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How to Increase Your Parent PLUS Loan Amount: A Pro’s Guide

Securing enough funding for your child’s education can be a stressful endeavor. If you’re relying on a Parent PLUS Loan, knowing how to potentially increase the loan amount is crucial. In short, you can increase your Parent PLUS Loan amount up to the full cost of attendance, as determined by the school, minus any other financial aid your child receives. This involves thoroughly understanding the cost of attendance, appealing for adjustments if necessary, exploring other aid options to reduce reliance on PLUS loans, and ensuring you meet the creditworthiness requirements of the loan program. Let’s dive deeper.

Understanding the Parent PLUS Loan

What is a Parent PLUS Loan?

The Parent PLUS Loan is a federal student loan available to parents of dependent undergraduate students to help pay for education expenses. Unlike some other federal loan programs, the PLUS loan’s eligibility is largely based on credit history rather than financial need. This means that if you have an adverse credit history, you may be denied the loan. However, if approved, it can be a powerful tool to bridge the gap between available savings, scholarships, and other financial aid resources.

Key Features of the PLUS Loan

Borrowing Limit: As mentioned earlier, you can borrow up to the full cost of attendance as determined by the school, minus any other financial aid your child receives.
Interest Rate: The interest rate is fixed for the life of the loan, but it’s typically higher than the rate for undergraduate federal loans. This rate is determined annually by Congress and applies to all PLUS loans disbursed during that academic year.
Repayment: Repayment typically begins soon after the loan is fully disbursed, although deferment options are available under certain circumstances. Several repayment plans are available, including standard, graduated, and extended repayment options.
Credit Check: Unlike subsidized and unsubsidized loans for students, Parent PLUS Loans require a credit check. An adverse credit history can lead to denial of the loan.

Maximizing Your Parent PLUS Loan Amount

1. Grasping the Cost of Attendance

The cornerstone of determining your Parent PLUS Loan eligibility is the cost of attendance (COA). This figure, established by the educational institution, represents the estimated total cost of attending for one academic year. It includes:

Tuition and Fees: Direct charges from the school.
Room and Board: Expenses for housing and meals.
Books and Supplies: Cost of textbooks, software, and other necessary materials.
Transportation: Estimated costs for traveling to and from school.
Personal Expenses: An allowance for miscellaneous personal costs.

Review the COA carefully. Ensure that it accurately reflects the real costs your child will incur. If you believe the COA is inaccurate, proceed to the next step.

2. Appealing for a Cost of Attendance Adjustment

If you believe the school’s COA doesn’t accurately reflect your circumstances, you have the right to appeal. This typically involves providing documentation to support your claim. Common reasons for appealing include:

High Medical Expenses: If your family has significant, unavoidable medical expenses, document these costs.
Dependent Care Costs: If you have dependent care expenses that are not adequately reflected, provide supporting documentation.
Unusual Housing Situations: If your housing costs are significantly higher than the standard COA estimate, due to geographic location or other factors, provide evidence.
Special Needs: If your child has special needs that increase their cost of attendance, be sure to document and communicate this.

Contact the school’s financial aid office directly to understand their specific appeal process and required documentation. Be prepared to provide receipts, bills, and other supporting documents to justify your appeal. A successful appeal will increase the COA, potentially allowing you to borrow a larger Parent PLUS Loan.

3. Exploring Other Forms of Financial Aid

Before solely relying on a larger Parent PLUS Loan, explore alternative financial aid options. This can significantly reduce the amount you need to borrow. Consider the following:

Scholarships: Encourage your child to apply for as many scholarships as possible. Many scholarships are available based on merit, need, or specific interests.
Grants: Federal and state grants, such as the Pell Grant, do not need to be repaid. Even if your child is not initially eligible, re-evaluate eligibility annually, as family circumstances can change.
Student Loans: Your child may qualify for federal student loans. Direct Subsidized and Unsubsidized Loans often have lower interest rates than PLUS Loans.
Work-Study: If your child is eligible for work-study, they can earn money to help cover their expenses.
Savings Plans (529 Plans): If you have a 529 plan, utilize these funds before taking out loans.

4. Addressing Credit Issues

As previously mentioned, Parent PLUS Loans require a credit check. An adverse credit history, such as a bankruptcy, foreclosure, or delinquent accounts, can result in denial. If you are denied a PLUS loan due to credit issues, you have a few options:

Obtain an Endorser: An endorser is someone who agrees to repay the loan if you fail to do so. The endorser must have a good credit history.
Document Extenuating Circumstances: You can appeal the credit denial by documenting extenuating circumstances that led to your adverse credit history. Examples include job loss, medical emergencies, or natural disasters. You will need to provide documentation to support your claim.
Improve Your Credit: Focus on improving your credit score before reapplying. This includes paying down debt, correcting errors on your credit report, and avoiding new credit inquiries.

