As a parent, it’s common to want to help your child with their college tuition and fees so they don’t have to pay for it all themselves. When it comes to paying for college, parents typically use their income and savings to pay for 30% of their child’s education costs and borrow enough money to cover an additional 10% of the expense.
There are several options for parent student loans, including federal loans and private student loans. Here’s what you need to know about parent student loans and how to choose the best one for your needs.
If you’re shopping around for parent loans for college students, your two choices are parent PLUS loans and private student loans.
1. Federal parent PLUS loans
Parent PLUS loans are part of the federal direct PLUS loan program. They are only available to biological or adoptive parents of dependent undergraduate students enrolled at least half time at an eligible school.
Unlike some other federal student loans that have caps on how much you can borrow per year, parent PLUS loan limits don’t exist. You can borrow up to the total cost of attendance at your child’s school, minus the other financial aid they receive.
The following rates and fees apply on parent PLUS loans as of 2020:
- Interest rate: 7.08% for loans disbursed on or after July 1, 2019, and before July 1, 2020
- Origination fee: 4.236% for loans disbursed on or after Oct. 1, 2019, and before Oct. 1, 2020
The parent PLUS interest rate is fixed, meaning it stays the same for the length of the loan. Your payment will stay the same, too.
If approved for a parent PLUS loan, payments are due as soon as it’s disbursed, unless you opt to defer the loan until after your child graduates, leaves school or drops below half-time enrollment. Under the default standard repayment plan, you’ll have 10 years to repay your loan.
2. Private student loans
While parent PLUS loans are federally backed by the U.S. Department of Education, private parent student loans are offered by individual banks and online lenders.
Terms and eligibility can vary widely by lender. Lenders will generally review your income and credit when they look at your application to determine whether to offer you a loan. Depending on your creditworthiness, you could qualify for a loan with a lower interest rate than you’d get with a parent PLUS loan. And private student loans for parents usually don’t have origination fees, helping you save money.
Private loans usually have different repayment options, allowing you to choose repayment terms ranging from five to 20 years. The longer repayment term can give you a more affordable monthly payment and more breathing room in your budget. Private lenders typically list both variable and fixed interest rates:
- Fixed-rate loans have the same interest rate for the life of the loan
- Variable-rate loans usually start off with a low interest rate, but — over time — the rate can change, causing your payment to fluctuate
Some borrowers opt for a variable-rate loan if they plan on paying off a loan early so they can take advantage of the initial lower rate.
The requirements for federal parent PLUS loans are often easier to meet than the criteria for private parent student loans. However, the lending requirements for private loans differ depending on the lender with which you’re working, so it’s a good idea to shop around for various lenders.
Parent PLUS loan eligibility requirements
To qualify for a parent PLUS loan, you must meet the following criteria:
- You’re a U.S. citizen or eligible noncitizen
- You’re the biological or adoptive parent of an undergraduate dependent student enrolled at least half time at an eligible school
- You don’t have an adverse credit history
While most federal loans don’t require a credit check, parent PLUS loans do. The U.S. Department of Education defines an adverse credit history as having one of the following on your credit report in the past five years:
- Default determination
- Discharge of debt in bankruptcy
- Tax lien
- Wage garnishment
- Write-off of federal student loan debt
You also can’t have one or more debt accounts with a total combined outstanding balance greater than $2,085 that are delinquent by 90 days or more, or that has been placed in collections or charged off during the two years before the date of the credit report.
If you do have an adverse credit history and are denied for a loan, there may be two ways you can regain parent PLUS loan eligibility:
- Use an endorser: If you have a friend or relative with good credit, ask them to be an endorser. The endorser acts as a guarantor on the loan. If you don’t make the payments, the endorser is instead responsible for paying them.
- Document extenuating circumstances: If there’s an extenuating circumstance, such as a timing issue regarding the foreclosure listed on your credit report, you can submit documentation and request an appeal.
If you qualify for a loan with either of these options, you’ll also have to undergo credit counseling for PLUS loan borrowers.
Private parent student loan eligibility requirements
For private student loan lenders, your credit score is a major factor in their decision in evaluating your application.
In general, you’ll need to have good to excellent credit. Lenders will also want to see that you have a low debt-to-income (DTI) ratio, or a low amount of debt relative to how much money you have coming in each month. Lenders often have minimum income requirements as well. If your credit score or income doesn’t meet their criteria, you may need a cosigner to qualify for a loan.
