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Student Loans for Parents

Francine L. Huff
LoanBiz Columnist

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Parents who want to help pay for their dependent kids' education can borrow money through the PLUS Loan program. This federal student loan program allows the money to be used to help pay for expenses not covered by a student's financial aid package. Here's what you need to know about PLUS Loans.

Not Just for Parents

Graduate and professional students can also borrow through the PLUS student loan program. Unlike private student loans, your income-to-debt ratio and FICO score don't matter when applying for a PLUS loan. However, your credit history should be free of defaults, bankruptcies, and delinquent bill payments. About 80% of people who apply for PLUS loans will be approved, according to FinAid.

Fixed Interest Rate

PLUS Loans carry a fixed interest rate of 8.5%, and the interest isn't subsidized. Borrowers must begin repaying loans 60 days after the funds have been paid out. However, some lenders may allow parents to defer payments on loans until after the student graduates. Recipients of the Grad PLUS who attend school at least half-time may be able to get an in-school deferment until they finish their studies.

The amount that can be borrowed with a PLUS loan is based upon the cost of attendance at the school you attend and the amount of other financial aid received. So if it cost $10,000 to attend school and you are awarded $6,000 in financial aid, your parents can borrow up to $4,000. 

Student Loan Consolidation

PLUS Loans can be consolidated with other federal student loans, but not private loans. Loans borrowed by parents can't be consolidated with their kid's student loans. But if parents have borrowed PLUS loans for their other children they can all be consolidated together along with their own Stafford Loans.

Parents are responsible for paying back PLUS loans even if their child has promised to pay it back. So it's important to make sure you'll have the means to repay your student loans. If you default on a federal student loan, the government can garnish your wages and attach income tax refunds.

Sources
Federal Student Aid
FinAid


About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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