child’s college program is estimated at $25,000, then that is how much you can borrow. You are not able to borrow more than the cost of the program or educational expenses set forth by the school.
Also, keep in mind that there may be some overpayment on the loan and you may receive some money back after your child pays for his or her tuition and supplies. You do have the option to send the money back into your loan service provider and it will be applied to the loan’s principal balance and you will not have to pay interest on it.
What If I Don’t Qualify for a Parent PLUS Loan?
If for some reason you are unable to get approved for a Parent PLUS loan, do not panic just yet. Your student will still be eligible to apply for Direct unsubsidized and subsidized loans to pay for school. Furthermore, you may want to consider applying for a applying for a private student loan, but it also pays to know the differences between this option and the Parent PLUS Loan.
If you are interested in applying for a Parent PLUS loan, please speak with your child’s financial aid counselor as he or she can help you apply and submit the correct documentation.