Parent Loan

6 Pros and Cons of Taking Out a Parent PLUS Loan

Parent PLUS Loan

The Parent PLUS Loan is a loan that parents can take out on behalf of their children to help them pay for college. Parents are able to borrow up to the full cost of attendance at any college in the United States, as determined by the Department of Education. The following pros and cons will help you understand if this loan is right for you!

What Is the Parent PLUS Loan?

The Parent PLUS Loan is available to parents of any age and is a federal loan. This loan comes with many benefits. It is a lifetime loan and there are no loan payments to pay. All the student has to do is to make sure they attend at least one college full time or part time and maintain a GPA of at least 2.0. When the loan is paid in full, the loan will be discharged after 20 years. Repayment Parents are able to borrow as much as the full cost of their child’s college education, up to the total cost of attendance. This includes tuition, fees, room and board, books and supplies, computers and other items needed for the educational experience. You are also able to borrow money for books or other living expenses for the child’s college education.

Pros of the Parent PLUS Loan

A Parent PLUS Loan can help your child get into private schools like a Harvard, Yale, or Princeton that they would have been priced out of otherwise The loan can help your child attend a school for the same or more money than their budget would otherwise allow. This loan can let you meet the higher deductible requirements of health plans. You can pay off the loan when you become eligible for Medicare. Cons of the Parent PLUS Loan While there are several cons to the Parent PLUS Loan, most of them are not the lender’s fault and are actually how the loans are set up in the first place. Parents are charged a very high interest rate on these loans. This makes it seem like a better idea for the borrower to pay off their loans in less time than they originally expected to pay it off.

Cons of the Parent PLUS Loan

The Parent PLUS Loan isn’t the best loan in terms of rates and terms. The rates tend to be on the higher end for private loans, and the terms can be more limiting. Only approved parents can receive the loan, and the age restrictions can be restrictive. This loan may make it more difficult to purchase a home in the future. It isn’t as easy to come up with the money as the other student loans. The parent PLUS Loan may affect your credit score. Pros of the Parent PLUS Loan The Parent PLUS Loan may be very useful in some situations. This loan can save the parents and students money because of the large borrowing limits and loan terms. If you take out this loan and are not approved for a Federal Perkins Loan, you can be approved for PLUS Loans.

Who Should (and Shouldn’t) Take Out a Parent PLUS Loan

While the Department of Education will make sure that your child is at least 16 years old to qualify, it is advisable for parents to think twice before taking out the parent PLUS loan. The student who is taking out the loan will be responsible for paying back the loan in full. You will be able to borrow up to the full cost of attendance of the college of your choice, with interest, for each year you take out the loan. Parents who use this loan should only consider a public college that is more affordable and your child will attend. If your child is able to pay for college, borrowing isn’t the right option for your family. What Qualifies as College Costs? The average cost of a private college in the United States is more than $40,000 a year.


As with all loan decisions, each situation is unique. There are no hard and fast rules to apply to choosing the right Parent PLUS Loan for your child. It’s important that you carefully consider the pros and cons, as well as the financial implications, when deciding whether or not to take out a Parent PLUS Loan for your child. There is no silver bullet, so talk to a knowledgeable financial professional to help you make the best decision for your family. This article is for general information only and is not intended to be legal, tax, investment or financial advice of any kind. As with any financial decision, it’s important that you use a good source to help you learn all the facts and take the right steps to achieve your goals.