Credit Diva Blog

Parent PLUS Student Loans and Your Credit

  • By Credit Diva of Dallas
  • 18 Oct, 2018

If you have a child heading to college, it would be wise to familiarize yourself with Parent PLUS Student Loans. These financial instruments may be a great help to you as you struggle to pay for your child’s education, but they may also cause unexpected financial troubles. When dealing with these loans, a little knowledge goes a long way.

What are They?

Parent PLUS Student Loans are federally guaranteed loans offered to parents to help pay for tuition and fees for their children. If approved, and most people without major financial infractions in their recent past will be, you will be able to borrow the entire out of pocket expense for your kid’s education.

Closeup portrait of young woman holding her piggy bank friend in hand, isolate on white background. Positive emotion facial expression feelings. Smart wise saving paid financial decisions. Nest egg-1

The interest rate for these loans is market-based, meaning that they do fluctuate, though the rate will be locked in at the time of issue. They offer free insurance that cancels the entirety of the remaining debt should the student die or become disabled before you finish repaying the loan.

What Should I know?

The financial aid offices of most educational institutions will provide you with an Award Letter (after filling out the FAFSA) that will identify the funds available to your child through scholarships and grants. The manner in which the Parent PLUS loan presents may seem misleading, as it usually is listed along with scholarships and grants that do not require repayment.

However, the PLUS loan is just that: a loan. It is expected to be paid back in full, along with accrued interest. Just because these appear on the Award Letter doesn’t mean that you can afford them. You have been approved, and almost all parents are. However, you will be incurring a substantial monthly bill if you take out this loan. As a general rule of thumb, you can safely expect to pay $120 a month for each $10,000 borrowed.


What if I Can't Pay?

Should you become unemployed or face some other unexpected form of financial hardship, PLUS loans do offer forbearance or payment deferments. Keep in mind that you will continue to accrue interest during these periods, and when you resume payments, you will be facing a more substantial sum to pay down.

It is also important to remember that student loans, even PLUS loans offered to parents, are not eligible for bankruptcy. Should you file for bankruptcy, you will still be expected to repay your PLUS loan in full.

Additionally, it is important to note that you cannot later transfer these loans. Many parents will enter an agreement with their children that they will pay the cost of student loans until their child becomes financially stable, at which point the child will assume the payments. PLUS loans cannot be transferred, meaning that they will always be in your name. The only way around this would be through private loan consolidation, which removes all of the federal protections provided by PLUS loans.

How Will They Affect My Credit?

Parent PLUS loans will affect your credit in the same way as other loans do. Be sure you can afford this option before taking it on because like other loans, late payments can severely damage your credit score.

Will cosigning a loan will help or hurt your credit? Contact Credit Diva of Dallas if you need help. If you aren't ready to pick a credit repair service, download this free guide to finding the best Dalals credit repair service.

Get My Guide

How Budgeting the Best Credit Repair in Dallas TX Helps Boost Your Credit Score!

By Credit Diva of Dallas 25 Jun, 2021 0 Comments

What can you do to maintain a good credit score and the benefits that come with it? A better credit score helps you now and in the future when you're ready to retire--and beyond!

If you've never

Continue reading

Tips to Manage Credit Cards and Pay Bills On Time

By Credit Diva of Dallas 18 Jun, 2021 0 Comments

Credit card management requires the right strategy to use cards smartly and boost your credit score. They can be a great financial tool, but they can also lead to excessive spending and bad credit

Continue reading

4 Financial Moves That You Can Enjoy When You "Fix My Credit!"

By Credit Diva of Dallas 11 Jun, 2021 0 Comments

Are you wondering, “should I fix my credit score?” That 3-digit score can make or break your retirement and many financial decisions in between!

A high credit score doesn't happen without working

Continue reading

Keeping a Good Credit Score through Retirement: 4 Useful Tips From Credit Repair Dallas

By Credit Diva of Dallas 03 Jun, 2021 0 Comments

Should you heed advice from the best credit repair Dallas offers as you grow older or at any point in your retirement? Maintaining good credit is critical at any age—even through retirement. 

Continue reading