Parent Plus Loan Interest Rate 2021-22

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It’s typically best to look into financial aid options like scholarships and grants first if you want to help pay for your child’s college education. When it comes to parent loans for college, you have two options: federal Direct PLUS Loans and private student loans, should there be any remaining costs.

Private student loans can have variable interest rates and fewer fees in contrast to federal Direct PLUS Loans, also known as parent PLUS loans, which have fixed interest rates and federal protections. The best decision for you will depend on your priorities and the financial situation of your family.

Parent PLUS vs. private student loan rates

Parent PLUS loans	Private parent student loans
Type of interest rate	Fixed	Fixed or variable
Current rates	6.28% for 2021-22, 7.54% for 2022-23	1% to 14%
Origination fee	4.228%	Varies by lender
Credit check required	Yes	Yes
Repayment terms	10 to 25 years	5 to 25 years
Borrowing limits	Up to the cost of attendance, minus financial aid	Often up to the cost of attendance, minus financial aid
FAFSA required	Yes	No

What is a parent PLUS loan?

Parent PLUS loans are government loans parents can take out to pay for all or some of their child’s college education. About 3.6 million parents have this type of loan at last count, according to the most recent data from the Trellis Company.

You may take out a loan for your child’s education costs, less any other financial aid they may receive. However, it’s crucial to remember that loan costs are slightly higher than those of federal loans intended for students. Parents not only pay a 4 upfront loan fee They are also charged an interest rate of 6 percent, which is added to the loan disbursement at a rate of 228%. 28 percent for the 2021-22 school year and 7. 54 percent for the 2022-23.

How do federal parent PLUS loans work?

Federal parent PLUS loans accrue interest as soon as the money is disbursed, though you can delay payments while your child is in school. Parent PLUS loans, as opposed to private options, are qualified for some federal repayment and forgiveness programs.

To apply for a parent PLUS loan, follow these steps:

Check your eligibility. To qualify, you’ll generally need to be the parent of a dependent undergraduate student who is enrolled at least half time in an eligible school. Stepparents qualify in some cases, but grandparents and legal guardians do not. You’ll also need to meet eligibility requirements for federal student aid and have a strong credit history.

Fill out the FAFSA. Before you apply for the loan, your child should first fill out and submit the Free Application for Federal Student Aid (FAFSA).

Apply for the loan. Head to the Direct PLUS Loan Application for Parents to apply. If you qualify, the loan will be included in your child’s financial aid package.

Receive the funds. The Department of Education will send the funds directly to your child’s school, which applies the money toward tuition, fees, room, board and other school charges. Any funds left over will go to you (or the student, if you allow).

Consider your repayment options. Parent PLUS borrowers are eligible for four types of repayment plans: a standard repayment plan, a graduated repayment plan, an extended repayment plan and an income-contingent repayment plan (if parent PLUS loans are consolidated into a Direct Consolidation Loan).

Each academic year, parents must reapply for the parent PLUS loan.

Will parent PLUS loans be included in student loan forgiveness?

President Biden has talked about forgiving borrowers who meet certain requirements for up to $10,000 in student loans. Even though there is still no assurance that student loans will ever be forgiven in any way, parent PLUS loans are probably going to be covered since they are owned by the government.

Parents with these loans can apply for current student debt forgiveness programs in the interim. Public Service Loan Forgiveness, which eventually forgives student loan debt for borrowers who work for a government or nonprofit employer, is among the most well-known of these programs. Parents must enroll in the income-contingent repayment plan and consolidate their parent PLUS loan through a Direct Consolidation Loan in order to benefit from the program.

How do private parent student loans work?

Private financial institutions like banks, credit unions, and online lenders are the source of private student loans. Parents may co-sign a loan with their child or take out the loan as the primary borrower. Here’s how to get a private college loan for parents:

Shop around. Research a few private student loan lenders and compare loan limits, fees, interest rates and repayment plans. If you’re unsure whether you qualify for a loan, see if the lender offers prequalification.

Apply for the loan. You may need to supply your identification information, employment history, proof of income and other details.

Receive the funds. The lender will notify you if you qualify for the loan and explain how to accept the funds. Typically, the lender first sends the funds to your child’s school and then sends leftover money to the borrower (you).

Choose a repayment plan. Make sure the monthly payment is affordable. You should also understand whether the interest rate will change and what you’ll have to pay in fees. Depending on the lender, you may be able to defer payments while your child is in school.

Like federal loans for parents’ college, you’ll probably need to reapply every year.

How to choose a parent student loan

It is up to each borrower to choose between federal PLUS loans and private parent loans. When choosing between parent loans for college, consider these issues:

Which type of loan do I qualify for? If you have a strong credit score and a long credit history, you may be able to get a much lower interest rate with a private parent loan. To find out about the interest rate you might qualify for as a private parent loan applicant or co-signer, look for online lenders that let you “get prequalified” or “check your rate” without a commitment.

Would I benefit from extended repayment timelines or income-driven repayment plans? If you want access to longer repayment periods, then parent PLUS loans could be your best option. After all, you could be eligible to repay parent PLUS loans with a graduated or extended repayment plan, or even an income-contingent repayment plan provided you consolidate your parent PLUS loans with a Direct Consolidation Loan first.

Does a fixed or variable interest rate make more sense for my budget? Where federal PLUS loans come with a fixed interest rate, private student loans can have either fixed or variable rates. In some cases, a lower variable rate could be more advantageous in the short term.

Are there ways to avoid fees or earn discounts? Where parent PLUS loans charge an upfront loan fee of 4.228 percent just to get started, private student loans often come with no origination fee at all. Meanwhile, some lenders offer autopay discounts you can qualify for.

What are the co-signer options? Although your child may agree to repay any debt, parent PLUS loans and private student loans in your name are ultimately your responsibility. If you feel that the debt should be a shared responsibility, co-signing a private loan that your child takes out makes more sense, because you both legally share the debt. Check whether the loan includes a co-signer release, which would allow your child to take full responsibility for their loan once they’ve made enough payments or built up enough credit.

A private loan or a parent PLUS loan may be able to meet your needs if you’re a parent who wants to contribute money to your child’s college expenses. Your best bet is to weigh the long-term costs of both options when comparing them.

Our recommendation is to compare private lender student loan rates and fees to the set, anticipated costs of parent PLUS loans. Private student loans could result in significant savings if you can get a comparable monthly payment and repayment schedule while paying less money overall.

Learn more:

FAQ

What is the current interest rate for the Parent PLUS loan?

The interest rate for Direct PLUS Loans is 0% during the payment break. Your Direct PLUS Loan will have a fixed interest rate of 7 percent if you obtained it on or after July 1, 2022, but before July 1, 2023. 54% after the payment pause ends.

Do Parent PLUS loans have lower interest rates?

Parent PLUS loans have the highest interest rates of all federal student loan programs, and they might even be higher than the rates you could get from a private lender. Parent PLUS loans must pay an origination fee of 4 percent. 228% of the loan amount. Private lenders often don’t charge fees.

What will interest rates be on student loans in 2022?

For the 2022–2023 academic year, the following federal student loan interest rates will be higher: Direct Subsidized Loans (Undergraduates): 4 99% Direct Unsubsidized Loans (undergraduates): 4. 99% Direct Unsubsidized Loans (graduate and professional students): 6. 54%.

What is the monthly payment for a parent PLUS loan?

Parent PLUS Loans have an income-dependent repayment option. The monthly payment is 20% of your discretionary income, which is the amount by which your income exceeds the federal poverty line.