Repaying PLUS Loans

A Federal PLUS Loan allows your parents to borrow money to help pay your educational expenses. Setting up a solid repayment plan is just as important for your parents as it is for you.

Federal PLUS Loans for Parents
Parents are expected to start repayment on the Federal PLUS Loan within 60 days of disbursement and the repayment term is up to 10 years. Some lenders allow parents to defer interest payments while the student is in school at least half time and add the interest to the capital and some, but not all, lenders offer a variety of repayments option. Contact your lender for specific information. Unlike student loans, the Federal PLUS Loan doesn't include a grace period and it must be repaid even if the student does not complete their educational program. If the Federal PLUS Loan papers were signed after July 1, 2006, the interest rate is fixed at 7.94%. The interest rate for loans taken out before that date cannot exceed 9%, and variable interest rates are adjusted annually. 

Deferment and forbearance options may be available, but the Federal PLUS Loan is unsubsidized, so interest payments must be made even if a deferment or forbearance request is granted. Failure to make timely payments on the Federal PLUS Loan affects the credit of the borrower(s), regardless of whether or not the student has agreed to repay the loan. Parents and their children should talk about who will be repaying the Federal PLUS Loan, to avoid monetary disputes when repayment time comes.

Your family may have mortgage payments, car loans, and other debts to pay in addition to the Federal PLUS Loan. Parents should always focus on paying off high interest debts more quickly, prioritizing the car, mortgage, credit cards, and personal loan payments in order of interest rate, and paying extra each month on the higher interest rate debts when possible. It may be feasible to consolidate debt through mortgage refinancing.