Need-to-Know Facts About PLUS Loans


Know The Minuses When It Comes To PLUS Loans 

New rates on student loan are lower but the same can’t be said for parent loans. 

It’s certain to create a degree of excitement:  As of July 1, 2019, interest rates on federal student loans are set to fall by over half a percentage point for loans issued for the upcoming academic year. While students can count on modest financial relief owing to the lesser rates, the same can’t be said for parent PLUS loans — one of the fastest-growing types of loans. In addition to worrying about how their kids will fare with dorm life, class schedules, and grades, parents will be faced with concerns over whether their finances will make the grade when it comes to paying tuition. 

On or after July 1, the rate on PLUS loans will be set at 7.079%, which is significantly higher than the 4.529%  rate for federal Stafford loans taken out by undergraduates. Do the math in terms of accumulating interest over a 10-year period and the numbers tell the story:  A $31,000 federal direct loan (the lifetime maximum most undergrads can borrow) would cost approximately $38,600 with interest when paid off in ten years. A parent PLUS loan paid off in the same number of years would cost more than $43,300, a difference of $4,700.

You might think that when it comes to college financing, the smart choice is a Stafford loan. But PLUS loans appeal to many parents for two specific reasons:  The loans can cover the full cost of attendance and they’re easy to qualify for when compared to other types of loans. The PLUS loan’s popularity is borne out by the dramatic increases in the number of loans taken out during the past several years. According to Mark Kantrowitz of, over the 2017-18 academic year the government paid out $12.7 billion in parent PLUS loans as compared with $7.7 billion in 2007-08.  

But be aware that paying off a PLUS loan might test your budgetary constraints: A recent AARP survey noted that about one-third of parents had difficulty making at least one payment on a PLUS loan over the course of five years. Betsy Mayotte, president of the Institute of Student Loan Advisors, states that “We have a growing population of parents with tens of thousands of dollars in student loan debt. At 45 or 55, your spending should be focused on retirement, not loans.”

Clearly, choosing the right loan for your child’s education can make a major difference in  your family’s current and future finances. Lesson learned. 


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Sandra Murphy

Sandra Murphy

Holds a master's degree in professional writing and has more than 15 years of experience writing for national and international entities.

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