A Parent PLUS Loan (PPL) is a Federal student loan program that helps parents finance their dependent children’s college education, making it a vital resource for families facing rising college costs. Carrying a fixed interest rate of 9.08% for both the 2024-25 and 2025-26 academic years and no upper borrowing limit except from a college’s Cost of Attendance(COA) less other financial aid, PPL’s allow parents to cover all college costs.
The application process for a PPL begins with the completion of the Free Application for Federal Student Aid (FAFSA), followed by an online application on which parents authorize a credit check and specify the loan amount. Approved PPL funds are sent directly to the college to be applied to the COA. A key consideration for parents is that they must have a satisfactory credit history.
Parents are encouraged to consider other financial aid options, especially Federal Direct Loans, before proceeding with a PPL. Direct Federal loans have better interest rates and terms than PPL’s, but are limited in the amount that may be borrowed.
Despite its benefits, the PPL program has faced criticism due to its comparatively high interest rates and ineligibility for Income-Driven Repayment (IDR) plans. Thus, while a PPL is a useful financial tool for many families, it comes with responsibilities and considerations that must be carefully weighed.
To qualify for a PPL, parents cannot have an adverse credit history. However, the credit check for a PPL is less stringent than those for private student loans. Even if a parent is denied a private loan, they may still be eligible for a PPL.
A PPL is often considered by many to be a last resort for Federal student financing. PPL’s are not subsidized by the government. They have higher interest rates than other Federal loans. They should be used only after other avenues for student loans have been exhausted.
Interest on PPL’s begins accruing as soon as loan funds are disbursed. For academic year 2025-26, the fixed interest rate is set at 9.08%. The origination fee for 2025-26 is 4.228%. Interest is calculated on the full amount borrowed, before the origination fee is deducted. The interest rate is changed every July 31 and remains the same for a full year.
Credit History
A parent’s adverse credit history can be a significant barrier. To qualify for a PPL, an applicant cannot have any debts that are over 90 days overdue and totaling more than $2,085, nor can they have a record of collection or charge-offs. If a parent is found to have an adverse credit history, they can still potentially qualify for the loan by appealing to the ED with documentation proving extenuating circumstances. The ED has final authority in adjudicating appeals.
Eligibility Requirements
To be eligible, certain criteria must be met by the borrower and the student, as follows:
- Parental Relationship: The borrower must be the biological or adoptive parent of the student. In some cases, a stepparent may also be eligible if their financial information is included in the FAFSA and PPL applications.
- Dependent Student Status: The student for whom the loan is sought must be a dependent enrolled at least half-time at an eligible institution. A student is typically considered dependent if they are under 24 years old, unmarried, not a veteran, without dependents, and not a ward of the court.
- Credit Requirements: Borrowers must meet specific credit standards, including no debts over 90 days overdue and no debts totaling more than $2,085. They cannot have had collections , charge-offs, or an adverse credit history. A credit check is performed as part of the PPL application process. If approved, the borrower must complete a Master Promissory Note (MPN). If not approved, the borrower has two options: to appeal the decision to the S. Education Department (ED) or get a cosigner. Borrowers may take out a loan up to the Cost of Attendance (COA) less other financial aid received by the student.
- Satisfactory Academic Progress: Another criterion that dependent students must meet is Satisfactory Academic Progress (SAP). Failure to meet SAP standards will result in denial of a loan application.
Application Process
The application process has several steps that must be followed meticulously.
- Initial Requirements
The first step for a parent is to ensure that their child has completed the FAFSA at Studentaid.gov and submitted it to the ED. The FAFSA is a prerequisite for all student financing programs.
- PLUS Loan Application
Parents need to log into Studentaid.gov using their FSA ID to complete the PPL application. During this process, they must authorize a credit check and specify the amount they wish to borrow. The ED will assess the parent’s credit history to determine eligibility. If deferment of repayment until after graduation is desired, it must be requested on the PPL application.
- Loan Period Selection
When filling out the application, the parent selects the desired loan period, including start and end dates. A college cannot approve a PPL request after the last day of enrollment for the selected academic period.
- Master Promissory Note
The parent who requests the loan must also complete and sign the MPN to finalize the borrowing process. It is essential that the same parent who requests the loan also signs the MPN.
If the PPL is approved, a disbursement will be sent directly to the college for the loan amount minus the origination fee. These funds will be applied to the student’s account at the college to settle any outstanding balances, with remaining funds either directly deposited or mailed to the parent-borrower. Parents are encouraged to consult the financial aid office at their child’s college for additional guidance.
Repayment Options
Repayment is effected in accordance with the borrower’s choice among several options designed to accommodate different financial situations. Repayment begins within 60 days of the loan disbursement. However, borrowers can request that repayments be deferred if certain criteria are met. The available repayment plans are summarized below:
Standard Repayment Plan
Under the standard plan, borrowers pay off their loans through fixed monthly payments spread over 10 years.
- Graduated Repayment Plan
The graduated repayment plan starts with smaller payments that increase biennially. This option is beneficial for borrowers anticipating a steady increase in income over time.
- Extended Repayment Plan
For those needing more time to repay, the extended plan allows for repayment over 10 to 25 years. This plan can result in lower monthly payments but will also result in paying more in total interest over time.
- Income-Contingent and Income-Driven Repayment Plans
Borrowers may use either an Income-Driven Repayment (IDR) plan or an Income-Contingent Repayment (ICR) plan is distinctive in that it caps monthly payments at 20% of discretionary income. The repayment term can be extended by up to 25 years. PPL rules require the aggregation of all loans via a Federal direct consolidation loan in order to be eligible for the ICR plan.
- In-School Deferments
Parent-borrowers can request an in-school deferment, which allows them to postpone principal and interest payments while their child is enrolled at least half-time in a degree program. Although interest will still accrue, this option provides financial relief during the student’s period of study.
Advantages and Disadvantages of PPL’s
The primary benefit of a PPL is that it facilitates borrowing money by parents that wish to help pay for their child’s education. PPL’s have fixed interest rates, providing stability during the payment term. Parents may borrow up to a college’s COA less other financial aid.
PPL’s also have drawbacks. A significant issue is that they are not eligible for Income-Driven Repayment (IDR) plans. This makes repayment more difficult for families who’s financial situation worsens during the term of the loan.
PPL’s have only a 60-day grace period before repayments begin, meaning that parents must begin making repayments soon after the loan has been disbursed.
Families can take on too much debt with a PPL because parental income is not a factor in loan approval. Repayment can take 25 years or more, which is retirement age for most parents. If a parent defaults on a PPL, the ED can deduct payments from their Social Security income in order to collect the full outstanding balance.
Table A
Pro’s and Con’s of PPL’s
|
Pro’s |
Con’s |
| Fixed interest rate (not based on credit) | High origination fee |
| Several repayment options | Interest may be higher than a private loan |
| In-school repayment deferment available | Credit check required |
| Eligible for other Federal aid programs | Not transferable to the student |
| Loans up to COA less other student aid | Not eligible for all ICR/IDR plans |
| Available to parents of undergraduates | Interest accrues as funds are disbursed |
| Available to parents of graduate students | Repayment starts 60 days after funding |
| Eligible for one IDR plan | Loan discharged if parent dies or is disabled |
| Eligible for PSLF loan forgiveness program | Tax lien makes parent ineligible for loan |
Recent Comments