Federal Parent PLUS Loans Can Solve Bad or No Credit Dilemma for Undergraduates

What is a Parent Plus Loan?

The Parent PLUS Loan is a student loan that is sponsored by the federal government. Parent PLUS loans were created to allow parents to borrow money to fund their child’s higher education. It is primarily for the parents of undergraduates who are their dependents.

Parent PLUS loans are given to parents with good credit histories. The interest rates are fixed and you don’t have to repay it until after the 2nd disbursement.

Eligibility and Requirements

-Good Credit History: Parents taking out this loan must have good credit.

-Half-Time Enrollment: You are required to be enrolled in an approved college or university at least half time. “Half-time” usually means you’re enrolled in six or more credit hours each semester.

-Submit a FAFSA: Typically, you are required to complete the Free Application for Federal Student Aid. Most schools will require this but some will not. Check with your school’s financial aid office to see if yours does. If they do, you can fill one out online at FAFSA.gov.

-US citizen: You must be a US citizen, permanent resident, or citizen of American Samoa or Swain’s Island.

What are the Benefits?:

-The best benefit is that parents are able to borrow money to help pay for their child’s education.

-Parent PLUS loans have federally guaranteed low interest. The interest rate on the PLUS loan is fixed at 8.5% as of July 1, 2006.

-No collateral necessary.

-Whether or not you receive a loan is based on credit history. This means you won’t be turned down because your income is too high.

-A Federal PLUS Loan allows parents to borrow enough money to pay for tuition, room and board, supplies, lab expenses, and travel.

-Interest may be tax deductible.

How Much Can I Borrow?

The amount of money you can borrow depends on what it costs you to go to school and how much other financial aid you are receiving. For instance, if you will be paying $8,000 per year to attend school and you have $2,000 in financial aid, your parents can borrow no more than $6,000.

The money is given directly to your school. It’s disbursed in at least two installments and used for tuition, fees, and housing. If there is any money left over sent to your parents to be used for your other educational needs.


Parent PLUS loans must be repaid in less than 10 years. If you must extend your repayment, consolidation is your only option.

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