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When the amount a student can borrow isn’t enough to cover the cost of attendance, parents may decide to take out additional loans. Parents of dependent undergraduate students can apply for a Direct PLUS Loan. PLUS Loans may also be offered to graduate and professional students, these are commonly referred to as grad PLUS Loans.

Parent borrowing has steadily increased in recent decades. There are about 3.7 million borrowers of the parent PLUS loan, according to the most recent federal data from the last quarter of 2022.

What Are Parent PLUS Loans?

A Parent PLUS Loan is a type of loan that is part of the Direct Loan program administered by the U.S. Department of Education. As mentioned, PLUS Loans can be borrowed by parents of undergraduate students. Graduate and professional students may also be eligible for PLUS Loans.

Parent PLUS Loans generally have higher interest rates than other Direct Loans. For Parent PLUS loans issued in the loan year starting July 1, 2023, the interest rate is 8.05%, while the interest rate for Direct Subsidized and Unsubsidized Loans to undergraduate students is 5.50%.

Interest rates for federal student loans are fixed, meaning they stay the same over the entire term of the loan. You generally can’t transfer a Parent PLUS Loan to your child down the line, but your child may be able to apply for student loan refinancing later on and, if they qualify and it makes sense to do so, use it to pay off the loan.

How Much Can You Borrow for a Parent PLUS Loan?

Congress established the Parent PLUS Loan program in 1980 with caps on how much parents could borrow. Those limits were eliminated in 1992. Parents are now able to borrow up to the full cost of attendance at their child’s institution (which the school determines), after any other financial aid the student receives.

Parent PLUS Loan Eligibility Requirements

Credit Score Requirements

While there is not a specific credit score requirement for borrowing a Parent PLUS Loan, borrowers with an adverse credit history may not qualify to borrow this type of loan. The U.S. Department of Education defines an adverse credit history as meeting any of the following criteria:

•   Having accounts with a total balance of more than $2,085 that are 90 or more days delinquent, or debts that have been placed in collections or have been charged off within two years of the date of the credit report

•   Having defaulted on a loan within five years of the credit report

•   Filed for bankruptcy within five years of the credit report

•   Experienced repossession or foreclosure within five years of the credit report

•   Having charged-off a federal student loan within five years of the credit report

•   Experienced wage garnishment or a tax lien within the five years prior to the credit report

Full details on PLUS Loan eligibility and adverse credit history can be found on the StudentAid website .

Parents with an adverse credit history who are denied a Parent PLUS Loan may be able to qualify for a Parent PLUS Loan if they add an endorser or provide supporting documentation to the U.S. Department of Education that indicates there are extenuating circumstances surrounding the adverse credit history.

Who Can Apply for a Parent PLUS Loan?

To apply for a Parent PLUS Loan, potential borrowers must be the biological, adoptive, or in certain situations the stepparent, of a dependent undergraduate student. The student must be enrolled in a participating school at least half-time.

Unless a grandparent has legally adopted the student, they are unable to borrow a Parent PLUS Loan.

Other Eligibility Criteria for Parent PLUS Loans

In addition to being the parent of the student and not having an adverse credit history, parent-borrowers also must meet the basic eligibility requirements for federal student aid , such as being a U.S. citizen or eligible non-citizen.

What If You Aren’t Eligible for a Parent PLUS Loan?

If you aren’t eligible for a Parent PLUS Loan, review the student loans, scholarships, and grants available to your undergraduate students. If these options are not enough to cover the cost of tuition and other expenses, you might consider borrowing a private parent student loan to help your child pay for their education.

Private student loans are awarded by private lenders based on personal financial factors such as income and credit score, among others.

Applying for a PLUS Loan

Before applying for a Parent PLUS Loan, ensure your child has completed their Free Application for Federal Student Aid (FAFSA®). Once this has been completed, you can apply for a Parent PLUS Loan. Typically, you’ll fill out an online application at StudentLoans.gov , though some schools have a different process and require you to request a loan through the institution’s financial aid office.

Recommended: When To Apply for a Parent Plus Loan

StudentLoans.gov has a list of all schools that allow you to apply through the website. If you have any questions, contact the financial aid office at your child’s school. When the loan is disbursed, you’ll have to pay a loan fee, which is 4.228% of the loan amount, if disbursed on or after October 1, 2020.

Pros and Cons of a Parent PLUS Loan

As with most financial decisions, there are pros and cons to Parent PLUS Loans.

Pros of a PLUS Loan

One of the biggest benefits of Parent PLUS Loans is that they allow parents to borrow up to the cost of attendance to help their child pay for college.

