Parent PLUS Loans work by letting a parent borrow federal student loans to cover the cost of their child’s education. The loan is placed in deferment and monthly payments are suspended while the child is enrolled in school at least half-time. During this period, the interest continues to grow and the parent — not the child — is legally responsible for repayment of this loan.
When you fill out the FAFSA, short for Free Application for Federal Student Aid, the US Department of Education determines how much financial aid your college-bound child can receive to pay for school. The federal government also figures out how much you can contribute to the bill. You can cover that shortfall out of pocket, or by borrowing from a private lender or the Direct PLUS Loan program.
Private student loans typically offer lower interest rates, but eligibility is credit-based. So parents who have poor credit or low income are often shut out.
Direct PLUS Loan’s, referred to as Parent PLUS Loans when borrowed by parents, don’t check credit scores or income as part of the application process. Loan eligibility is instead based on need and passing a simple credit check that looks for foreclosures, repossessions, and recent bankruptcy filings.
Keep reading to learn what Parent PLUS Loans are, how they work, and how to qualify for borrowing.