Can You Afford a Parent PLUS Student Loan?

The Parent PLUS student loan program allows you to borrow funds from the Department of Education to pay for higher education for your children. The PLUS loan program is open to all parents within the United States, regardless of income or need. However, if you do have an extreme need, you may qualify for added benefits through the program. As a result, the PLUS program is one of the most affordable options to finance a college education.

Costs and Fees of a PLUS Loan

To start, the fees for applying for a PLUS loan are extremely low. You may fill out the Free Application for Federal Student Aid (FAFSA) in order to determine your eligibility. There are no fees or costs associated with the processing of this application. Once you have applied, you will receive a rejection if you are not eligible based on your credit, or you will receive a loan offer. If you receive an offer, you can simply sign it in order to secure the funding. The funds are always issued at a fixed interest rate, and the rate is typically lower than the going rate from a private lender. You will be able to secure funding to pay for tuition only, but you may still have to pick up a portion of the cost if the limits of your loan are not sufficient to cover the entire tuition.

Subsidized PLUS Loans

If you are among the neediest applicants based on your income, you may be offered the opportunity to receive a subsidized loan. With a subsidized loan, you can defer payment until your student has graduated without additional interest accruing. This is particularly beneficial to parents with more than one child in college at a time. By repaying only one loan at a time without racking up interest fees on the other, you can continue to afford college for multiple students.

Consolidation and Refinancing

A further fiscal advantage of the PLUS loan program is the ease with which you can consolidate and refinance the loans in the future. Once you have received all of the debts you need through the program, you can apply for a direct consolidation with the PLUS loan program. There is no additional fee to consolidate, and consolidation will not harm your credit. If your financial abilities change in the future, you can refinance most federal student loans very easily. There is never a prepayment fee on a federal student loan.

Alternatives to a PLUS Loan

For all of their benefits, PLUS loans do have some shortfalls. First, they will rarely cover 100 percent of the costs associated with college. In most scenarios, you will be required to take multiple loans to pay for school for your children. Second, since the loans are federally supplied, they come with more restrictions than private loans do. If you wish to forego these restrictions and increase your loan limits, you may consider applying for private loans. Alternatively, if you would like your child to personally pay the costs, have him or her apply for loans directly.

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