Another pro is that there are no minimum credit score requirements. While there is a credit check, so long as parents meet the adverse credit requirements, they stand a reasonably good chance of being approved for a parent PLUS Loan.

When repaying Parent PLUS Loans, borrowers have a few different repayment options available to them, which can offer flexibility. PLUS Loans are eligible for the standard, graduated, or extended repayment plans. And if Parent PLUS Loans are consolidated into a Direct Consolidation Loan, they can be enrolled in an income-contingent repayment plan, which is one of the income-driven repayment plans available for federal student loans.

Cons of a PLUS Loan

One negative is that Parent PLUS Loans cannot be transferred to the student borrower. They are the responsibility of the parents, and they are legally responsible for repaying the loan.

Parent PLUS Loans, as mentioned, have an origination fee.

Another con is that parents are expected to begin repayment as soon as the loan is disbursed. While it is possible to apply for a deferment, interest will continue to accrue during this time.

SoFi Private Student Loans

When evaluating private student loans vs. parent PLUS loans, generally, federal student loan options are a strong starting place for most borrowers. That’s because federal student loans come with many important protections and often with lower interest rates. Students and parents who have exhausted their federal aid options may want to consider taking out loans from a private lender.

Student loans with SoFi offer competitive interest rates to qualifying undergrads, graduate students, and parents. Student loans can be used to cover up to 100% of school-certified costs which typically include things like tuition, books, supplies, room and board, food, and other education expenses.

SoFi doesn’t charge any fees related to private loans, meaning no origination fees or application fees. There are no prepayment penalties, and typically the sooner you pay off your loan, the less you pay overall.

You can choose from several repayment options, and it’s quick and easy to apply online.

FAQ

Does everyone automatically get approved for Parent PLUS loans?

No, not everyone gets approved for a Parent PLUS Loan. In addition to being the parent of an undergraduate student and meeting basic eligibility requirements, the U.S. Department of Education requires that parent borrowers not have an adverse credit history in order to borrow a PLUS Loan.

Parents who are denied from borrowing a Parent PLUS Loan because of an adverse credit history may be able to add an endorser to their application or file paperwork with the Department of Education to prove there were or are extenuating circumstances related to their adverse credit history.

Are Parent PLUS loans based primarily on income?

There are no specific income requirements for borrowing a Parent PLUS Loan.

What is the maximum borrowable amount of Parent PLUS loans?

Parent borrowers can borrow up to the full cost of attendance as defined by your child’s school, less any other financial aid your child has received.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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It may come as no surprise that many Americans are stressed about medical debt and the rise of healthcare costs. The average family health insurance premium has increased 43% in the past 10 years, according to a 2022 survey conducted by the Kaiser Family Foundation (KFF). What’s more, one-third of insured Americans are concerned about being able to afford their monthly premiums, and about four in 10 adults (41%) carry some form of medical debt.

Fortunately, there may be some options for those struggling with medical debt.

How Much Do Americans Spend on Healthcare Each Year?

Many people receive health insurance through an employer. And even though employers generally help pay for a portion of the costs, the financial burden can still be significant. A typical household spends $431 per month — or $5,177 per year — on healthcare expenses, according to the U.S. Bureau of Labor Statistics Consumer Expenditure Survey. This includes routine things such as health insurance costs, doctor’s visits, medications, and medical supplies.

At the same time, the U.S. tends to outspend other countries when it comes to healthcare. In 2021, healthcare spending topped $4.3 trillion, or $12,914 per person, according to the latest figures available from the Centers for Medicare & Medicaid Services. That figure represents 18.3% of the country’s Gross Domestic Product.

How Many Americans Struggle With Medical Debt?

Despite employer-sponsored health plans covering some of the costs, some Americans struggle to pay their medical bills.

In fact, nearly 1 in 10 adults — or around 23 million people — owe at least $250 in medical bills, a 2022 KFF analysis found. Of that, 11 million people owe more than $2,000, and 3 million people owe more than $10,000.
Certain groups of people appeared to be more impacted than others. For instance, people aged 35-49 and 50-64 are more likely than other adults to report medical debt. The same goes for people in poor health and those living with a disability. And among racial and ethnic groups, a larger share of Black adults (16%) report having medical debt compared to White (9%), Hispanic (9%), and Asian American (4%) adults.

What Happens If Medical Debt Is Not Paid?

Even if you’re facing an overwhelming amount of medical debt, the worst thing to do is ignore it. Depending on the state where you live, a medical provider might charge you a late fee for bills not paid on time and may even charge interest if payments aren’t made at all.

After a few months, if medical bills go unpaid, the provider might choose to pass the debt over to a debt collection agency.

