Parent Plus Loans: What are they?


Parent Plus Loan What is it-900

A Parent Plus Loan is a loan that’s taken out by the parents of a college or university student. It’s a fixed interest loan designed to allow parents to help their children fund college.

Not all students have the ability to receive Pell Grants or other monies intended to offset the cost of education. The Parent Plus Loan takes the stress off of a student since they don’t need to worry about paying back the loan.

To qualify, you must be the parent of a college student who’s attending at least halftime. You also must not have an adverse credit score. Students can apply for the Parent Plus Loan up until June 30.

Parent Plus Loans: Interest Rates and Fees

As you can imagine with any loan, there are interest rates and fees. You will want to check back yearly to see if the rates and fees have changed. It’s not uncommon for a rate to get hiked due to interest rates across the board going up.

This has more to do with current economic situations on the ground than it does with the program itself. Many factors come into play when it comes to a financial institution determining what interest rates to charge. Student loans aren’t free from those factors, and they play a decisive role in how much interest rates are.

The current interest rate is 7.08% for Parent Plus Loans. The current fee is 4.248%. If all of this sounds confusing to you, don’t let it get in your way of pursuing higher education. All you need to do is talk to the financial aid office of your college.

They will be able to break down what the fees are and how you’re expected to pay them. The most confusing aspect of the loan process is understanding how much additional money you’re expected to pay back.

It’s a common question, and no one will think of you differently for asking. They are there to help, and you’d be surprised by how often this question pops up.

Parent Plus Loans: How much can I borrow?

No number is set in stone when it comes to how much you can borrow. With that said, you will want to try to get all of the grants and scholarships possible.

You don’t want to cause your parents hardship down the line because you weren’t willing to put in the hard work of learning what you have coming to you.

A Parents Plus Loan is meant to be a stop-gap to make going to college possible. Without it, many students wouldn’t be able to attend college. The loan was started as a measure to increase college attendance while making sure there are affordable solutions for students who need assistance.

The amount that can be borrowed is determined by how much is needed to cover the cost of your education. All of your grants, scholarships, and loans are calculated and to come up with a final number.

That number is then subtracted from the amount that it costs for you to attend college. The remaining balance can be paid using a Parent Plus Loan. This is the only amount that a Parent Plus Loan is good for.

There is no way to determine across the board how much a Parent Plus Loan can be. This is because no two schools charge the same amount per year.

Also, the workload that each student faces is different. A full-time student going for as many credits as possible will encounter a bill that’s much higher than a student who is studying much less. While this may seem like common sense, it often gets lost through the cracks.

The amount that a parent can borrow is determined by the total cost and how much of it remains after all of the financial aid options have been exhausted.

Parent Plus Loans: What kind of repayment Plans Are available?

It should come as no surprise that you’ll have to repay these loans at some point. It is a loan and not a grant. Though, you shouldn’t get too worried about repaying the loan.

You will be given ample time, and it’s also possible to ask for an extension. Those who are already heavily burdened by debt will be thankful for their lenient ways.

However, you must be aware that they are charging you interest on the money. So, it’s in your best interest to pay off the loan as quickly as possible. Interest has a way of escalating to the point of being out of control when you pay off the bare minimum every month.

Repayment: The standard repayment plan

The standard plan spreads out all of the payments over ten years. You will pay the same amount every month for the next ten years. If you’re strapped for cash, this is a great way to spread out the payments without having it impact your budget too much.

You should be advised that this may not be the best method of repayment as the interest will compound over the years. If you can pay the loan off quicker, then do it.

You’ll save yourself a considerable amount of money for every year you’re able to shed off of the repayment plan.

Repayment: Graduated repayment plan

The graduated repayment plan is best for those who are currently struggling financially. For the first two years after graduation, you’ll only have to pay barely above the interest rate.

Every two years afterward, the amount you pay monthly will increase. If money is a problem, then this might be the best route to go. Just remember that if you end up paying for the full ten years, you’ll end up shelling out quite a bit for interest.

The best advice would be to get your financial house in order for the first two years that the payments are low. After that, increase the payments or ask to be changed over to the standard plan.

The goal should be to get rid of the debt as quickly as possible. The extended repayment plan With the extended repayment plan, you can repay your loan in up to 30 years. The amount determines the length of time that you have to repay the loan.

The more money borrowed, the longer you have to repay it. Those with $60,000 or more debt have up to 30 years to pay it back. As you can imagine the interest rates will cause a hefty additional sum to be paid if a person waits so long to repay a loan.

