“Understanding Parent PLUS Loans: Eligibility, Credit History, and Alternatives”

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Can I Take Out Parent PLUS Loans for My Child’s Education?

Even if you are still repaying your own student loans, you can take out a parent PLUS loan for your child’s education, provided you meet the eligibility requirements. However, there are several factors to consider before proceeding. Understanding your eligibility and the factors that may impact lender approval is crucial. Additionally, there are various ways to support your child’s education beyond borrowing with parent loans.

Eligibility for Parent PLUS Loans

There are no restrictions preventing someone with existing student loans from taking out parent loans. To qualify for parent PLUS loans, you must meet federal financial aid eligibility, which includes:

• Demonstrating financial need
• Being a U.S. citizen or eligible noncitizen
• Having a Social Security number
• Certifying that you are not in default on a federal student loan, do not owe money on a federal student grant, and will use borrowed funds solely for educational expenses

The student must be enrolled or accepted as a regular student in an eligible program and must be enrolled at least half-time if taking direct loan program money. They must also be qualified for higher education and maintain satisfactory progress while in school.

When applying for parent PLUS loans, you must be a biological or adoptive parent of the child for whom you’re seeking funding and must not have an adverse credit history. For parents still paying off their own loans, this final point may be challenging, as the status of your own student loan debt can influence your ability to get approved for parent PLUS loans.

Parent PLUS Loans and Credit History

Unlike other borrowing situations, applying for PLUS loans does not consider debt-to-income ratios, credit scores, or employment status. The most critical factor is not having an adverse credit history. Federal Student Aid defines an adverse credit history as:

• In the two years before the credit report date, having one or more debts totaling over $2,085 that are at least 90 days delinquent, placed in collections, or charged off.
• In the five years before the credit report date, having a default determination, bankruptcy to discharge debts, repossession, foreclosure, tax lien, wage garnishment, or write-off of federal student aid debt.

Even if you are new to credit or working on rebuilding your credit, you may qualify for parent PLUS loans as long as you have not experienced any events listed above that lead to an adverse credit history.

Other Ways to Help Your Child Pay for College

If you decide not to take out parent loans for your child, there are other ways to assist with college expenses:

• Allow them to live at home and commute while you continue to support them with utilities, cellphone, food, and other needs as much as possible.
• Encourage them to attend community college for the first two years.
• Help them apply for scholarships.
• If academically appropriate, encourage your child to earn Advanced Placement credits during high school.
• Consider the military, AmeriCorps, or other service-oriented options that can help pay for college.
• Assist in a job search so they can find work to help pay for some classes.

Be upfront with your kids about your finances and what you can afford for college as a family throughout the process. While it may be hard to disappoint them, this is one of the most important budgeting lessons you can share. Helping them learn to live within their means early in adulthood will pay off in the future.

The Bottom Line

To assess your current student loan situation, start by checking your credit report. You can also monitor your credit and get a FICO® Score for free from Experian. Monitoring includes updated reports every day, notifications for spending and credit utilization increases, real-time suspicious credit activity, and more.

Think carefully about whether or not it’s a good idea to take out more loans. If you’ve been paying off your own student loans for a long time, it’s understandable if you are reluctant to take on more debt, even for your child. When you get a full picture of your student debt on your credit report, you’ll be more prepared to consider applying for parent PLUS loans or deciding to contribute to your child’s education in a different way.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you navigate your financial journey with expert advice and personalized service.

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