Is the parent PLUS loan the best option for parents looking to cover outstanding costs related to college attendance? This federal loan is just one option to consider. Before applying for a parent PLUS loan, understand student loan basics and what you, as parents, should know before applying for a student loan. Then, carefully consider the features, benefits and drawbacks of a parent PLUS loan compared to other college financing options to determine the best choice for you and your student.
Basics of the Parent PLUS Loan
- Availability: The parent PLUS loan is available to biological and adoptive parents, and in some cases stepparents, of undergraduate students who do not have adverse credit history. Some colleges may include the PLUS Loan in a student's financial aid offer; however, just because a PLUS Loan is included does not mean that parents are required to accept it.
- Limits: Beginning July 1, 2026, the maximum a parent can borrow per student is $20,000 annually or the school’s determined cost of attendance minus other financial assistance, whichever is less. There is a cumulative limit of $65,000 per student on PLUS loans, also beginning July 1, 2026. Note: Parents with PLUS loans disbursed prior to July 2026 may continue to borrow up to the cost of attendance minus other financial aid with no annual or lifetime limit for up to an additional three years as long as the student remains in the same program.
- Interest rate: Parent PLUS loans have fixed rates. Like other federal student loans, the interest rate for new PLUS loans changes annually on July 1. Visit the Federal Student Loan website for current interest rates.
- Repayment: Parents who take out PLUS loans disbursed on or after July 1, 2026, must repay under the standard repayment plan. The repayment term is between 10 and 25 years depending on the total dollar amount borrowed. Repayment generally begins as soon as the loan is disbursed, but parents may request to defer repayment while the student is enrolled at least half time plus an additional six months.
Benefits of the Parent PLUS Loan
- Pre- and overpayment: Some borrowers choose to make extra payments to pay down parent PLUS loans more quickly and to reduce the amount of interest repaid. There is no penalty for paying extra on PLUS Loans.
- Death and disability: The loan can be discharged if the parent borrower dies or becomes totally and permanently disabled. In addition, the loan can be discharged if the student dies.
- Cancellation: If a parent applies for a PLUS Loan, he or she can cancel all or part of the amount before the loan is disbursed to the school. After disbursement, borrowers have a limited time to cancel all or part of the loan amount by contacting the school's financial aid office.
Drawbacks of the Parent PLUS Loan
- Upfront Fees: The parent PLUS loan has an upfront loan fee of more than 4% that is automatically deducted from the loan amount before it is sent to the student's college or university.
- Discharge: Federal parent PLUS loans are rarely discharged for financial difficulties resulting from unemployment, age-related or other illnesses and injuries, or bankruptcy.
- Nontransferable: Parents cannot transfer the PLUS loan to their student to repay after they finish school. Parents and their students may be able to work together to refinance the loan in the student's name through a private lender, although doing so will result in the loss of federal repayment options.
- Timing: Many parents face high education debt burdens at a time of life when earning power generally decreases and limited income is needed for living or medical expenses. Defaulting on a parent PLUS loan can lead to the garnishment of Social Security benefits, tax refunds and wages.
Other Considerations Before Taking Out a Parent PLUS Loan
The following items could be considered a drawback or a benefit, depending on personal and other circumstances.
- Qualification: Approval for a PLUS Loan does not take into consideration a parent's income, other outstanding debt, assets or years until retirement, so parents should carefully consider how much they can realistically repay.
- Interest: The fixed interest rate will not increase during the life of the loan, but borrowers also won't be able to take advantage of lower market rates in the future unless they refinance with a private lender.
Before taking on a parent PLUS loan, you should also compare it to other options, such as our College Family Loan, which is a private education loan with a cosigner option to help secure lower rates, no upfront cost and no fees. The College Family Loan also offers multiple repayment options so you can choose what works best for you.
Bottom line: Choosing to apply for either a private parent loan or the parent PLUS loan is a personal decision. The PLUS loan has one interest rate for all applicants and includes an upfront fee of more than 4.00%. Rates for private loans, like the College Family Loan, are based on your credit and typically do not have an upfront fee. It's important to understand the differences before deciding which is best for your circumstances.
Interested in the benefits of our College Family Loan? Check out the details.