If the medical provider does decide to give the debt to a debt collection agency, the debt might immediately appear on the debtor’s credit report and affect their credit score. The debt collector will take steps to collect the bill. If the debt is not collected, the provider may take it even further and take legal action.

While U.S. laws don’t allow debtors to be imprisoned for unpaid debts, they could face another consequence, such as wage garnishment. If the case goes to court and a judge rules in favor of the medical service provider, there’s a chance the debtor’s wages could be garnished. In simple terms, this means that payment will be taken out of their paycheck and sent to the provider.

Recommended: Tips for Paying Off Outstanding Debt

4 Medical Debt Relief Options

While there are no one-size-fits-all solutions to help ease the financial burden of medical debt, the following ideas may be worth considering. It’s also a smart move to contact a professional before taking any action.

1. Medical Debt Payment Plans

Because healthcare services are often costly, contacting medical providers to ask if they offer payment plans might be one plan of action to consider. Some medical providers may offer payment plans to pay off debt in installments instead of paying it off all at once, which might make the debt more manageable.

2. Negotiating Medical Debt

It may feel counterintuitive or inappropriate to negotiate medical bills, but some providers actually expect it. While it may seem awkward at first, negotiating medical bills can help make them more manageable. Additionally, negotiating may even help avoid a credit score ding, or worse, getting sued.

For starters, reaching out to the provider’s billing department directly to see if negotiation is possible might be an option. Many providers have financial departments that can determine if patients qualify for discounts or reductions. Remember, when negotiating, try to be as polite as possible. But it can be helpful to be persistent, too.

Another point to remember is that providers may favor cash. So those who can afford to make a lump sum payment might consider asking if the provider offers a discount for a cash payment.

Recommended: What Is Considered a Bad Credit Score?

3. Working With a Nonprofit Advocate

If the medical bills keep piling up, it may be worthwhile to consider finding a nonprofit advocate or reputable credit counseling organization that offers assistance with managing money and debts, creating a budget, and providing resources to help consumers pay off the debt that’s dogging them.

Certified counselors that have been trained to help individuals create a plan to solve financial concerns can be found through the U.S. Department of Justice. These organizations offer counseling and debt management plans and services.

One solution credit counselors may suggest is a debt management plan. These plans may help the borrowers get their debt under control.

With one type of debt management plan, the borrower makes a lump sum payment to the credit organization, and then the organization pays the creditor in installment payments. If you decide to go this route, make sure not to confuse a credit counseling nonprofit organization with a debt settlement company.

In contrast to credit counseling nonprofits, debt settlement companies are profit-driven. They negotiate with creditors to reduce the debt owed and accept a settlement — a lump sum — that’s less than the original debt. However, these companies can charge a 15% to 25% fee on top of the debt settled. While some of these companies are legitimate, consumers are cautioned to be wary of scams.

Some deceptive practices include guarantees that all of a person’s debts will be settled for a small amount of money, that debtors should stop paying their debts without explaining the consequences of such actions, or collection of fees for services before reviewing a person’s financial situation. Researching a company’s reputation can be done through the state attorney general’s office or the state consumer protection agency.

4. Using a Personal Loan

Using a credit card to pay off medical bills doesn’t help anything when you’re trying to reduce your overall debt. Taking out a personal loan could be a way to streamline multiple bills into one monthly payment.

Consolidating medical debt might include a number of benefits, but it’s important to note that it isn’t a cure-all. A loan will not erase your debt, but it could help you get a fixed monthly payment and, potentially, reduced interest rates.

It’s important to compare rates and understand how a new loan could pay off in the long run. If your monthly payment is lower because the loan term is longer, for example, it might not be a good strategy, because it means you may be making more interest payments and therefore paying more over the life of the loan.

Taking the Next Steps

If you’re steeped in medical bills, you’re hardly alone. One in 10 adults owe medical debt, with 3 million people saying they owe more than $10,000, according a 2022 analysis from the Kaiser Family Foundation. While dealing with the debt may not be pleasant, it’s a task you shouldn’t ignore. You may end up having to pay a late fee or interest rate on unpaid bills, or the provider could choose to pass the debt to a collections agency. This could negatively impact your credit score.

Fortunately, there are some debt relief options you may want to consider. Examples include exploring debt payment plans, negotiating the debt with your provider, enlisting the help of a nonprofit advocate, or taking out a personal loan to help pay off the bills.

If you are thinking about taking out a loan to consolidate your debt, a SoFi personal loan may be a good option for your unique financial situation. SoFi personal loans offer competitive, fixed rates and a variety of terms. Checking your rate won’t affect your credit score, and it takes just one minute.

See if a personal loan from SoFi is right for you.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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