How to Pay Off Parent PLUS Loans Faster

How to Pay Off Parent PLUS Loans Faster

BIG Ideas:

  • A Parent PLUS Loan is a federal loan that allows parents to borrow money to help finance their children’s college.
  • Parent PLUS Loans usually have the highest interest rates of any federal student loan.
  • You can reduce Parent PLUS Loan debt and interest by making extra payments. You may also be able to reduce your Parent PLUS Loan debt and interest by refinancing to a private student loan. 

You wanted to give your child a brighter future by helping finance the cost of college. To make that possible, you chose a Direct PLUS Loan, a federal loan for parents looking to pay for college.

You’re certainly not alone. As of January 2023, there were 3.9 million borrowers with outstanding Parent PLUS student loan balances.

But there are some important things to know about Parent PLUS Loans that can impact your financial future.

First, they allow you to borrow up to the cost of attendance minus any federal aid received. You can borrow up to that amount, no matter what your income is. So, you could end up with more debt than you can afford. And that debt can be very expensive.

Parent PLUS Loans usually have the highest interest rates of all federal loans, which can drain your budget when your loan enters repayment.

How to Pay Off a Parent PLUS Loan Faster

If you have a Parent PLUS Loan, however, you can get relief. Read on to learn about key ways to pay off Parent PLUS student loans faster:

  • Make payments while your child is in school. With Parent PLUS student loans, you could defer payments while your student is in school at least half-time and up to six months after graduation.While deferring payments may sound good, it will cost you more since interest on those deferred payments will continue to accrue. What’s more, interest is capitalized, which means it will be added to the amount you owe, making your loan even more expensive.

    One way to avoid paying more interest is to make payments while the student is in school.

  • Pay more than the minimum payment or make extra payments. The longer it takes to repay your loan, the more interest you’ll pay. You can reduce interest fees by making additional payments or paying more than the minimum payment, which will help reduce the amount you borrow and owe.If you have extra funds, such as savings or a tax refund, consider putting that money toward the principal of your PLUS Loan, which will lower your cost of borrowing.

    Also, always pay your loan on time and never miss a payment, since the consequences for not paying PLUS Loans are severe, including wage or Social Security garnishment.

  • Determine if you qualify for public service loan forgiveness. As a federal loan, Direct PLUS Loans may be eligible for Public Service Loan Forgiveness (PSLF).To qualify you must consolidate your loan into a Direct Consolidation Loan that’s being repaid through an Income-Contingent Repayment Plan.

    Keep in mind that it’s your employer, not your child’s, that must be a qualified government agency or non-profit. And, you must have worked there full-time and made 120 qualifying monthly payments.

  • Refinance to lower your interest rate. Another option is to exchange your high-interest Parent PLUS student loan with a private student loan, which may offer a lower interest rate. Understand that if you refinance with a private loan, you’ll no longer be eligible for federal loan benefits, such as PSLF.If you are considering refinancing your Parent PLUS student loan, you must generally have good credit, since private lenders evaluate your creditworthiness when making loan decisions and determining interest rates.
  • Enroll in automatic payments. If you arrange to have your monthly payments automatically deducted from your checking account, you may qualify for an interest rate discount that can help you save.

Why It’s Important to Pay Down Parent PLUS Student Loans

We understand that you want your child to have a secure financial future. You also need to ensure you have one and are not saddled with high monthly payments that will strain your budget and cause you to put aside your goals, such as retirement.

Brazos Offers Private Student Loans to Help You Save Money

For more than 40 years, Brazos Higher Education has been helping make education more accessible for students and parents. As a Texas non-profit, we can help you refinance higher-interest student loan debt and save money. Contact us to learn more.