Understanding PLUS Loans: What Parents Need to Know Before Borrowing

Understanding PLUS Loans

BIG Ideas:

  • A Parent Loan for Undergraduate Students (PLUS) is a federal unsubsidized student loan that helps parents and graduate students afford educational costs.
  • PLUS loans usually have higher interest rates than other federal loans, making borrowing expensive.

As a parent, you want your children to have the brightest future possible. A college education can go a long way in making that happen. But with the average cost of college in the United States being $38,270 per student, per year, affording that education without sacrificing your financial future can be a great challenge (Average Cost of College Tuition; Melanie Hanson; Mar. 8, 2025).

So, what’s a parent to do?

One option is a Parent Loan for Undergraduate Students (PLUS), an unsubsidized loan from the federal government offered to parents of undergraduate students and graduate students to help finance educational costs.

PLUS loans come with some features that have made them a popular way for parents to afford the high cost of college. The first is that they offer higher borrowing limits per year and in aggregate; you can borrow up to the total cost of attendance (including books, supplies, travel, and other education-related expenses) minus financial aid. Secondly, unlike some loans, PLUS loans don’t require a comprehensive credit check to determine your ability to repay the loans.

Know the Drawbacks of PLUS Loans

All of this leads to a burning question: Is a Parent PLUS loan a smart way to pay for college? To answer that, you need to understand some of the drawbacks of PLUS loans:

  • Interest rates on PLUS loans are the highest of all federal loans.
  • PLUS loans also come with an origination fee: a one-time fee that is a percentage of the amount borrowed.
  • Interest on PLUS loans accrues during deferment. So, you’ll pay more interest if you wait until the student is out of school to repay funds.
  • Parent PLUS borrowers are not eligible for income-driven repayment, and forbearance options are limited.
  • Late or missed payments come with severe penalties, including wage or tax return garnishment.

Understand Alternative Options

If you’re having difficulty meeting the cost of college, you should consider alternatives, including:

  • Other forms of federal aid. Make sure your student has applied for all federal aid they may qualify for such as federal student loans, work-study programs and grants that are based on financial need.
  • Scholarships and grants. There’s no shortage of scholarships and grants offered by non-profits, companies, and other organizations that can provide free money for school. Learn how to find scholarship opportunities.
  • Private loans. If you’ve exhausted other federal aid programs, you could apply for a private loan with a private lender to fill the gap where financial aid leaves off. Private loans, available through banks, credit unions, and non-profit lenders, are credit based and may come with no fees. Rates can vary by lender, though state-based non-profit lenders like Brazos often offer you lower rates.

Brazos is Here to Help You Afford College Without Sacrificing Your Financial Future

For more than 40 years, Brazos Higher Education has been helping make education more affordable for students and parents. As a Texas non-profit, we offer great rates and no fees on private student loans for parents and graduate students. Contact us to learn more.