FAFSA Parent Plus Loan - Are there early repayment penalties?
Hi everyone! My daughter just got her acceptance letter to her dream school (so proud!!) but the financial aid package includes Parent Plus loans that we'd need to take out. We're thinking about using some inheritance money I'll be getting next year to pay off the loans early, but I'm worried there might be hidden penalties for early repayment? I've heard horror stories about private loans having these traps, but not sure about federal Parent Plus loans specifically. Does anyone know if there are prepayment penalties if we pay them off early? Thanks in advance for any help!
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Keisha Robinson
Good news! Federal student loans, including Parent PLUS loans, do NOT have prepayment penalties. You can pay them off as early as you want without any additional fees. This is actually one of the benefits of federal loans compared to some private loans. Just make sure when you make extra payments that you specify you want it applied to the principal balance, not just advancing future payments.
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Yara Haddad
•Thank you so much! That's really helpful to know. Do you happen to know how I specify that the payment goes to principal? Is there a special form or do I just write a note with the payment?
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Paolo Conti
congrats on your daughters acceptance!! we paid off my sons parent plus loan early last year and didnt get charged anything extra. just make sure your telling them its for that specific loan because we had multiple
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Yara Haddad
•Thanks for sharing your experience! That's really reassuring. How did you specify which loan the payment was for? Did you have to call them or was there an option online?
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Amina Sow
One important thing to consider: while there are no prepayment penalties on Parent PLUS loans, sometimes it might actually be better to invest that inheritance money elsewhere if the interest rate on your Parent PLUS loan is low. Federal student loan interest is tax-deductible up to $2,500 per year, and you might get better returns by investing the money. Just something to think about from a financial planning perspective!
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Yara Haddad
•I hadn't even thought about that angle! The inheritance will be around $45,000 and the interest rate on the Parent PLUS loans would be 7.54% right now. Would you still recommend investing vs. paying off at that rate?
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Amina Sow
•At 7.54%, I'd personally pay off the debt. That's a guaranteed 7.54% return on your money, which is hard to beat consistently in the market without taking on significant risk. Plus, the peace of mind of being debt-free is worth something too! Just make sure you still have emergency savings before putting everything toward the loans.
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GalaxyGazer
My sister thought the same thing and paid off her Parent PLUS loan early last year only to find out she could have qualified for some forgiveness under Biden's plan if she'd waited!!! Double check if any forgiveness options might be coming before you pay it all off!!
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Oliver Wagner
•This is misleading. Parent PLUS loans have very limited forgiveness options compared to student loans. The Biden forgiveness plan was struck down by the Supreme Court, and the new SAVE plan specifically excludes Parent PLUS loans from most benefits. While there is Public Service Loan Forgiveness for Parent PLUS loans if the PARENT (not the student) works in qualifying employment for 10 years, most other forgiveness programs don't apply to Parent PLUS loans.
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Natasha Kuznetsova
I've been trying to reach someone at Federal Student Aid for WEEKS about Parent Plus loan repayment options and kept getting disconnected or waiting forever!!! So frustrating! Finally I found this service called Claimyr that got me through to a real person in under 30 minutes. They call FSA for you and then connect you when they reach an agent. Saved me hours of hold time! You can see how it works at https://youtu.be/TbC8dZQWYNQ and the site is claimyr.com. The agent confirmed there are NO prepayment penalties on Parent PLUS loans and gave me some really helpful tips about how to make sure extra payments go to principal.
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Paolo Conti
•does it cost money??
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Oliver Wagner
To address your specific question: No, there are no prepayment penalties on Parent PLUS loans. But when making extra payments, you need to provide specific instructions to your loan servicer. Log into studentaid.gov, go to your loan servicer's website, and look for options like "apply to principal" or "do not advance due date" when making additional payments. Otherwise, they might just apply it to future scheduled payments rather than reducing your principal directly. Also remember that Parent PLUS loans have the highest interest rates of all federal loans (currently 7.54%), so paying them off early generally makes good financial sense if you have the means to do so.
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Yara Haddad
•Thank you for the detailed explanation! This is extremely helpful. I'll make sure to look for those specific options when making payments. I definitely want the extra money to reduce the principal directly.
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Javier Mendoza
Wait so Im confused... are Parent PLUS loans the same as the regular FAFSA loans? My son is going to college next year and im trying to figure out all this loan stuff its so complicated!!
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Keisha Robinson
•No, they're different. "FAFSA" is just the application (Free Application for Federal Student Aid), not a type of loan. There are several federal student loan types: 1. Direct Subsidized Loans - for students with financial need 2. Direct Unsubsidized Loans - for students regardless of need 3. Parent PLUS Loans - for parents of dependent undergraduate students 4. Grad PLUS Loans - for graduate students Parent PLUS loans are taken out by the parent (not the student), require a credit check, and have higher interest rates than the loans offered directly to students.
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Natasha Kuznetsova
When we paid off our Parent PLUS loans early, we made a HUGE mistake that cost us thousands! We just sent in extra money each month without specifying how to apply it. Found out later they were just advancing our due date instead of reducing principal. ALWAYS call your loan servicer first or use their online payment portal to specifically designate extra payments as "principal only" or you might not be saving as much interest as you think!
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Yara Haddad
•Oh wow, that's really good to know! I definitely don't want to make that mistake. I'll make sure to be very clear about how I want extra payments applied.
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Emma Thompson
Parent PLUS loans are the WORST! The interest rates are ridiculous compared to the student loans, and they give them out like candy even when families can't really afford them. Sure there's no prepayment penalty but the whole system is designed to trap parents in debt for their kids' education! Sorry for the rant but I'm still paying my daughter's PLUS loans and she graduated 7 years ago because the interest just keeps piling up!
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Keisha Robinson
•I understand your frustration. The higher interest rates on PLUS loans (7.54% currently) are definitely a challenge. For anyone reading this thread who hasn't taken the loans yet, always exhaust other options first: maximize grants, scholarships, student direct loans, and work-study before turning to Parent PLUS loans. And if you do take them, try to pay more than the minimum whenever possible to tackle that interest.
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Malik Thompson
Just wanted to add another perspective as someone who works in financial aid - you're absolutely right that there are no prepayment penalties on Parent PLUS loans! One tip I always give parents: if you're planning to pay off early with a lump sum like your inheritance, consider making a test payment first (even just $50-100 extra) to make sure you understand how your servicer processes "principal only" payments. Each servicer's website is slightly different, and it's better to figure out the process with a small amount than risk misapplying a large payment. Also, keep detailed records of all your payments - screenshot confirmations showing the principal reduction. This helps you track your progress and gives you documentation if there are ever any discrepancies. Congratulations on your daughter's acceptance!
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