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Last Updated 03.01.2023
Last Updated 03.01.2023

What Are Parent PLUS Loans?

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Parent PLUS Loans – What Are The Differences?

Parent PLUS Loans – What Are The Differences? - photo 3

A parent’s credit card is a tool they can rely on when times are tough, but it can also pose some serious financial risks if used irresponsibly. The same can be said for an unsecured loan, which is why it’s important to be aware of the differences between them. Here’s a closer look at parent plus loans – also known as PARPLUSs – and how to make the most of them.

Basic Differences Between Parent Plus Loans And Traditional Loans

As the name would suggest, a parent plus loan is a combination of a credit card and an unsecured loan with the latter being offered as a “plus” to the former. The reasoning behind this is that the parent is acting as a guarantor for the loan, so in case the student defaults, the parent will be on the hook for the remaining amount. Traditional loans, on the other hand, are usually funded by a bank or credit card company and carry interest rates that can reach 20% in some cases. Parents are usually required to co-sign on these loans with the bank or card company, but they are not legally obligated to do so. This is one of the major differences between traditional loans and parent plus loans.

Advantages Of Parent Plus Loans

As a parent, there are a number of advantages to using a parent plus loan to fund your child’s studies. One of the primary advantages is the convenience of the loan. Since you are acting as a guarantor for the loan, you can apply for one when needed and it will be deposited directly into your account. In most cases, applying for a parent plus loan is easier and faster than applying for a traditional loan, and this can make a difference in terms of which loan you choose when in a hurry.

Another major advantage of using a parent plus loan is how affordable they can be. In most cases, the application process is highly competitive and the interest rates are at a minimum. In addition, the collateral that’s usually required to secure the loan is usually not that substantial, making them an affordable option for potential applicants.

A major difference between a parent plus loan and a traditional unsecured loan is in the terms and conditions of each loan. A traditional loan will usually have many restrictions and may come with a set of tough covenants that the borrower must adhere to. In some cases, these loans may not be that easy to qualify for if you meet the requirements for the credit card you have chosen, or if your circumstances change significantly after the loan is approved.

A parent plus loan will not have these sorts of restrictions. Usually, the only requirement is that the borrower provide at least one guarantor – a parent in most cases – and sign any loan documents that may be required. If the borrower meets these requirements, the loan will be approved and the money will be deposited into the account of the parent who cosigned the loan. In addition, as the parent of the loan’s guarantor, you will have access to all of the loan’s information and may inspect the books of the loan’s business whenever you want. This can be invaluable in case the borrower misses a payment or defaults on the loan.

Risks Associated With Parent Plus Loans

As with any other loan, using a parent plus loan comes with certain risks. One of the primary risks is losing your job and being unable to pay back the loan. Since you are acting as a guarantor for the loan, you will have to make good on the loan if the student defaults. In addition, if the student finds it difficult to pay back the loan, this could put you in a potentially embarrassing situation. Your credit rating may also be affected, depending on what type of credit card you use. In most cases, if you co-sign for a student loan, it will be listed on your credit report as a revolving debt.

In most cases, the risks associated with using a parent plus loan are the same as those associated with using a credit card as a guarantor for a loan. If you use your credit card to guarantee a loan, you run the risk of overusing it and being unable to pay back the credit card balance in full. In some cases, a credit card may be declined if the user’s credit rating is low. This can make it difficult to get credit cards if you are seeking them.

In conclusion, using a credit card as a guarantor for a loan is not a perfect solution, but it does have its perks. Especially if you are looking for an affordable solution that’s simple to qualify for and manage, consider a parent plus loan instead of a traditional solution.

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In the grand scheme of things, your kids are grown up, and you may feel more relaxed about paying off your student loans. While this may be true, it doesn’t mean you should stop paying attention to them. After all, once your child is off your financial horizon, they may continue to require support, especially if you are unable to help out with their educational expenses. This is where the Parent PLUS loan comes in.

What exactly is a Parent PLUS loan?

