A Parent PLUS Loan offers an opportunity for parents to cover their child’s higher education costs. But how many Parent PLUS Loans can you get?
The answer depends on your unique situation — keep reading to learn more about this useful federal loan option.
How many Parent PLUS Loans can you get?
Before jumping in, you’ll need to meet some basic qualifications to receive a Parent PLUS Loan.
Borrowers must be the biological or adoptive parent of a dependent undergraduate student who’s enrolled in an eligible school for at least half-time status. In some cases, stepparents might be able to qualify for this Direct Loan program. Grandparents and legal guardians aren’t eligible to take out Parent PLUS Loans.
You can’t have an adverse credit history, like a recent bankruptcy discharge, default, tax lien, delinquent accounts, repossession or foreclosure. If you meet the aforementioned qualifications, then you can apply for a Parent PLUS Loan for your child.
But how many Parent PLUS Loans can you get? The answer depends on the number of children you have attending college.
A parent can obtain a PLUS Loan for each child in each school year. You can obtain additional PLUS Loans for any year that you have an eligible child in school.
Let’s say that in 2021, you have one child entering their senior year of college and a second child entering as a freshman. You’d have the potential to take out two Parent PLUS Loans in the same year. But in the previous year, you can only take out one PLUS Loan for the olde student who’s enrolled in college.
Borrowing amounts for Parent PLUS Loans
The amount you can borrow through a Parent PLUS Loan varies and is based on your child’s school. The maximum loan amount is the cost of attendance minus other financial aid that your child receives.
The number of children you have attending college, and the gap that’s left for their cost of attendance expenses, will decide how much you can borrow through the Parent PLUS program.
There’s no functional limit to how much you can borrow through the Parent PLUS Loan program. Through our work with borrowers, we’ve seen some parents take out as much as $600,000 in student debt to fund their children’s college education, for example.
Repaying Parent PLUS Loans
Helping your child cover their college costs can feel rewarding. But it’s important to know when the repayment period for Parent PLUS Loans kicks in. In most cases, you’re expected to start payments immediately after the loan is disbursed, if you don’t request deferment while your child is enrolled in school.
If you secure a deferment, you’ll start payments after a six month grace period following your child’s graduation date, or whenever your child falls below half-time enrollment status.
Throughout the deferment and grace periods, interest continues to accrue on your loan even if you aren’t required to make any payments. As with any loan, the interest rate on these Parent PLUS Loans can add up quickly.
Since these loans are disbursed on a year-to-year basis for each child, the timing of your repayment start dates can vary. For example, let’s say that you apply for Parent PLUS Loan deferment for your younger child’s loan, but your oldest child graduated college seven months ago.
In this scenario, you’re responsible for starting payments on your Parent PLUS Loans for your recent graduate, but can continue deferring the PLUS Loans for your younger child.
Double consolidation for Parent PLUS Loans
Parent PLUS loans aren’t eligible for income-driven repayment (IDR) on their own. The lack of IDR plans during can put a wrench in your future financial plans. Especially, if you’re planning a modest retirement in the near future.
Through a Direct Consolidation Loan, you can combine multiple Parent PLUS Loans. But a Direct Consolidation Loan only provides access to the income-contingent repayment plan which calculates monthly payments at 20% of your discretionary income.
Luckily, it’s possible to get this monthly payment even lower with the help of double consolidation. The double consolidation loophole offers parents the opportunity to access lower repayment options, which can be based on 10% to 15% of a parent borrower’s discretionary income.
Double consolidation isn’t a strategy you’ll see overtly offered by your loan servicer. But a double Direct Consolidation Loan process offers a pathway for Parent PLUS Loan holders to access more IDR options to ease the repayment burden of these loans.
When should you pursue the double consolidation loophole?
Keep in mind that this legal loophole could potentially close at any time so you might want to jump on this option sooner than later.
However, it might be worth waiting if you have more children to send to college. If you anticipate taking on more Parent PLUS Loan debt to fund your children’s education, then it makes sense to wait on the double consolidation process.
Many parents choose to wait to undergo this process until all of their children are out of college. The main goal is to consolidate your loans twice so that you access the most affordable income-driven repayment plans.
For example, if you pursued a Direct Consolidation Loan for educational loans in the past, but took out four new Parent PLUS Loans to fund another child’s education, you can consolidate the four new loans into two separate consolidations. From there, you could consolidate the two consolidation loans into a new single consolidation loan without touching the original one.
If you have multiple children, you can take advantage of Parent PLUS Loans to help fund your children’s education costs. Although the exact amounts will vary, you should be able to borrow the funds you need.
Once you’ve taken out the loans, the double consolidation strategy can help keep your repayment costs manageable. Want some help working through the process? Take a minute to chat with a Student Loan Planner consultant.