Why You Need to Apply for a Parent PLUS Loan Every Year

More than 3.6 million Americans have turned to Direct Parent PLUS Loans to help fund their child’s educational expenses. The student loan system is inherently complicated, and this type of loan comes with its own playbook that can be even more confusing. As a parent borrower, you might be wondering if you have to apply for a Parent PLUS Loan every year.

The short answer: Yes, you need to apply for each academic year that you want to receive Parent PLUS Loan funds.

But let’s dive deeper to understand why you need to apply on an annual basis and what that process looks like.

Why Parent PLUS Loans don’t automatically renew each year

You’re required to apply for the Parent PLUS Loan annually if you’d like to receive funding for the year. This is because federal financial aid is distributed annually based on your child’s Free Application for Federal Student Aid (FAFSA).

There are a lot of factors that go into determining financial aid (e.g. Pell grants and loans), including:

• Your family’s income and size,
• The number of children in college within your household, and
• Your child’s cost of attendance (e.g. tuition, room and board, etc.).

These variables often fluctuate from year-to-year. Therefore, families are required to submit the FAFSA each academic year.

Additionally, unlike with other federal student loans, the Parent PLUS Loan requires a credit check. Your credit history can make or break whether you’re approved for a Parent PLUS Loan. The U.S. Department of Education will evaluate your credit each year before handing over loan funds.

However, if you don’t need or want a Parent PLUS Loan, there’s no need to apply for it each year.

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What to know about the Parent PLUS loan application process

The Parent PLUS Loan program is available to parents of dependent undergraduate students to cover the full cost of attendance minus your child’s student aid package.

Studentaid.gov explicitly lists biological and adoptive parents as eligible recipients. But in some cases, a stepparent might qualify. Additionally, the student must be considered at least half-time enrollment at an eligible school.

The loan is based on your own general eligibility requirements (e.g. good credit score vs. adverse credit history) and will be created in your own name. Therefore, you’re legally liable for the Parent PLUS Loan unless you refinance or transfer the loan to your child through a private student loan lender.

If you're a two-parent household, you must also consider which parent should apply for the Parent PLUS loan. It depends on several factors like age, credit history and forgiveness eligiblity.

How to apply for a Parent PLUS Loan

Applying for a Parent PLUS loan is fairly straightforward. Follow these five steps:

1. Submit the FAFSA based on federal and college deadlines

Your child must complete the FAFSA to be eligible for financial aid. Once they receive an award letter, you can decide how much is needed to fill any remaining financial gap with a Parent PLUS Loan.

2. Log into your own Federal Student Aid (FSA) account

If you don’t have an FSA ID, you’ll need to create one before applying. Don’t use your child’s FSA ID.

Create your FSA ID through the Student Aid website.

3. Complete the Parent PLUS Loan application

Block out at least 20 minutes to complete the Parent PLUS Loan application.

Be ready to indicate the award year and provide personal information for both you and your child (e.g. name, Social Security number, date of birth, address and contact information).

You can request the maximum Parent PLUS Loan amount allowed or request a specific dollar amount. Depending on your financial habits, the latter might be the safest bet to limit overextending yourself.

You’ll have the option to request a deferment while your child is still in school. The application also requires you to indicate who’ll receive any remaining credit balance once loan disbursement to the student’s school account is completed.

4. Sign a Master Promissory Note (MPN)

If your application is approved, read and sign the loan agreement. The school will then apply the funds appropriately and disburse any remaining balance to you or your child (depending on who is designated in the application).

5. Start repaying the Parent PLUS Loan

If you didn’t choose to defer payments, you’ll need to start making payments immediately. If you opted to defer, put together a loan repayment strategy in advance of payments.

If your Parent PLUS Loan application is denied, explore other options to help your child pay for college.

Important considerations before getting a Parent PLUS Loan

Parent PLUS loans can be beneficial for families wanting to help pay for college. But they aren’t always the right option. If you’re already struggling to make ends meet, taking on another financial obligation isn’t the best idea — even though it’s done with the best intentions.

Our Parent PLUS Loan calculator can help you estimate monthly payments and illustrate how the repayment options affect your payments.

Note that Parent PLUS Loans aren’t eligible for the full range of income-driven repayment (IDR) plans or Public Service Loan Forgiveness (PSLF). However, there’s a strategy that allows you to unlock the income-contingent repayment plan and loan forgiveness options.

But this consolidation loophole must be executed precisely. Consider speaking with a consultant from our team for assistance since your loan servicer likely won’t fully understand this loophole.

Parent PLUS Loans can be challenging to understand considering they have some of the most complex and limited loan payment options. Therefore, we’ve created a wealth of free resources related to Parent PLUS Loans.

Additionally, our team of student debt experts is available for pre-debt consults. You’ll receive customized, holistic guidance related to parent loans, retirement planning and other financial goals.