As a parent, you’ve always done everything you can to help your child succeed.
Now that they’re heading off to college, you’re in the market for a student loan. You want to support your child as they pursue their education, but you also want to keep costs down.
How can you find a student loan that won’t break the bank? In this article, we’ll compare SoFi Parent Loans, which are private, with Parent PLUS Loans, a type of federal loan offered through the U.S. Department of Education (DOE).
By learning about each type, you can determine which student loan would be better suited to your family’s situation.
SoFi vs. Parent PLUS Loans: A quick comparison
SoFi Parent Loans and Parent PLUS Loans are both designed for parents whose children are in college. But since one is private and the other is federal, their similarities largely end there.
To help you compare SoFi versus Parent PLUS Loans, this chart gives an overview of their terms, eligibility requirements, repayment options, and application processes.
|SoFi Parent Loans||Parent PLUS Loans|
|Eligibility requirements||Your child is enrolled full time in college; you’re a U.S. citizen or permanent resident||Your child is enrolled at least half time in college; you’re a U.S. citizen or eligible non-citizen|
|Application process||Apply for an instant rate quote with a pre-approval application (soft credit pull); submit full application when you choose a loan (hard credit pull)||Submit the FAFSA; work with your college financial aid office to request a Parent PLUS Loan|
|Credit requirements||SoFi considers your credit score, debt-to-income ratio, income, career, education, and other factors. Another parent or guardian can cosign||You can’t have an adverse credit history. If you do, you can apply with an endorser who has strong credit|
|Borrowing limits||$5,000 minimum, up to the total cost of attendance||Up to the total cost of attendance, minus any other financial aid received|
|Rates||Fixed APRs from 3.90% – 7.80%; variable APRs from 2.47% – 6.99%||Fixed interest rate of 7.00% for the 2017-2018 school year|
|Origination fees||None||4.264 percent for the 2017-2018 school year|
|When repayment begins||Immediate repayment||Immediate repayment, unless you request a deferment while your child is in school and for up to six months after they graduate|
|Repayment options||Five- or 10-year terms||Standard Repayment Plan (10 years); Graduated Repayment Plan (10 years); Extended Repayment Plan (25 years); Income-Contingent Repayment, if you consolidate first (25 years)|
Now that you’ve got an initial sense of how SoFi Parent Loans compare to Parent PLUS Loans, let’s take a closer look at the most important differences.
1. SoFi Parent Loans could have lower interest rates
There are lots of factors that go into choosing a loan, including eligibility criteria and repayment options. But if your priority is saving money, take a close look at interest rates.
All Parent PLUS Loans come with a fixed rate of 7.00%. SoFi student loans for parents, however, come with fixed rates between 3.90% – 7.80% and variable rates between 2.47% – 6.99%.
Depending on your credit, income, and other factors, you could snag a rate on a SoFi Parent Loan that’s much lower than the 7.00% you’d get with a Parent PLUS Loan. Reducing your interest could save you a good deal of money over the long run.
Since SoFi offers an easy pre-application online, it’s worth it to check your rates. This preliminary rate quote won’t affect your credit score, and you’ll see what rate you could be eligible for.
If it’s a lot lower than the one you’d have on a Parent PLUS Loan, it could be worth going with SoFi.
2. SoFi could save you money on fees
Besides potentially giving you a lower interest rate, SoFi also saves you money on origination fees; it doesn’t charge any fees for disbursing the loan.
Parent PLUS Loans, on the other hand, come with a 4.264 percent origination fee. If you borrowed $20,000, you’d be charged a fee of about $850 once it was disbursed.
If you’re only taking out a small loan, this origination fee probably won’t break the bank. But if you’re taking out a large amount, it significantly increases your cost of borrowing.
3. Parent PLUS Loans have more flexible repayment plans
SoFi Parent Loans have the potential to save you money, but they don’t come with as many repayment options. With SoFi, you must begin repaying the loan within 30 to 45 days of disbursement. Plus, you can only choose between a five- or 10-year repayment term.
