Student Loans for Parents
Francine L. HuffLoanBiz Columnist
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.
