Parent PLUS Loans are for parents of undergraduate dependent students to help finance higher education. Parent PLUS Loans can be a significant source of financing for families in providing funding for higher education. This guide will take you through an application process and eligibility criteria for aParent Plus Loan Application along with some considerations in managing a Parent PLUS Loan.
Parent PLUS Loans Overview
A Parent PLUS Loan is a student loan offered by the U.S. Department of Education. Under this loan program, parents can borrow up to the full cost of tuition for their child’s college education, minus other financial aid received. Some key points about Parent PLUS Loans include:
Amounts borrowed
Eligibility to borrow: You can borrow up to the cost of attendance at the student’s school minus any other financial aid the student receives.
Cost of Attendance: That includes the tuition and fees, room, and board and other costs of attending college.
Interest Rates
Fixed Rate: Parent PLUS Loans have a fixed rate set by the federal government. So your interest rate will be fixed for the lifetime of the loan, although it does reset every year.
Repayment Terms
Start: For most loans, repayment begins within 60 days of disbursement.
Repayment Term
         The repayment term can range from the amount borrowed and even the type of      repayment plan, though generally this can fall anywhere between 10 to 25 years.
 Fees
 Origination Fee
An origination fee is deducted from the loan amount before disbursement of the proceeds. Origination fees are a percentage of the total loan amount and will vary.
Eligibility Requirements
For you to be eligible for a Parent PLUS Loan, you must meet the following eligibility requirements:
Credit Check
Credit Record: A credit report is required for the Parent Plus Loan Application. There are no minimum requirements, although the credit report is reviewed by the Department of Education for adverse credit history.
Adverse Credit History:An adverse credit history is a history that includes one of the following reports within the last five years: bankruptcy, default, or accounts with major delinquencies. Consequently, if you have adverse credit, you might need to satisfy other conditions or alternatively, get a co-signer.
Parent Status
Eligibility: You must be the biological or adoptive parent of a dependent undergraduate student.
Student Enrollment
Eligibility: The student you are borrowing for, must be enrolled at least half time in an eligible institution. The student must also meet the general eligibility requirements to receive federal student aid.
Application Process
Applying for a Parent PLUS Loan involves a number of process from eligibility check up to the application. Here is the step-by-step application guide:
Review Loan Terms and Conditions
Pre-application check-up: Review Parent PLUS Loans terms and conditions. KNOW THE INTEREST RATES, FEES, or REPAYMENT OPTION, so this loan will be in line with your financial objectives.
Fill Up the FAFSA
Submit the FAFSA: Confirm the student applying for whom you are borrowing has submitted a Free Application for Federal Student Aid.
Student Aid Report (SAR): Confirm that the SAR is correct and valid for the student’s financial aid.
Apply for the Parent PLUS Loan
Online Application: Apply online at StudentAid.gov. You will require your Federal Student Aid (FSA) ID to log in. If you do not have an FSA ID, you can make one on that same website.
Information Submission: Fill in your personal information, the student’s information, and information about the amount of loan you want to borrow.
Credit Check
Credit Review: The Department of Education will perform a credit review as part of processing your loan application. If you have a bad credit, you might require extra steps or a creditworthy co-signer.
Sign the Master Promissory Note
MPN Completion:
When your loan is approved, you will be required to sign a Master Promissory Note, the legal document in which you will promise to repay the loan according to its terms.
Loan Disbursement
Disbursement Process: The loan is usually disbursed to the student’s school to cover tuition and fees, room and board, and other school expenses.
Repaying Your Parent PLUS Loans
Operating a Parent PLUS loan effectively is all about knowing your options and choosing a plan that best fits your financial situation.
Fixed Repayment Plan
Monthly PaymentsÂ
Spread out monthly payments over a term up to 10 years
Pros:Â
Shorter term to repay; less paying into interest over the term of the loan.
Cons:
 High month-to-month payment than other plans.
Graduated Repayment Plan
Pay-out structure: Lower payments initially and then pay increases every two years
Pros: Reduced payment up front can be more manageable when your income will become greater.
Benefits: The entire period the loan has to be repaid will be longer. That is, the total interest expenses on the loan are lower.
Income Contingent Repayment Plan
Calculation of Payment: Your payment is calculated based on your income and family size. Payments have a cap at 20% of discretionary income or what you would pay on a fixed 12-year term, whichever is less.
Forgiveness: Any balance remaining will be forgiven after 25 years of qualifying payments.
Pros: Payback is income-sensitive, which can be great if your income is low
Cons: Longer payback may generate more in total interest
Deferment and Forbearance
If you have trouble making payments, there are options for deferment or forbearance
Deferment
You are eligible for deferment if you are experiencing financial difficulties temporarily, or if you are returning to school’
Forbearance
Eligibility: Available if you are unable to pay your loans for a financial or other reason.
Interest: Interest remains charged on all loans during forbearance.
Consolidation
Direct Consolidation Loan:Â
Federal loans are consolidated into one loan at a fixed interest rate. Payments are easier but take longer to pay off.
Advantages:Â
All of your loans are consolidated into one monthly payment.
Cons: It may take a longer period to pay off and can actually increase the total amount of interest paid.
Managing Your Parent PLUS Loan
A sound management strategy of the Parent Plus Loan Application will keep you protected from financial loss or default.
Set Up Automatic Payments
Automatic Payments: Enroll in automatic payments through your loan servicer’s website. Another incentive for paying on time, along with a lower interest rate.
Create a Budget
Budgeting: Include your loan payments into your monthly budget. Observe your income and expenses so that you make timely payments.
Monitoring Your Loan Balance
Regular Account Checks: Periodically inspect and review your loan balance and repayment history. This means that you have an overview of your outstanding balance, and payments are applied correctly.
Maintenance of Communication with Your Servicer
Contact Servicer: If you are experiencing financial difficulties or need assistance, contact your loan servicer. They can provide you information about deferment, forbearance, and other alternatives that can help you manage your loan.
Consider Refinancing
Refinancing: You can reduce your interest rate by refinancing if you have several loans rolled into one. When you refinance federal loans, however, you will lose federal benefits and protections.
 End
Avoid these common mistakes to better manage your Parent PLUS Loan:
Failure to heed loan terms
Review Terms Before Lending: You have to review all the terms and conditions of your loan before borrowing. Understand the interest rates, repayment terms, and any fees associated with the loan.
Missing Payment
Timely Payments: You may incur extra charges and lower credit due to defaulted payments. For this, pick reminders or opt for auto-payments so that you never miss the deadline.
Overborrowing
Borrow Only What Is Needed:Â
Only borrow that amount which is needed, by you to avoid unwanted debt.Â
.
Failure to Review Loan Statements
Review statements:
 Check each loan statement to ensure proper application of payment and track balance.