Parent PLUS Loans, on the other hand, have a lot more options. First, you can request deferment of your loan while your child is in school. With deferment, you won’t have to start repaying the loan until six months after they graduate. (Note that interest will continue to accrue, even while your payments are paused.)
Besides deferment, you can also choose from a variety of repayment plans. The Standard Repayment Plan, for instance, gives you fixed monthly payments over 10 years. The Graduated Plan also spans 10 years, but payments start small and increase over time.
If your payments are too burdensome, you can opt for the Extended Repayment Plan, which lowers your monthly bills by spreading them out over 25 years. Finally, if you consolidate your Parent PLUS Loans you can request Income-Contingent Repayment, which caps your bills at 20 percent of your discretionary income.
These plans can be a lifesaver if you’re struggling to make your monthly payments. They offer a way to reduce your monthly bills while avoiding student loan default.
If you’re concerned about your ability to pay back the loan, a Parent PLUS Loan likely has more options than a SoFi Parent Loan.
4. It could be easier to qualify for a Parent PLUS Loan, but SoFi’s application is more straightforward
When comparing SoFi versus Parent PLUS Loans, you might also consider the qualification process. As a private lender, SoFi’s eligibility criteria is more stringent than the DOE’s.
When you apply for SoFi Parent Loans, SoFi reviews your credit history, income, and other debts. Unlike some other lenders, SoFi takes a more holistic approach to your finances, taking your career and education into account.
Although it doesn’t advertise a strict minimum, you’ll likely need a decent credit score and steady income to qualify for the best rates.
Parent PLUS Loans, on the other hand, only state that you can’t have an adverse credit history. In other words, you can’t have derogatory marks on your credit report, such as unpaid debts or loan defaults. If you do, you could still qualify by applying with a creditworthy endorser.
Although it might be harder to qualify for a SoFi Parent Loan, the application process itself is easy. As an innovator in the online lending space, SoFi lives up to its reputation with a user-friendly website.
It’s easy to get a rate quote, and filling out a full application is painless as well. That’s not to say applying for a Parent PLUS Loan is difficult, but the process can vary depending on where your child goes to college.
Shop around to find the right parent loan for you
For college students, federal student loans typically have better terms than private ones. But when it comes to parent borrowing, this isn’t necessarily the case.
Because Parent PLUS Loans come with relatively high interest rates and origination fees, they might cost you more than a private student loan, such as SoFi student loans for parents.
But be mindful that private student loans aren’t as flexible if you run into economic hardship. If you’re worried about repayment, a Parent PLUS Loan could be a safer bet.
Besides learning about the different terms and conditions, use a student loan repayment calculator to estimate the long-term costs of borrowing.
That way, you’ll have a clear sense of the costs of borrowing — and you’ll be armed with a foolproof plan for paying back your debt.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust 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.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB) or Turnstile Capital Management, LLC (TCM), which are not affiliated entities. Certain restrictions and limitations may apply. Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. All loan products may not be available in certain jurisdictions. Other terms and conditions apply. Ascent is a federally registered trademark of TCM and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* 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.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.69% – 10.94%1||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|3.97% – 12.97%3||Undergraduate and Graduate||Visit Ascent|
|4.34% – 12.99%2||Undergraduate and Graduate||Visit Discover|
|4.12% – 10.98%*,4||Undergraduate and Graduate||Visit SallieMae|
|5.03% – 11.23%5||Undergraduate and Graduate||Visit PNC|
|4.00% – 13.00%6||Undergraduate and Graduate||Visit SunTrust|
|4.72% – 9.81%7||Undergraduate and Graduate||Visit LendKey|
|3.72% – 9.68%8||Undergraduate, Graduate, and Parents||Visit CommonBond|
|4.19% – 12.06%9||Undergraduate, Graduate, and Parents||Visit Citizens|