If your child isn’t getting enough federal funding, you may be able to help by taking out a parent loan in your name. Both federal parent PLUS and private parent loans can bridge any financial gaps so your student can pursue higher education.
It’s usually better to use federal student loans before turning to private lenders. After all, federal loans typically come with more federal government protections and benefits like lower fixed interest rates, income-driven repayment plans, and student loan forgiveness.
But even if private parent loans don’t always have the same advantages, they can still be a viable option to help your child pay for college. Here’s what to know:
- What is a parent PLUS loan?
- What are the pros, cons of parent loans?
- What are the different types of parent loans?
- 6 best parent student loans
- Frequently asked questions
What is a parent PLUS loan?
A parent PLUS student loan, or a Direct PLUS Loan, is a federal loan you can get to help pay your child’s college expenses up to the full cost of attendance (minus any other federal financial aid). This includes tuition, room and board, school administrative fees, and so forth. These loans are especially helpful if your child has already reached their federal student loan limit and isn’t eligible for any other federal aid.
To qualify for a parent PLUS loan, you must:
- Be the biological parent, adoptive parent, or legal guardian of a student pursuing an undergraduate, graduate, or professional degree at a school participating in the Direct Loan Program.
- Undergo a credit check to prove you don’t have any major discrepancies in your credit history — such as bankruptcies or defaulted accounts.
- Have steady income showing you can repay the loan.
- Have both yourself and your child fill out the Free Application for Federal Student Aid (FAFSA).
- Complete and submit an online Direct PLUS Loan application.
- Complete a Direct PLUS Loan Mastery Promissory Note, a legally binding contract explaining the terms and conditions of the loan.
Parent PLUS student loans come with high borrowing limits, making them ideal for covering any gaps in federal funding. They also come with fixed interest rates — currently 7.54% — and flexible repayment options. Like federal student loans, these loans may also be eligible for student loan forgiveness.
Despite their advantages, parent PLUS loans do come with certain downsides. For example, when you take out a parent PLUS student loan, you become solely responsible for repaying it. The exception is if you refinance it in the student’s name through a private lender but doing this may void any federal government protections.
What are the pros and cons of parent student loans?
Parent student loans, federal or private, aren’t right for everyone. They can be more expensive than traditional student loans and can become a financial burden if you’re not careful. Before applying for one, here are the main advantages and disadvantages.
Pros
- High loan amounts that can fund up to the full cost of attendance as set by the school (minus federal funding)
- Flexible repayment plans with the option to defer repayment until after graduation
- Fixed interest rates independent of credit score
- Option to convert the loan into a direct consolidation loan eligible for an income-driven repayment plan
- May be eligible for student loan forgiveness (this is not usually an option with private loans)
Cons
- Borrowers must not have adverse credit history (ex. bankruptcy, accounts in collections, tax liens, etc.)
- Typically have higher interest rates than federal student loans (ex. Parent PLUS Loans have 7.54% fixed interest and 4.228% origination fee)
- Loans are unsubsidized, so they may accrue interest during deferment or while the student is enrolled in school
- Fewer repayment options than federal student loans
- Student must be enrolled in an eligible school half-time or full-time to qualify
What are the different types of parent student loans?
With either a parent PLUS loan or a private parent loan, you can help bridge the gap in your child’s college education. But even though you can use these loans in much the same way, several key differences exist between them.
Parent PLUS Loans
Parent PLUS loans are federal loans that are issued through the U.S. Department of Education, the loan provider or servicer.
Since they’re federally funded, these loans may be eligible for Public Service Loan Forgiveness (PSLF). If consolidated, they could also qualify for an income-driven repayment plan like the Income-Contingent Repayment (ICR) Plan.
These loans require a separate application and a credit check. However, they don’t require a specific credit score, meaning parents with bad credit could still qualify if they don’t have adverse credit history.
Parent PLUS loans come with loan terms ranging from 10 to 25 years. They also have a fixed interest rate and other fees. This can be higher than what you’d find with a private lender, especially if you have good credit.
Private parent student loans
Similar to private student loans, private parent loans are issued through private lenders, such as banks or credit unions. They typically have stricter eligibility requirements than parent PLUS loans, but they may come with lower interest rates and better terms for borrowers with good credit.
Depending on the lender, private parent loans may have either a fixed or variable interest rate. Some loans come with additional fees.
You don’t need to fill out the FAFSA to get a loan. However, the lender may ask that the school certifies the cost of attendance when determining the loan amount to offer.
Like parent PLUS loans, private parent loans typically benefit from periods of deferment or forbearance. Some come with flexible repayment plans, but most are not eligible for income-driven repayment plans or student loan forgiveness.