It’s a government-backed loan specifically for parents who want to contribute towards their child’s post-secondary education. Eligible parents can use the funds for any purpose, including fees, books, and supplies — as long as the money is spent on their child’s education. In 2020, the Education Department will limit the amount that a parent can borrow for their child’s education. For now, though, there is no annual limit, and the loan can be used for any educational expense. For complete details on the Parent PLUS loan, visit this link or the federal government’s website.

Who Are the Eligible Applicants?

To be eligible for a Parent PLUS loan, you must meet the following criteria:

  • You must have been a parent of a child who is a U.S. citizen or permanent resident;
  • You must have contributed financially to the child’s education during the credit period;
  • You must not have received an education benefits package from the military;
  • You must not meet the definition of being a prisoner as that term is used in the federal Prisoner Transport Act;
  • You must not be declared incompetent by a court of law; and
  • You must not have been convicted of a crime.

When Do I Have to Repay My Loan?

Just like any other student loan, you must repay your Parent PLUS loan within a reasonable period of time. The U.S. Department of Education sets the bar quite high for what constitutes a reasonable period of time. For full-time students who are enrolled in a degree or certificate program, the repayment period cannot exceed 10 years.

In some cases, if you are a single parent, you may be able to get an extension on your student loans. You should ask your lender for more information regarding this possibility.

How Much Can I Borrow?

You can borrow up to the following amounts for your child’s education:

  • For students who are full-time day scholars, the maximum amount that you can borrow is $20,500 for the 2020-2021 school year;
  • For students who are full-time residential students, the maximum amount that you can borrow is $17,850 for the 2020-2021 school year; and
  • For part-time students who are enrolled in an accredited school, the maximum amount that you can borrow is $15,675 for the 2021-2022 school year.

How Many Loans Can I Get?

If you are a single parent and want to pursue a degree or certificate in education, you may be eligible to consolidate your student loans. In that case, you can obtain a larger loan with lower monthly payments. Your credit will also be better overall if you have multiple loans to manage. Be sure to ask your lender about this possibility.

Where Can I Get Financing?

If you meet the criteria for a Parent PLUS loan, you can apply for the funds at participating lenders. Just remember to compare interest rates and terms offered by different lenders before making a decision. Several online platforms, like Quicken Loans, provide the tools to help you find and compare loans, as well as to make the loan application process easier. For those who need additional help, in-house counselors are available to assist via phone or email.

If you meet the criteria for a Parent PLUS loan and are considering how to pay for your child’s post-secondary education, be sure to compare the various options available to you. You will need to make a decision based on your budget constraints, as well as the type of program that your child wants to pursue. For more information regarding the Parent PLUS loan, visit this link or the federal government’s website.

Parents who co-signed on their children’s behalf for a student loan can now borrow up to the combined amount of the student loans. The Parent PLUS Loan program was established as part of the 2008 Global Financial Crisis Legislation and provides relief for struggling parents who may have limited resources.

The act allows qualified co-signers of parent loans to access the full amount of their available credit, combined. This is in comparison to the previously capped student loans where the co-signer’s credit could only be used for the amount of their student loan.

The new rules apply to existing loans and require the parent to make monthly payments on the combined loan amount. The rules also permit student loan servicers to lower interest rates for qualified borrowers. Borrowers must currently be making at least $50,000 per year to be eligible for the lower rates.


To be eligible, parents must have co-signed for at least one of their children’s loans. This includes loans made directly by a lender as well as those made by other financial institutions such as credit cards. To be considered a qualified borrower, the parent must make regular monthly payments on their loans. If the payments are made on time each month, the interest rate on the loan may be reduced.

Also, the act permits student loan servicers to cancel certain payments for borrowers who are unable to pay their monthly bills. This could include medical bills, automobile repairs, or other living expenses. In that case, the payment would be converted to an interest free loan. The act also provides that if the borrower makes 120 payments on time, the loan will be forgiven.

How To Apply

If you’re a parent who has co-signed on your child’s behalf for a student loan, you may now qualify to borrow up to the combined amount of your student loans. To learn more, contact a local SBA lender or visit the SBA website.

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