Parent’s Guide to Applying for Private Student Loans

 June 9, 2020
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If your child has exhausted their options for federal student loans, you might be looking to fill the gap. As a parent, you have two main choices for parent loans for college students: federal parent PLUS loans or private student loans.

Since PLUS loans have relatively high interest rates, it’s worth seeing if you can get a better offer from a private lender, especially if you have good credit. Read on to learn how to apply for private student loans for parents, along with tips on how to decide between a private loan and the federal PLUS loan. Specifically, we’ll look at:

Understanding parent loans for college students

Before applying for private student loans as a parent, it’s important to make sure that a loan is a good financial decision for your family.

“Parents should borrow no more in total for all their children than their annual income,” advised financial aid expert Mark Kantrowitz. “If total parent loan debt is less than parents’ adjusted gross income, the parents can afford to repay the parent loans in 10 years or less.”

You’ll want to make sure that you have a good credit score so you can get approved, as well as receive the most favorable interest rate in the case of private student loans. Check out our guide to getting your credit score for free.

Kantrowitz also suggests getting a copy of your credit report before applying (you can access your reports from all three credit bureaus for free at Although you can’t view your credit score on your credit report, checking your reports ahead of time will give you the chance to fix any errors that could hurt your score and prevent you from qualifying for a loan or more favorable terms.

Besides checking your credit, it’s also a good idea for your child to max out their options for federal financial aid before you pursue parent loans for college students. This is because federal loans for students tend to have the most favorable rates and terms.

But if they’ve hit their borrowing limits, it’s worth considering whether to borrow a parent loan.

How to apply for private student loans for parents

If you’re interested in private parent loans for college students, here are the steps to take to apply.

1. Gather the information needed for parent loan application
2. Compare private student loan offers
3. Submit your application
4. Make a plan to repay private student loans

1. Gather the information needed for parent loan application

The nice thing about applying for private student loans is that it can be done online. Before you begin the application process, you should gather the information needed for a parent loan application. This can include:

  • Your name, address, Social Security number and contact information
  • Information about your income and work history
  • Your child’s Social Security number
  • Information about the school your child will be attending (including the state, grade level and field of study)
  • The cost of attendance for the college program your child will be attending
  • The estimated amount of financial aid your child will receive
  • The anticipated college graduation date for your child
  • The information about what academic term the loan will be used to pay for

Sallie Mae indicates that their online application process takes around 15 minutes. It’s a good idea to get your paperwork in order before you begin the process of applying for a private loan. However, lenders will typically allow you to save an application, so you can return to it and complete it later if you don’t have all the documentation you need at hand.

2. Compare private student loan offers

If you decide that applying for a private student loan is the right choice for you as a parent, you need to understand the practicalities of how to apply for a student loan.

First and foremost, this means finding a lender. There are a number of different private student loan lenders that will loan money to parents to pay for their children’s education. Some of these private student loan lenders include:

It’s important to shop around and get offers from several private student loan lenders before going through with the full application. This will allow you to find your best rates and terms available without performing a hard pull on your credit.

3. Submit your application

Once you make a final decision on your best loan offer, submit your application. At this point, the lender will perform a hard credit inquiry, evaluate your credit history and financial profile and notify you of whether your application is approved or denied.

If you are approved for the loan, you will need to sign the loan paperwork electronically and the funds will then be disbursed.

If you are denied a private loan for your child, you may be able to appeal the decision. You could also consider applying with a cosigner who is willing to cosign loans for you or for your child.

4. Make a plan to repay private student loans

If you’re a parent who’s thinking about taking out private student loans for your children, repaying these loans might be a top priority after they graduate. Fortunately, you have options to get this debt taken care of.

There are many great lenders that will allow you to refinance parent loans. Refinancing could potentially lower your interest rate, so you could save money on repayment.

If you have taken out private loans and your child can repay them, refinancing those loans into your child’s names could be a good option if your child has good enough credit to qualify for a loan. You could also be aggressive about making extra payments for loans you’re responsible for paying back so you can retire the debt as soon as possible.

The key is to find a plan that works for you so you can manage your student debt while balancing other financial priorities, such as saving for retirement.

Parent PLUS loans vs. private student loans for parents

Along with private student loans, you might also be eligible to obtain a parent PLUS loan through the Department of Education to cover educational costs for a dependent child.

As a parent, you can borrow up to the cost of attendance as determined by the school, minus other financial assistance that you or your child receives. However, weigh the pros and cons of PLUS loans vs. private loans. Some key things to consider:

  • Credit: Both private student loans for parents and parent PLUS loans consider a parent’s credit. However, Kantrowitz advised that private lenders usually have stricter criteria for approvals than parent PLUS loans. All PLUS loans check for is an “adverse credit history,” which includes payments that were 90 days or more delinquent on more than $2,085 in debt during the prior two years, or a derogatory event such as a foreclosure or bankruptcy within the past five years.
  • Interest rate: Both private loans and parent PLUS loans charge interest. The interest rate for all parent PLUS loans disbursed between July 1, 2019, and July 1, 2020, is 7.08%. Individual lenders set interest rates on private student loans, which vary according to the credit profile of each applicant. Parents with excellent credit might qualify for lower fixed interest rates from private lenders than through parent PLUS loans. (You can view some private interest-rates comparisons here.)
  • Fees: There is a 4.236% origination fee for federal parent PLUS loans disbursed on or after Oct. 1, 2019 and before Oct. 1, 2020. Many private lenders, however, do not charge any fees, according to Kantrowitz.

There’s one benefit for parents to apply for a parent PLUS loan, even with bad credit.

“If a parent is denied a federal parent PLUS loan, the student can become eligible for the higher unsubsidized federal Stafford loan limits available to independent students,” Kantrowitz said. “Some families prefer this, even though the limits are only $4,000 or $5,000 a year higher.”

If, as a parent, you’re concerned you don’t have good enough credit to qualify for a federal or private loan, you may wish to apply for a parent PLUS loan to see if you can help your child get this extra access to federal funds.

However, if you have strong credit and can qualify for a better rate than the one on the PLUS loan, a private student loan might be the better option for you and your family.

Rebecca Safier contributed to this article.

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