Which Federal Loan Type Is Available for Parents?
Learn about the federal loan type available for parents to finance college. Understand its terms, eligibility, and application process.
Federal student aid helps families finance higher education by providing financial assistance for various educational expenses. Understanding the types of federal loans available, particularly those designed for parents, is an important step for families planning for college costs. These loans can bridge the gap between a student’s financial aid package and the total cost of attendance.
The Federal Direct PLUS Loan for Parents
The Federal Direct PLUS Loan for Parents is a federal program helping biological or adoptive parents, and in some cases stepparents, pay for their dependent undergraduate child’s educational expenses. This loan can cover costs not met by other financial aid the student receives. The student must be enrolled at least half-time at an eligible institution for the parent to qualify.
Eligibility for a Parent PLUS Loan includes a credit check, requiring no “adverse credit history.” This history is defined by specific financial conditions, such as accounts with significant delinquent balances, debts in collection, or charged-off debts within the last two years. It also includes events like bankruptcy, foreclosure, repossession, tax liens, wage garnishments, or federal student aid debt write-offs within the past five years. While no specific credit score is required, the absence of adverse credit history is a firm requirement.
Should a parent’s application be denied due to adverse credit history, there are alternative paths to eligibility. A parent may still qualify by obtaining an endorser who agrees to repay the loan if the parent defaults. Another option is to document extenuating circumstances related to the adverse credit history. If eligibility is gained through an endorser or extenuating circumstances, the borrower will be required to complete PLUS Credit Counseling.
The maximum amount a parent can borrow through a Parent PLUS Loan is the student’s cost of attendance minus any other financial assistance the student receives. Currently, there is no cumulative borrowing limit for a single student. However, changes taking effect on July 1, 2026, will introduce annual borrowing limits of $20,000 per child and an aggregate limit of $65,000 per child. These new limits apply per student.
Understanding Parent PLUS Loan Terms
Once obtained, a Parent PLUS Loan has a fixed interest rate. For loans disbursed between July 1, 2025, and June 30, 2026, the interest rate is 8.94%. This rate is fixed for the life of the loan, and interest begins to accrue from the date the loan is first disbursed.
In addition to interest, Parent PLUS Loans carry an origination fee, which is a percentage of the total loan amount. For loans disbursed between October 1, 2020, and October 1, 2026, this fee is 4.228%. This fee is deducted proportionately from each loan disbursement, meaning the amount received by the school or borrower is slightly less than the amount borrowed.
Several repayment options are available for Parent PLUS Loans. The Standard Repayment Plan involves fixed monthly payments over a 10-year period. The Graduated Repayment Plan allows for smaller initial payments that gradually increase over a 10-year term. For borrowers with more than $30,000 in Direct Loan debt, the Extended Repayment Plan offers fixed or graduated payments stretched over up to 25 years.
Parents can also choose to defer payments on a Parent PLUS Loan while their child is enrolled at least half-time in an eligible school. This deferment can continue for six additional months after the student graduates, leaves school, or drops below half-time enrollment. Interest continues to accrue during any deferment period. If accrued interest is not paid during deferment, it will be capitalized, meaning it is added to the principal balance, increasing future interest calculations.
The Income-Contingent Repayment (ICR) plan is available for Parent PLUS Loan borrowers only if the loan is first consolidated into a Direct Consolidation Loan. Under the ICR plan, monthly payments are capped at 20% of the borrower’s discretionary income or a fixed payment amount based on a 12-year repayment schedule, whichever is less. Any remaining loan balance may be forgiven after 25 years of qualifying payments.
Applying for a Parent PLUS Loan
The first step for any federal student aid, including the Parent PLUS Loan, is completing the Free Application for Federal Student Aid (FAFSA). While primarily for the student, the FAFSA collects financial information to determine eligibility for federal aid programs. After FAFSA processing and student eligibility is established, parents can apply for the Parent PLUS Loan.
Parent PLUS Loan applications are typically completed directly through the official Federal Student Aid website, StudentAid.gov. Parents must log in using their own unique FSA ID, not the student’s, to ensure correct attribution. The online application allows parents to request and specify the loan amount, and authorize fund usage for educational expenses.
After submitting the Direct PLUS Loan Application, parents must complete and sign a Master Promissory Note (MPN). The MPN is a legal document outlining loan terms and conditions, promising repayment of the loan, interest, and fees. One MPN can cover multiple Parent PLUS Loans for the same student over up to 10 years, but a separate MPN is required for each dependent child. This step finalizes the borrowing agreement, making loan funds available for disbursement to the student’s educational institution.