Anyone who is in this much debt probably isn’t thinking about interest rates. A loan of this magnitude is one that needs careful consideration to determine if it’s worthy of going into such debt for.

Repayment: Income contingent repayment plan

The income-contingent repayment plan is a little tricky. It’s for those who are considered low income. You will spend no more than 20% of your discretionary income.

If the loan hasn’t been paid off after 25 years, you won’t be held liable for it. This plan is based upon your income and nothing else. Those who are unsure if they qualify for this should ask the lender and possibly the financial aid department of the college.

Repayment Public student loan forgiveness

Those who have been paying their loans for a total of 10 years may have their outstanding balance forgiven depending on their chosen profession. You must have paid every month and be in good standing.

Those who are and are in the right field can find their debt forgiven. Check with the lender to see which fields are currently applicable for the public student loan forgiveness option.

A few helpful Tips

For those with Parent Plus Loans, refinancing is available You’ve probably heard about refinancing loans. It’s where you shop around to get a better deal on interest and fees.

It’s possible to do that with your Parent Plus Loan. You will need to read the fine print and all of that. What seems like a great deal, in the beginning, might not be such a fantastic deal in the end.

Shop around and see who is giving the best offer. You’ll find many competing offers and one of them could end up saving you quite a bit of money.

Transferring the loan from parent to child You may find that the burden is far too great on yourself to carry the weight of the loan. If so, then transferring the loan to your child is an option.

Also, if they’ve recently graduated from school, hopefully, they have a job. If so, then there’s no good reason why you shouldn’t transfer the loan. It would help lessen the load on yourself while teaching your child about the importance of paying what they owe.

They’ll have quite a few chances to learn that as they probably have other loans that need to be repaid. It’s possible to defer the loan You can defer the loan for up to three years if you’re unable to pay.

It should be noted that you will still be charged interest for these three years. This isn’t a get out of jail free card for those who don’t feel like paying the loan.

Additional Tips

The amount owed is going to increase over those three years as they give you time to get everything ready. This is a good option only if you have no other choices.

If you can pay anything at all, it would be best to go with the graduated payment plan. At least by going this route you’d still be paying off some of the money as time goes on.

Though, it is possible to defer the loan if that is an absolute must. There are no penalties for paying off the loan early As you may know, some loans have penalties if you pay them off too quickly.

That’s not the case with the Parent Plus Loan. If you can pay it off in a year, then great. You should try to pay the loan off as fast as possible. The interest you pay on the loan isn’t doing you any good at all.

That is money you’re throwing out the window never to see again. If there are months where you can make a double payment or pay a few extra bucks, then that would help you out significantly in the future.

Don’t crack under the burden of debt Parents and students alike are finally waking up to the harsh reality that is required of them to achieve higher education.

It has never been more difficult for a student to get a college degree. The financial burden alone is more than enough to make anyone doublethink going to college. It’s a tough road, but it’s one that we all must go down if we want to better ourselves.

Food For Thought

Those who have a college degree earn more money than those who don’t. They have the type of upward mobility that many can only dream of. A college education is about so much more than being book smart. It’s about living out to your fullest potential.

Every person deserves to be the very best they can be. It’s only possible to achieve this lofty goal by receiving a higher education. The price is steep, but the cost is even higher for those who don’t go to college.

They will live a life of not fulfilling their dreams and not earning the type of salary they deserve. Education is something that no one can take away from you. By educating yourself, you’re giving yourself a fighting chance in an ever-changing economic world.

Conclusion

The flexibility to face the challenges tomorrow begins with educating yourself today. There is no loan amount too great to push a person away from their desired goal. Dedication is a must for those who wish to go in debt to better themselves. A dedication to not only themselves, but to their families who put their financial future in jeopardy by taking out loans that must be repaid.

Every person deserves to be the very best they can be. It’s only possible to achieve this lofty goal by receiving a higher education. The price is steep, but the cost is even higher for those who don’t go to college.

They will live a life of not fulfilling their dreams and not earning the type of salary they deserve. Education is something that no one can take away from you.

By educating yourself, you’re giving yourself a fighting chance in an ever-changing economic world. The flexibility to face the challenges tomorrow begins with educating yourself today.

There is no loan amount too great to push a person away from their desired goal. Dedication is a must for those who wish to go in debt to better themselves. A dedication to not only themselves but to their families who put their financial future in jeopardy by taking out loans that must be repaid.

For more reading on additional loans and grants, click here.

If you are starting to think about applying for loans and grants, we recommend starting with Scholly.

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