5. Understanding Loan Disbursement and Refund Policies

Once your Parent PLUS Loan is approved, the funds are disbursed directly to the school to cover tuition, fees, and other charges. If the loan amount exceeds the cost of attendance, the school will issue a refund to either you or your child, depending on school policy and your preference. Be aware of the school’s refund policy to understand how any excess funds will be handled. These funds can then be used to cover other educational expenses, like books or living costs, therefore contributing to the overall benefit of the Parent PLUS Loan.

6. Consider Loan Counseling

Some schools may require loan counseling before disbursing a Parent PLUS Loan. Even if it’s not required, consider seeking loan counseling. A qualified counselor can help you understand the terms and conditions of the loan, including repayment options and the potential impact of borrowing a large amount. This can equip you to make informed decisions about managing the debt responsibly.

Frequently Asked Questions (FAQs)

1. Can I borrow more than the cost of attendance with a Parent PLUS Loan?

No, you cannot borrow more than the cost of attendance as determined by the school, minus any other financial aid received by the student. The loan is designed to cover the remaining gap after all other resources are applied.

2. What happens if I’m denied a Parent PLUS Loan?

If you are denied a Parent PLUS Loan, your child may be eligible for additional unsubsidized Direct Loan funds. You can also explore private student loans, consider finding an endorser for the PLUS Loan, or appeal the denial by documenting extenuating circumstances.

3. Does the Parent PLUS Loan have a grace period?

Unlike some student loans, the Parent PLUS Loan typically does not have a grace period. Repayment generally begins within 60 days of the final disbursement of the loan. However, you can apply for a deferment under certain circumstances.

4. What are my repayment options for a Parent PLUS Loan?

Several repayment plans are available, including the Standard Repayment Plan (10 years), Graduated Repayment Plan (payments start low and increase over time), and Extended Repayment Plan (up to 25 years). You can also consolidate your PLUS Loan into a Direct Consolidation Loan and then choose an Income-Contingent Repayment (ICR) plan.

5. How does loan consolidation affect my Parent PLUS Loan?

Consolidating your Parent PLUS Loan can simplify repayment by combining multiple loans into one with a single monthly payment. However, it may also extend the repayment term, potentially increasing the total interest paid over the life of the loan.

6. Can I transfer a Parent PLUS Loan to my child?

No, Parent PLUS Loans cannot be transferred to the child. The parent is legally responsible for repaying the loan. While there’s no official transfer mechanism, some families may come to an informal agreement where the child makes the payments.

7. What is the interest rate on a Parent PLUS Loan?

The interest rate on a Parent PLUS Loan is fixed for the life of the loan but is determined annually by Congress. Check the Federal Student Aid website for the current interest rate.

8. How does the Parent PLUS Loan affect my credit score?

Taking out a Parent PLUS Loan will add to your overall debt, which can affect your credit utilization ratio. Making timely payments will help build positive credit. Defaulting on the loan will have a severe negative impact on your credit score.

9. Can grandparents apply for a Parent PLUS Loan?

No, Parent PLUS Loans are available only to parents (biological, adoptive, or stepparent) of dependent undergraduate students. Grandparents are not eligible unless they have legally adopted the student.

10. Are Parent PLUS Loans eligible for Public Service Loan Forgiveness (PSLF)?

No, Parent PLUS Loans are not directly eligible for PSLF. However, you can consolidate the PLUS Loan into a Direct Consolidation Loan and then repay it under the Income-Contingent Repayment (ICR) plan. After 25 years of qualifying payments under ICR, the remaining balance may be eligible for forgiveness.

11. How do I apply for a Parent PLUS Loan?

You can apply for a Parent PLUS Loan through the Federal Student Aid website. You will need to complete the FAFSA, undergo a credit check, and sign a Master Promissory Note (MPN).

12. What happens to my Parent PLUS Loan if my child drops out of school?

You are still responsible for repaying the Parent PLUS Loan even if your child drops out of school. You may be eligible for a deferment while your child is not enrolled. Contact your loan servicer to discuss your options.

By understanding these key aspects of the Parent PLUS Loan and actively exploring all available options, you can strategically maximize your borrowing potential while remaining fiscally responsible. Securing funding for your child’s education is a significant responsibility. Approaching it with knowledge and careful planning will yield the best results.