PLUS loans and regular student loans both help families pay for college, but they work very differently. A PLUS loan is taken out by a parent or graduate student, while regular student loans are taken out by the undergraduate student. The biggest difference is who is responsible for repaying the loan and how much it costs to borrow.
Who Can Borrow Each Type of Loan?
Regular student loans, also called Direct Subsidized and Direct Unsubsidized Loans, are for undergraduate students. The student must be enrolled at least half-time at a school that participates in the federal student aid program.
PLUS loans are for two groups: parents of dependent undergraduate students and graduate or professional students. A parent PLUS loan requires the parent to pass a credit check, while a graduate PLUS loan requires the student to pass the same check.
Credit Requirements
Regular student loans do not require a credit check for most borrowers. The only exception is if the student has an adverse credit history, but that is rare for first-time borrowers.
PLUS loans do require a credit check. If the borrower has an adverse credit history, they may need an endorser (a co-signer) or must appeal the decision.
Interest Rates and Fees
Interest rates for federal student loans are set by Congress each year. For the 2025-2026 academic year, the interest rate for Direct Subsidized and Unsubsidized Loans for undergraduates is 6.54%. For PLUS loans, the rate is 9.08%.
Both loan types also charge an origination fee. For regular student loans, the fee is 1.057% of the loan amount. For PLUS loans, the fee is 4.228% of the loan amount.
These fees are deducted from the loan before the money is sent to your school, so you will receive slightly less than the amount you borrowed.
Repayment Options
Regular student loans offer several repayment plans, including income-driven repayment (IDR) plans. IDR plans cap your monthly payment based on your income and family size, and any remaining balance is forgiven after 20 or 25 years.
PLUS loans also qualify for IDR plans, but only if the borrower (parent or grad student) consolidates the loan first. Parent PLUS loans are not eligible for the Pay As You Earn (PAYE) plan, but they are eligible for Income-Contingent Repayment (ICR) after consolidation.
| Feature | Regular Student Loans | PLUS Loans |
|---|---|---|
| Borrower | Undergraduate student | Parent or graduate student |
| Credit check | No (for most) | Yes |
| Interest rate (2025-26) | 6.54% | 9.08% |
| Origination fee | 1.057% | 4.228% |
| Eligible for IDR plans | Yes (all) | Only after consolidation (ICR for parents) |
| Loan limits | Set by grade level | Up to cost of attendance minus other aid |
Loan Limits and Borrowing Amounts
Regular student loans have annual and aggregate limits. For example, a first-year dependent undergraduate can borrow up to $5,500, and the total limit for dependent undergraduates is $31,000.
PLUS loans have no annual or aggregate limit. You can borrow up to the full cost of attendance minus any other financial aid the student receives. This makes PLUS loans useful for families who need to cover a gap after other aid is applied.
Deferment and Forgiveness
Regular student loans offer automatic deferment while the student is enrolled at least half-time. Interest does not accrue on subsidized loans during deferment, but it does accrue on unsubsidized loans.
PLUS loans also offer deferment for parents while the student is enrolled, and for graduate students while they are enrolled. However, interest accrues during all deferment periods on PLUS loans, and there is no subsidized version.
Public Service Loan Forgiveness (PSLF) is available for both loan types, but parent PLUS loans must be consolidated first to qualify. Only the parent’s employment counts for PSLF, not the student’s.
Which Loan Should You Choose?
Start with regular student loans because they have lower interest rates and lower fees. Max out the student’s federal loan eligibility first.
If you still need more money, consider a PLUS loan. But be aware of the higher costs and the fact that the parent is legally responsible for repayment, even if the student agrees to help.
Before borrowing a PLUS loan, explore other options like scholarships, grants, work-study, or private loans with a co-signer. Compare the total cost over the life of the loan.
Actionable Tips
- Always complete the Free Application for Federal Student Aid (FAFSA) to see what grants and regular loans you qualify for.
- Borrow only what you need for tuition, fees, and essential living expenses, not for extras.
- If you take a PLUS loan, consider making interest payments while the student is in school to avoid capitalization.
- Check if the school offers a tuition payment plan that might help you avoid borrowing altogether.
Summary
In short, regular student loans are cheaper and easier to get, but they have borrowing limits. PLUS loans fill the gap but come with higher interest rates, higher fees, and a credit check. Choose regular loans first, and only use PLUS loans if you have a clear plan to repay them. Understanding these differences helps you make a smarter financial decision for your family’s education.
Frequently Asked Questions
Can a parent take out a PLUS loan instead of a student loan?
Yes, a parent can take out a PLUS loan to help pay for their dependent undergraduate student’s education, but the parent is the borrower and is responsible for repayment.
Are PLUS loans more expensive than regular student loans?
Yes, PLUS loans have a higher interest rate and a higher origination fee compared to regular federal student loans, making them more expensive over time.
Do PLUS loans require a credit check?
Yes, PLUS loans require a credit check, and if you have an adverse credit history, you may need an endorser or must appeal the decision.
Can PLUS loans be forgiven?
PLUS loans can be forgiven through Public Service Loan Forgiveness, but parent PLUS loans must be consolidated first, and only the parent’s qualifying employment counts.
What happens if a parent cannot repay a PLUS loan?
If a parent cannot repay a PLUS loan, they risk default, which can lead to wage garnishment, damage to their credit score, and loss of eligibility for future federal aid.
