Parent PLUS Loans: The Pros and Cons Every Family Should Know
If you’re a parent helping your child pay for college, you’ve probably run into the option of Parent PLUS loans. On the surface, they seem like a simple solution: the government lets you borrow whatever your child’s financial aid package doesn’t cover. But before you sign on the dotted line, it’s important to know both the good and the bad.
The Pros of Parent PLUS Loans
1. They fill the gap.
For many families, the financial aid package plus savings and student loans still doesn’t cover the full cost of attendance. Parent PLUS loans step in to cover the difference. There’s no set borrowing cap other than the cost of attendance, which can be a lifesaver if your child’s dream school is still just out of reach financially.
2. Federal protections.
Unlike private loans, Parent PLUS loans come with federal benefits like deferment, forbearance, and potential access to income-driven repayment options. If you’re asking yourself, “can Parent PLUS loans be forgiven,” the answer is yes, in certain cases. If you consolidate into a Direct Consolidation Loan, you may qualify for Public Service Loan Forgiveness (PSLF) or an income-contingent repayment plan. It’s not automatic and it doesn’t apply to every borrower, but it can be an option.
3. Easy approval.
Credit requirements for Parent PLUS loans are not nearly as strict as private lenders. As long as you don’t have an adverse credit history, you’re generally approved. That means families with less-than-perfect credit still have a path to borrowing.
The Cons of Parent PLUS Loans
1. High interest rates and fees.
This is where it starts to sting. Parent PLUS loans carry one of the highest interest rates among federal loans. For 2024-25, the interest rate is over 9 percent, plus a hefty origination fee of around 4 to 5 percent that comes right off the top. Borrow $20,000 and nearly $1,000 disappears before you even make your first payment.
2. No real borrowing limit.
Yes, I listed this as a “pro” earlier, but it’s also the biggest danger. Because you can borrow up to the full cost of attendance, parents often take on way more debt than they can reasonably pay back. I’ve talked to families with $100,000 or more in Parent PLUS debt (and that’s on top of the student’s loans).
3. Repayment is tough.
Unlike student loans, Parent PLUS loans don’t automatically qualify for the most flexible repayment plans. The standard term is 10 years, which can make monthly payments very high. You can consolidate to get on an income-contingent repayment plan, but that stretches repayment out to 25 years or even 30 years under newer rules. That means you could still be paying when you’re approaching retirement.
4. Limited forgiveness.
Back to that question: can Parent PLUS loans be forgiven? The reality is, it’s limited. Forgiveness is only possible if you consolidate and then qualify for programs like PSLF. Even then, many parents don’t meet the exact requirements or work in eligible jobs, so forgiveness is far from guaranteed.
Refinancing Parent PLUS Loans
A common question I hear is: should I refinance Parent PLUS loans? Refinancing with a private lender can sometimes lower your interest rate, especially if you have strong credit and stable income. That could save thousands in interest over the life of the loan. But here’s the tradeoff: once you refinance, you lose federal protections like forbearance, income-contingent repayment, and potential forgiveness. For some families, the lower rate is worth it. For others, the flexibility of federal benefits is more valuable.
Final Thoughts
Parent PLUS loans can help bridge the gap when other funding falls short, but they’re not a decision to take lightly. They can give your child access to opportunities, but they can also saddle you with debt that lingers well into retirement.
My advice? Treat Parent PLUS loans as a last resort, not the first option. Always look at the ROI of the college decision (what your child is likely to earn after graduation compared to what you’ll owe). Sometimes the better investment is a school with a lower price tag and stronger financial aid, even if it doesn’t have the flashy name.
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