What You Should Know About Parent PLUS Loans

Parent PLUS loans are one variety of many that are offered to students by the federal government. One thing that’s a bit different about Parent PLUS loans versus other types is they’re designed specifically for the parents of dependent students to be the borrowers.

Essentially, all PLUS loans are meant as supplemental borrowing options when other forms of federal loans aren’t enough to pay for school costs. Let’s look deeper at what you should know about Parent PLUS loans.

What Are Advantages and Disadvantages of Parent PLUS Loans?

People have written pretty extensively about how Direct PLUS loans, which include Parent PLUS loans, aren’t the best way to fund your education. But before we get into some of the drawbacks of Parent PLUS loans, it’s worth noting some of the things that are good about them.

  • You’ll be able to fund your education – Parent PLUS loans ensure students are able to meet their financial needs for college. This can be a necessary bridge for those who are unable to do so through other means.
  • You can get one without great credit – You’ll likely still be able to get a Parent PLUS loan even if the borrower doesn’t have amazing credit. Adverse marks on a credit report can even be looked past if you can claim extenuating circumstances.

Beyond these points, it’s also a positive that Parent PLUS loans come with a fixed interest rate, which makes it easier to project total costs of the loan.

Other than these high points, however, there are quite a few drawbacks to a Parent PLUS student loan, such as:

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  • High interest rates and origination fees – Since Parent PLUS loans are designed as supplemental financing to cover what couldn’t be by other federal loans, they don’t come with the greatest terms. Current interest rates are 6.28% and loans also come with a 4.228% origination fee. These rates are significantly higher than those offered by other federal loans.
  • You can easily borrow too much – Since Parent PLUS loans cover whatever’s necessary to meet funding requirements for the student’s university of choice, it’s easy to accidentally bite off more than you can chew.
  • The loan is in the parent’s name – While it’s good for parents to help their children, taking out a loan in their own name to fund a child’s education can be a risky move. This can lead to situations where neither parent nor child is able to sufficiently repay the loan.

Clearly, it’s wise to seek out alternatives to a Parent PLUS student loan. But it can be difficult to navigate the world of private student loans on your own.

Can You Get Something Better Than a Parent PLUS Loan?

Those who are looking for a better deal than what’s offered by Parent PLUS student loans can turn to the private lending marketplace. One company, Juno, is making this process far easier for students and parents looking to fund an education.

Instead of lending, Juno takes bids from a large pool of financial organizations to obtain the best loan deals for their group members. They then pass these along for no fee. Many people will find they can get much more attractive financing terms for a student loan through this route than with a Parent PLUS loan. With lower interest rates and no origination fees, what’s not to like? This is also much less complicated than having to deal with each individual lender on your own, which can be time-consuming and confusing.

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There are about 45 million people in the U.S with current student loan obligations. The need for student financial aid isn’t going anywhere. If you’re thinking about going the path of a Parent PLUS loan, it’s worth checking out some of your other options, as it’s likely you’ll find something better out there.

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