What Is a Federal Parent Loan & How Does It Work?

Federal Parent PLUS Loans allow parents to financially support their dependent undergraduate students’ higher education expenses. These loans are part of the broader Direct Loan Program, provided by the U.S. Department of Education. They serve as a resource to cover educational costs not fully addressed by other financial aid, such as grants or scholarships.

Understanding Federal Parent PLUS Loans

A Federal Parent PLUS Loan is designed for parents of dependent undergraduate students to help bridge the gap in educational funding. These are federal loans, originating from the government, distinguishing them from private loans.

Federal loans offer distinct advantages compared to private lending options. They feature fixed interest rates, meaning the rate remains constant throughout the loan’s life, providing predictable monthly payments. Borrowers also benefit from various repayment plans and options for temporarily postponing payments through deferment or forbearance if they encounter financial difficulties. The parent is always the borrower and assumes full responsibility for repayment, not the student.

Eligibility and Loan Terms

Qualifying for a Federal Parent PLUS Loan involves meeting specific criteria for both the parent borrower and the student. The parent must be the biological or adoptive parent of a dependent undergraduate student. In some cases, a stepparent may also be eligible if their income information is included on the student’s Free Application for Federal Student Aid (FAFSA). A key eligibility factor for the parent borrower is not having an adverse credit history, though there is no minimum credit score requirement.

An adverse credit history, as defined for Parent PLUS Loans, includes conditions such as accounts with an outstanding balance greater than $2,085 that are 90 or more days delinquent, or accounts placed in collection or charged off within the past two years. It also encompasses events like bankruptcy discharge, foreclosure, repossession, tax liens, or federal student loan default within the preceding five years. If a parent has an adverse credit history, they might still qualify by obtaining an endorser who does not have such a history, or by documenting extenuating circumstances. If approved through these alternative methods, the parent borrower will need to complete PLUS credit counseling.

The student must be a dependent undergraduate student enrolled at least half-time at an eligible educational institution. Additionally, the student needs to maintain satisfactory academic progress as defined by their school and must have completed the FAFSA.

Parent PLUS Loans disbursed between July 1, 2025, and June 30, 2026, carry a fixed interest rate of 8.94% for the life of the loan. An origination fee of 4.228% for loans disbursed on or after October 1, 2020, is deducted proportionately from each loan disbursement. The maximum amount a parent can borrow is determined by the student’s cost of attendance at their school, reduced by any other financial aid the student receives.

Loan funds are typically disbursed directly to the student’s school, often in at least two installments, such as one for the fall semester and one for the spring semester. The school first applies the funds to cover tuition, fees, and other authorized charges like room and board. Any remaining funds are then disbursed to the parent, or directly to the student if the parent provides authorization.

Applying for a Federal Parent PLUS Loan

The application process for a Federal Parent PLUS Loan begins with the student completing the Free Application for Federal Student Aid (FAFSA). The FAFSA determines the student’s overall financial aid eligibility, which in turn impacts the maximum amount that can be borrowed through a PLUS loan. The FAFSA itself does not constitute the PLUS loan application; it is a prerequisite for determining aid eligibility.

Once the FAFSA is on file, the parent can proceed with the Parent PLUS Loan application. The official application is available through the Federal Student Aid (FSA) website, StudentAid.gov. Before starting the online application, parents should gather their Federal Student Aid ID (FSA ID), personal identifying details, the name of the student’s school, and the desired loan amount.

The online application will guide the parent through various informational fields, requiring accurate input of all gathered details. During this process, the parent will provide consent for a credit check, which is a mandatory part of the Parent PLUS Loan application to assess for any adverse credit history. If the parent is approved based on the credit check, or if they gain approval through an endorser or by documenting extenuating circumstances, the next step involves completing a Master Promissory Note (MPN). The MPN is a legally binding document outlining the terms and conditions of the loan and serves as the borrower’s agreement to repay the funds. In most cases, a single MPN can be used for loans received over multiple academic years for the same student.

Managing Repayment

Repayment of a Federal Parent PLUS Loan generally begins after the loan has been fully disbursed for the academic year. However, parents have the option to defer payments while the student on whose behalf the loan was borrowed is enrolled at least half-time in an eligible school. This deferment can extend for an additional six months after the student graduates, withdraws, or drops below half-time enrollment. This deferment must be requested, as it is not automatically applied.

During periods of deferment, interest continues to accrue on the loan balance. If the accrued interest is not paid during the deferment period, it will be capitalized, meaning it is added to the principal balance of the loan. This capitalization increases the total amount owed and can lead to a higher overall cost of the loan.

Several repayment plans are available for Federal Parent PLUS Loans. The Standard Repayment Plan involves fixed monthly payments over a 10-year period, resulting in the lowest total interest paid over the life of the loan. The Graduated Repayment Plan starts with lower payments that gradually increase every two years, also over a 10-year term. For larger loan balances, the Extended Repayment Plan allows for fixed or graduated payments over a period of up to 25 years.

Parent PLUS Loans are also eligible for the Income-Contingent Repayment (ICR) Plan, but only if the loans are first consolidated into a Direct Consolidation Loan. Under the ICR plan, monthly payments are calculated based on the borrower’s income and family size, capping payments at 20% of discretionary income or the amount that would be paid on a fixed 12-year repayment schedule, whichever is less. Any remaining loan balance after 25 years of payments under ICR may be forgiven, though the forgiven amount could be subject to income tax.

In addition to deferment, borrowers may also qualify for forbearance, which allows for a temporary postponement or reduction of payments due to financial hardship or other specific circumstances. While forbearance can provide temporary relief, interest continues to accrue on all loan types during this period, which can also lead to an increased total repayment amount.