Understanding the Impact of Parent Plus Loans on Your Credit Score_1

Do Parent Plus Loans Affect Credit Score?

Parent Plus loans are a popular option for parents who want to help their children finance their college education. These loans are offered by the U.S. Department of Education and are designed to assist students whose parents cannot obtain a PLUS loan from a private lender. However, many parents are concerned about the impact of Parent Plus loans on their credit scores. In this article, we will explore whether or not Parent Plus loans affect credit scores and what parents should consider before taking out these loans.

Understanding Parent Plus Loans

Parent Plus loans are credit-based loans that are available to parents of dependent undergraduate students. These loans can be used to cover educational expenses that are not covered by other financial aid, such as tuition, fees, room and board, and books. While the loan is in the parent’s name, the student is responsible for repaying the loan after graduation or if they drop below half-time enrollment.

Impact on Credit Score

The direct impact of a Parent Plus loan on a parent’s credit score is relatively minimal. When a Parent Plus loan is approved, the lender will typically perform a credit check to determine the parent’s creditworthiness. This credit check may cause a small, temporary dip in the parent’s credit score, usually around five points. However, this drop is usually short-lived and should not have a significant impact on the parent’s overall credit score.

Repayment and Credit Score

The real impact of a Parent Plus loan on a parent’s credit score comes from the repayment history. Just like any other loan, making timely payments on a Parent Plus loan can positively affect a parent’s credit score. Conversely, missing payments or falling behind on the loan can negatively impact the credit score.

Monitoring Credit Score

It is important for parents to monitor their credit score while they are repaying a Parent Plus loan. There are several free credit monitoring services available that can help parents keep track of their credit score and ensure that their payments are being reported accurately to the credit bureaus.

Conclusion

In conclusion, while Parent Plus loans do have a minor impact on a parent’s credit score during the approval process, the overall impact is relatively small. The real impact comes from the repayment history, and making timely payments can help improve a parent’s credit score. As long as parents are diligent about their repayment obligations, a Parent Plus loan should not have a significant negative impact on their creditworthiness.