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PLUS Loans: Understanding Eligibility & Applying

As tuition costs increase, college is becoming more expensive. Fortunately, there are many financing options available to students and their families. Direct PLUS loans (commonly called simply “PLUS loans”) are one example—these federal student loans can cover the full cost of college attendance, minus any financial aid you have received. 

But is taking out a PLUS loan the right option for you and your family? Keep reading to find out everything you need to know about getting a PLUS loan. 

What is a PLUS Loan? 

A Direct PLUS loan is a federal student loan that’s provided through the U.S. Department of Education. PLUS loans can be taken out by parents of undergraduate students (or by eligible graduate students) to help finance their education. You can read more about PLUS loans in the Department of Education’s guide, but we’ll hit the highlights below.

What Are the Benefits of a PLUS Loan?

Compared to other types of student loans, PLUS loans stand out for their: 

  • Generous loan limits – PLUS loans allow parents to borrow up to the full cost of their child’s college attendance, minus any other financial aid they receive. These loans can go toward tuition, room and board, fees, books, and other education-related expenses.
  • Fixed interest rates – PLUS loan interest rates are fixed, which means they stay the same throughout the entire repayment period. In turn, you won’t need to worry about your interest rate going up in the future. However, the rate may be higher than other types of loans (read more about this below). 
  • Flexible repayment options – Like other types of federal student loans, PLUS loans come with several repayment options. Some offer lower monthly payments, while others can help you save money on interest. You can also consolidate your PLUS loan and take advantage of an income-driven payment plan. 
  • Potential for loan forgiveness – If you consolidate your PLUS loan into a Direct Consolidation Loan, you may be able to have your remaining loan balance forgiven after participating in an Income Contingent Repayment (ICR) or Public Service Loan Forgiveness (PSLF) program.  

PLUS Loan Amounts and Fees

Since PLUS loans don’t have set loan limits, they can be as high as the total cost of tuition if your child isn’t receiving any other financial aid. However, you’re not obligated to take out the largest loan amount you qualify for. Instead, you can select an amount that suits your budget. 

You can find PLUS loans’ current interest rates on the Department of Federal Student Aid’s website. As of June 2024, the interest rate is 8.05%, and you’ll also incur loan fees of 4.228% that will be deducted from your PLUS loan disbursements unless you choose to roll it into your outstanding loan balance.

Since PLUS loans’ interest fees are not subsidized, you’ll start accruing interest on them as soon as the money is disbursed. While you can defer your loan payments until six months after your child graduates, you’ll still accrue interest during that time. 

What Are Some Alternatives to PLUS Loans?

While PLUS loans have some special advantages, they may not be the most affordable way to pay for your child’s education. You can use a combination of these financing options to pay for college:

  • Scholarships and grants – These should be your first choice for paying for college, as they generally do not have to be repaid if conditions are met.
  • Direct federal student loans – In addition to PLUS loans, the federal government offers two types of direct student loans:
    • Subsidized – Subsidized student loans are given out based on financial need. The federal government covers their interest payments until the deferment period is over, which is typically six months after the student has graduated. 
    • Unsubsidized – Unsubsidized student loans are not based on financial need. Instead, they’re calculated using the cost of your child’s tuition and financial aid. These loans start accruing interest as soon as they’re dispersed. Your child can make interest payments throughout college or roll them into their total loan balance. 
    • Both types of direct federal loans are taken out in the student’s name, rather than their parents.
  • Private student loans – Private student loans can be taken out by students or their parents. These loans require a credit check. Since students are less likely to have high credit scores, many need their parents to co-sign to get approved. Loan amounts and interest rates for private student loans can vary from lender to lender, but given the current interest rate environment, interest rates may be lower than PLUS loan rates. Credit unions often offer the most competitive rates, and we can help match you with a credit union to join if you aren’t already a member of one.

Who is Eligible for a PLUS Loan?

Before you apply for a PLUS loan, you’ll want to make sure you meet the PLUS loan eligibility requirements. To qualify for a PLUS loan, you must:

  • Be the biological or adoptive parent of the student 
  • Ensure that your student is enrolled at least half-time at an eligible school
  • Fill out the Free Application for Federal Student Aid (FAFSA) along with your child
  • Meet the general eligibility requirements for federal student aid 
  • Not be in default on any other federal student loans
  • Not have an adverse credit history

While your credit is taken into consideration, you may still be able to get a PLUS loan with poor credit. Applying with an endorser can drastically improve your chances of qualification, as an endorser is someone with better credit who agrees to take over your payments if you can’t make them yourself.

If extenuating circumstances contributed to your low credit score, you can explain them to the Department of Education, too. Depending on the circumstances, they may be willing to overlook lower scores. 

How Do You Apply for a PLUS Loan?

First, the student must have completed the Free Application for Federal Student Aid (FAFSA). To apply for a PLUS loan, you must follow the application process of your student’s school’s financial aid office. You’ll also have to fill out a loan application on Studentaid.gov. This application will ask you to provide:

  • Your verified FSA ID
  • The name of your child’s school
  • Your child’s name, address, Social Security number, and birth date
  • Your personal information
  • Your employer’s information

Once you submit your application, you’ll be notified of the maximum amount you can borrow. After selecting your preferred loan amount, simply sign a Master Promissory Note (MPN) at Studentaid.gov to finalize the process.

Once you’re approved for your PLUS loan, your money will be sent to your school’s financial aid office, where it will be automatically applied to your student’s tuition, room, and board. Any remaining balance will be refunded to you within 14 days.

Learn More About Your Options for College Financing

PLUS loans can help many families afford college tuition if other sources don’t cover the costs in full. Now that you know how PLUS loans work, you can decide if they’re the right college financing option for your family.

Have more questions about financial aid? Our College Counselor can answer also personally answer your financing questions. We can also help you find affordable private student loans from a credit union near you.

This post was updated on June 6, 2024.