Pro and Cons of Borrowing Federal Parent PLUS Loans
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June 10, 2020

As their children get ready to head to college, parents quickly realize the truth: a college education has never been more expensive!

Some students may have much of their costs covered by scholarships and grants. However, many need to borrow student loans in order to cover the cost.

There are hard limits to how much a student can get in the form of federal loans each academic year. To pay the rest, more and more parents are taking out parent loans such as the Parent PLUS loan or private parent loans.

Here is what you should consider about parent loans. 

Pros of Borrowing Parent Loans

  • For the federal Parent PLUS loan, the amount you can borrow is not limited like traditional federal student loans. You can borrow what your child needs up to the cost of attendance for that academic year.
  • Your interest rate remains fixed for the lifetime of the PLUS loan. This helps you plan your repayment and not worry about any curveballs regarding what you owe.
  • It’s possible to request a PLUS loan deferment while the student is in school, which gives you more options when it comes to paying back the loan.
  • Parent PLUS loans are eligible for Income Contingent Repayment, where payments are based on your income and family size. Private parent loans would not be eligible for payments based on income. 
  • A Parent PLUS loan could be eligible for Public Service Loan Forgiveness if consolidated into a federal direct loan. 
  • Parent PLUS loans are available for unemployment deferment and economic hardship deferments, unlike private parent loans. 

Cons of Borrowing Parent Loans

  • The Parent PLUS loan has a higher interest rate than other federal student loans.
  • Because PLUS loans and other parent loans are based on credit, you may not be able to borrow as much as you need
  • Because you can borrow so much money, it’s possible to borrow too much and end up in risk going into default
  • Unless you request deferment and get accepted, you must start paying parent loans back right away. 
  • Unlike other federal student loans, the parent PLUS loan isn’t available to as many income-based repayment options. 

The Final Verdict

Only you can decide whether a parent loan is best for you and for your child’s education. However, make sure you have fully exhausted other potential options (including potential scholarships and grants) before you apply.

A good place to start:

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