Parent Plus Loan

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Why should I take out a Parent PLUS loan?

We recently received an email from a concerned consumer who didn't understand what a parent PLUS loan was. Their child has just been awarded a place at a university and the financial aid granted doesn't cover the full cost of tuition and fees.

Hi there

I am so ecstatic that my daughter has got into the University of her Choice. We recently received her award from the government that outlined which grants and student loan she was eligible for. Yet they also expect me to make quite a big contribution, which I just can't make! I have three other hungry mouths to feed! My friend mentioned that I should look into taking out a parent PLUS loan but I have no idea what this is! Can you help me?

Thanks

Sharon

Our response:

Thank you so much for your email in regards to a Parent PLUS loan. Let us try to help you!

First of all, the government has looked at your financial situation and determined, by using formulas, what they believe you can afford to contribute to your daughter's further education. This is known as your Expected Financial Contribution, or EFC for short. This is what they can believe you can afford to pay. Quite often you have too many other financial commitments to manage this but there are other sources of financial help available, such as a parent PLUS loan.

In simple terms a parent PLUS loan is a loan granted to the parent of the child that has been offered a place. This is a federal loan that enables you to borrow the cost of education to you, which equals your EFC.

Many different lenders provide a parent PLUS loan and the university or government can recommend which lenders to try. These loans can normally be processed very quickly either over the phone or online. Repayments normally start 60 days after your daughter starts attending her university course.

There are other types of non-need based college loans available that you should also investigate before deciding whether or not a parent PLUS loan is for you. These include an unsubsidized Stafford loan, a direct loan or a private loan from a private loan source such as a bank. You need to determine which provide the best interest rates and repayment terms for you. Also be aware of fees associated with each type of loan.

Hope this helps you!