It’s often possible to cosign for a private parent loan. Most lenders have a cosigner release option that lets you remove your name from the loan after a certain point. This can make transferring a private loan to a student much easier than it would be with a parent PLUS loan.
6 best parent student loans
The first five listed are Credible partners. Our methodology is below.
1. Sallie Mae
- Minimum credit score: Undisclosed
- Maximum loan amount: Up to 100% of cost of attendance
- Variable rates: 5.87% to 16.20% APR
- Fixed rates: 4.50% to 14.830% APR
- Loan terms (years): 10 to 15
- Repayment options: Deferment, forbearance, discharged upon disability or death
- Fees: Late fee
- Discounts: 0.25% automatic payment
- Cosigner release: After 12 consecutive on-time payments
- Loan servicer: Sallie Mae
2. Citizens
- Minimum credit score: 720
- Maximum loan amount: $350,000
- Variable rates: 6.92%+
- Fixed rates: 7.14%+
- Loan terms (years): 5, 10, 15
- Repayment options: Full deferment, interest-only deferment, forbearance, loans discharged upon death or disability
- Fees: Late fee
- Discounts: 0.25% automatic payment, 0.25% loyalty
- Cosigner release: After 36 months
- Loan servicer: Firstmark Services
3. College Ave
- Minimum credit score: Undisclosed
- Maximum loan amount: Full cost of attendance
- Variable rates: 4.74%+
- Fixed rates: 4.44%+
- Loan terms (years): 5, 8, 10, 15, 20
- Repayment options: Full deferment, interest-only repayment, forbearance, loans discharged upon disability or death
- Fees: Late fee
- Discounts: 0.25% automatic payment
- Cosigner release: After 24 months
- Loan servicer: College Ave Servicing LLC
4. INvestEd
- Minimum credit score: 670
- Maximum loan amount: Up to cost of attendance
- Variable rates: 6.85%+
- Fixed rates: 4.37%+
- Loan terms (years): 5, 10, 15
- Repayment options: Full or interest-only deferment, forbearance
- Fees: Late fee
- Discounts: 0.25% automatic payment, 2% principal reward for on-time graduation
- Cosigner release: After 48 months
- Loan servicer: American Education Services
5. MEFA
- Minimum credit score: 670
- Maximum loan amount: Up to cost of attendance
- Variable rates: N/A
- Fixed rates: 4.89%+
- Loan terms (years): 10, 15
- Repayment options: Full or interest-only deferment, forbearance
- Fees: None
- Discounts: None
- Cosigner release: After 48 months
- Loan servicer: American Education Services
6. SoFi
- Minimum credit score: 700
- Maximum loan amount: Covers up to 100% of the school-certified cost of attendance
- Variable rates: 6.32% to 13.13% (with autopay)
- Fixed rates: 6.5% to 13.98% (with autopay)
- Loan terms (years): 5, 7, 10, 15, 20
- Repayment options: Academic deferment, military deferment, medical deferment, payment postponement due to unemployment (maximum 12 months)
- Fees: None
- Discounts: 0.25% automatic payment
- Cosigner release: None
- Loan servicer: Missouri Higher Education Loan Authority (MOHELA)
Methodology
Credible evaluated private student loan lenders in 10 different categories to determine the best lenders for parent plus student loans. This included interest rates, repayment options, terms, fees, discounts, customer service availability, as well as eligibility requirements and cosigner release options. Credible lets you compare private student loan rates from multiple lenders, all in one place.
Parent loan FAQs
Who should choose a private parent loan?
Private parent loans are best for those with good or excellent credit who can qualify for the lowest interest rates. But it’s recommended to only take out a private parent loan or parent PLUS student loan after exhausting all other forms of federal financial aid, including grants and scholarships.
How is the interest rate on a parent loan determined?
The loan servicer determines a parent loan’s interest rate. For example, parent PLUS student loans have a 7.54% fixed interest rate on loans disbursed between July 1, 2022 and July 1, 2023, thanks to the U.S. Department of Education. The interest rate for private parent loans depends on the specific lender, as well as other factors like the borrower’s credit score.
Can a parent PLUS loan be transferred to the student?
No. Once you take out a parent PLUS loan, you are responsible for it until you’ve repaid it in full. It may be possible to transfer the loan if you refinance it through a private lender. But the refinanced loan won’t have any federal protections or benefits.
What if I can’t pay my parent PLUS loan?
Failing to repay a parent PLUS loan could mean late fees or damaged credit. After about nine months, the loan will be in default and the lender could take legal action (ex. file a lawsuit or garnish your wages). To avoid this, consider consolidating the loan or setting up an income-driven repayment plan.
What happens to my parent PLUS loan when I retire?
You’ll still be responsible for repaying the loan even after you retire unless you qualify for Public Service Loan Forgiveness.