The application process is quite different for parent PLUS loans than it is for private parent student loans. Parent PLUS loans require your child to complete the Free Application for Federal Student Aid (FAFSA) before you can apply, while you’ll have to submit separate applications for private loans.
Parent PLUS loan application process
The application process for parent PLUS loans has two steps:
1. Fill out the FAFSA
Before you can apply for a parent PLUS loan, your child must complete and submit the FAFSA. Your child may need your help to fill out the application since you have to enter your household income and other financial information.
2. Apply for the parent PLUS loan
Once the FAFSA is submitted, you can proceed with the parent PLUS Loan application. In most cases, you can apply for parent PLUS loans online. However, some schools have a different process.
When you go to the Federal Student Aid website to fill out the application and select your child’s school, the site will notify you if the college has a different application process. If that happens, contact the school’s financial aid office and ask for next steps.
The parent PLUS loan deadline can vary by school, so check with the financial aid office to find out when applications need to be submitted.
Private parent student loan application process
Each private parent student loan lender has its own application, but you’ll generally be able to apply online in just a few minutes.
1. Gather necessary information
Lenders will ask you for basic information about yourself, including your name, address, Social Security number, employer name and address, and income. You may also be asked to submit the following documentation:
- Government-issued identification, such as a driver’s license
- Recent pay stub
- W-2 form from most recent tax year
2. Compare loan offers
It’s always a good idea to shop around and compare offers from multiple lenders to ensure you get your best rates. When looking at your options, consider the following key factors:
- Interest rate
- Interest rate type
- Length of loan term
- Monthly payment
3. Submit your application
Once you find a lender and loan terms that work for you, you can complete the full application. The lender will review the application and will perform a hard credit inquiry, which can affect your credit score. You’ll usually receive a decision quickly, but the lender may reach out to you if they need additional information or documentation.
Parent PLUS loans and private student loans also have different repayment options.
Parent PLUS loans
With federal parent PLUS loans, there are five repayment options, including one that offers parent PLUS loan forgiveness:
- Standard repayment: Under a standard repayment plan, your loans are paid off within 10 years. You have a fixed monthly payment for the duration of the loan.
- Graduated repayment: With graduated repayment, your payments start out low. Every two years, they gradually increase, but your loans are still paid off within 10 years.
- Extended repayment: When you sign up for extended repayment, your repayment term is extended to 25 years. Your payments are either fixed or graduated.
- Income-contingent repayment: Parent PLUS loans are eligible for income-contingent repayment (ICR) if they’re consolidated with a direct consolidation loan. The repayment term is 25 years. The payment is capped at 20% of your discretionary income or what you would pay with a 12-year repayment term adjusted to your income, whichever is less.
- Public Service Loan Forgiveness: If you work for a nonprofit organization or government agency, parent PLUS loan borrowers can qualify for parent loan forgiveness through Public Service Loan Forgiveness (PSLF). To be eligible, you must consolidate your loans with a direct consolidation loan and apply for an ICR plan, then work for an eligible employer for 10 years and make 120 qualifying monthly payments.
Private student loans
Your repayment options for private parent student loans are dependent on which lender you choose. In general, your repayment terms can range from five to 20 years. Some lenders require you to start making payments while your child is still in school, while others allow you to defer payments until after your child graduates or leaves college.
Private student loans aren’t eligible for loan forgiveness, so you can’t qualify for PSLF even if you work for a nonprofit organization or the government.
Parent PLUS loans vs. private loans: Which are right for you?
|Parent PLUS loans||Private parent student loans|
|Pros||● Eligible for loan forgiveness
● Eligible for federal loan deferment and forbearance
|● Competitive interest rates
● Variable interest rates
● May be dischargeable if the student dies or becomes permanently disabled
|Cons||● Not dischargeable if the student is permanently disabled
● Relatively high interest rates
|● Not eligible for loan forgiveness● Limited repayment options|
If you’re not sure which loan type is best for you, there are three key differences that can help you make an informed decision.
Parent PLUS loans have the highest interest rates of all federal student loans. If you have good credit and a low DTI ratio, you may be able to qualify for a private parent student loan with a lower interest rate, helping you save money. And private student loans can come with variable rates, which may give you more options.
