Parent PLUS Loan: Definition and What It Is
A Parent PLUS Loan is a federal Direct PLUS Loan taken out by the parent of a dependent undergraduate student to help cover the cost of the child's education. The parent, not the student, is the legal borrower. The parent's credit is checked at application. Repayment is the parent's obligation, and this does not change regardless of any family agreement about who will make the payments.
Borrowing limits are tied to the school's cost of attendance minus other financial aid received, which means a Parent PLUS Loan can cover the remaining cost in a given year. Interest begins accruing on disbursement, and repayment typically begins within 60 days of the final disbursement unless the parent requests deferment during enrollment.
Why it Matters
Parent PLUS Loans are the legal obligation of the parent. Parents who take PLUS Loans late in their careers may find themselves entering retirement carrying substantial debt taken on for someone else's education. The repayment options for Parent PLUS Loans are fewer than for standard Direct Loans, though consolidation can open additional income-driven plan options.
Parents who borrowed heavily through PLUS Loans and are now in repayment difficulty should review what consolidation and income-driven options are available before missing payments. Yrefy's article on repayment options covers the full range of federal borrower programs, and the debt and financial freedom survey data includes perspectives from borrowers carrying debt taken on for their children's education.
Comparison
Parent PLUS and Grad PLUS Loans share the same interest rate and credit check requirement, but the borrower situation is very different. With a Grad PLUS Loan, the student is the borrower. They have their own post-graduation income to work with and access to income-driven plans tied to their earnings. With a Parent PLUS Loan, the parent carries debt that benefited someone else, faces repayment at a stage of life when retirement savings should be the priority, and has fewer plan options by default than a student borrower would.