Private loans aren’t eligible for loan forgiveness, so if you work for a nonprofit organization or government agency, you may be better off with parent PLUS loans. By consolidating your debt with a direct consolidation loan and enrolling in an ICR plan, you can qualify for PSLF and have your loans forgiven after 10 years of working for an eligible employer and making qualifying payments.
However, you should know that few people qualify for PSLF. As of December 2018, just 262 out of over 38,000 applicants qualified for loan discharge through PSLF. You can use the federal PSLF Help Tool to assess your eligibility, find out whether your loans and employment qualify for PSLF and figure out what forms to submit.
Discharge in cases of disability
If your child becomes totally and permanently disabled, the type of loan you have will affect your options. Parent PLUS loans can only be discharged if you die, your child dies or if you — the borrower — become permanently disabled. If your child is the one who becomes disabled, your loans aren’t eligible for discharge.
Policies for private student loans vary by lender. Some private lenders, such as Sallie Mae, will discharge your parent student loans if your child becomes totally and permanently disabled, eliminating a serious financial burden and giving you some relief.
If you need help choosing a parent student loan, use our Student Loan Term Comparison Calculator to compare your options and see whether a private loan or parent PLUS loan is most cost-effective for you.
Elyssa Kirkham and Meredith Simonds contributed to this report.
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|3.99% – 14.86%1||Undergraduate|
|3.58% – 12.28%2||Undergraduate|
|4.49% – 13.82%3||Undergraduate|
|4.62% – 14.96%4||Undergraduate|
|0.00% – 23.00%5||Undergraduate|
|3.25% – 9.69%7||Undergraduate|
|* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
1 Important Disclosures for College Ave.
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
Information advertised valid as of 12/1/2022. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Interest Rate Disclosure: Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.24% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 3.83% APR to 12.53% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
Auto Pay Disclosure: You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
Loan Cost Examples: Earnest’s Loan Cost Examples: These examples provide estimates based on principal and Interest payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $118.28) and a 11.69% APR would result in a total estimated payment amount of $21,290.40. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $126.82) and a 13.03% APR would result in a total estimated payment amount of $22,827.79.
These examples provide estimates based on interest only payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $145.41) and a 11.69% APR would result in a total estimated payment amount of $26,173.03. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $156.59) and a 13.03% APR would result in a total estimated payment amount of $28,186.67. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on fixed $25 payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $169.92) and a 11.69% APR would result in a total estimated payment amount of $30,584.74. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $188.42) and a 13.03% APR would result in a total estimated payment amount of $33,915.55. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on deferred payments. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $174.79) and a 11.69% APR would result in a total estimated payment amount of $31,462.16. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $193.75) and a 13.03% APR would result in a total estimated payment amount of $34,874.28. Your actual repayment terms may vary. Other repayment options are available. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.
Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grant and work-study opportunities. 2) Next, fill out a FAFSA® form to apply for federal student loans. Federal student loans do not require a credit check or cosigner, and offer various protections if you’re struggling with payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.ed.gov.
Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.
Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.
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3 Important Disclosures for SoFi.
UNDERGRADUATE LOANS: Fixed rates from 4.99% to 14.75% annual percentage rate (“APR”) (with autopay), variable rates from 4.49% to 13.82% APR (with autopay). GRADUATE LOANS: Fixed rates from 5.25% to 14.48% APR (with autopay), variable rates from 4.99% to 13.82% APR (with autopay). PARENT LOANS: Fixed rates from 6.50% to 14.83% APR (with autopay), variable rates from 5.74% to 13.88% APR (with autopay). For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 11/14/2022.
4 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for Edly.
1. Loan Example:
About this example
The initial payment schedule is set upon receiving final terms and upon confirmation by your school of the loan amount. You may repay this loan at any time by paying an effective APR of 23%. The maximum amount you will pay is $22,500 (not including Late Fees and Returned Check Fees, if any). The maximum number of regularly scheduled payments you will make is 60. You will not pay more than 23% APR. No payment is required if your gross earned income is below $30,000 annually or if you lose your job and cannot find employment.
2. Edly Student IBR Loans are unsecured personal student loans issued by FinWise Bank, a Utah chartered commercial bank, member FDIC. All loans are subject to eligibility criteria and review of creditworthiness and history. Terms and conditions apply.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
7 Important Disclosures for Funding U.
Funding U Disclosures
Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.