4 Crucial Facts About Interest Rates on Parent PLUS Loans

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

student loan interest rates
Logo

We’ve got your back! Student Loan Hero is a completely free website 100% focused on helping student loan borrowers get the answers they need. Read more

How do we make money? It’s actually pretty simple. If you choose to check out and become a customer of any of the loan providers featured on our site, we get compensated for sending you their way. This helps pay for our amazing staff of writers (many of which are paying back student loans of their own!).

Bottom line: We’re here for you. So please learn all you can, email us with any questions, and feel free to visit or not visit any of the loan providers on our site. Read less

Comparing student loan interest rates is important for parents who are helping fund their child’s college education. Parents who borrow loans to help their children pay for school will typically choose between Parent PLUS Loans and private student loans. Interest rates can vary widely between these products.

Interest rates impact both your loan payments and the total cost of the loan. Conducting careful research now could save you thousands of dollars later. Read on to see how interest rates on parent student loans compare.

1. Parent PLUS Loans charge more interest than other federal loans

One of the first things to be aware of when researching student loan interest rates is that Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduates and postgrads have lower interest rates than Parent PLUS Loans.

Interest rates for 2017-2018 Who can qualify for the loan
Direct Subsidized Loans 4.45% Undergraduate students
Direct Unsubsidized Loans for undergraduates 4.45% Undergraduate students
Direct Unsubsidized Loans for graduate students 6.00% Graduate or professionals students
PLUS Loans 7.00% Parents and graduate students

Lower interest rates often mean your monthly payments are lower. They can also mean more of each payment goes toward the principal balance. This can result in a lower cost to repay the loan.

However, as the table above shows, most of the loan options with the lowest interest rates aren’t available to parents.

Because the lowest-rate loans from the Department of Education are only available to students, parents should make sure their children have borrowed as much as they can on their own.

2. Parent PLUS Loan rates are fixed

While Parent PLUS Loans have some of the highest interest rates of the federal loan program, there’s some good news: Parent PLUS Loans have fixed interest rates. This means the interest rate will never change over the life of the loan.

Although many private lenders also offer fixed-rate loans for parents, they might also offer variable-rate loans. While the initial starting interest rate is often lower on a variable-rate loan than a fixed-rate loan, that rate can rise over time. That means your monthly loan payment could increase, making it more difficult to budget or create a payoff plan.

3. Parent PLUS Loans charge origination fees

When considering the cost of Parent PLUS Loans, it’s crucial to consider fees. For Parent PLUS Loans disbursed before Oct. 1, 2018, there’s a 4.264% origination fee.

The origination fee is taken out of the Parent PLUS Loan before being disbursed. That means the amount of money disbursed to the school will be less than what you borrowed.

When you compare Parent PLUS Loans with other loan offerings, take fees into account to understand the total cost of each loan.

4. Parent PLUS Loan rates are always the same

Because Parent PLUS Loans have such high interest rates, parents should consider whether private loans are a better option. Private loans for parents are available from a variety of private loan lenders, including Citizens Bank and SoFi.

When you research private loans, you’ll typically see both variable- and fixed-rate loan offerings. You’ll also find that private lenders show potential borrowers a range of interest rates. For example, as of February 2018, SoFi is offering variable rates from 4.02% to 7.45% and fixed rates from 4.25% to 8.00% when you enroll in autopay.

Private student loan companies provide a range because the interest rate for each loan is determined by different factors, including the borrower’s credit score, financial history, and income.

When parents apply for Parent PLUS Loans, on the other hand, the interest rate is the same for all borrowers, regardless of their specific situation. While parents with an adverse credit history can be denied Parent PLUS Loans, those who are approved will all pay the same rate.

Parents who want to compare private student loans and PLUS Loans will need to submit information to lenders to see rates.

Why it’s important to understand student loan interest rates

Taking the time to understand your student loan options is important. You don’t want to pay more than you need to for your child’s education.

Finding a loan at a lower rate could save you thousands of dollars over the life of the loan. Just be sure other loan terms, including your repayment options, are reasonable before you settle on a loan.

Interested in refinancing your Parent PLUS loans?

Here are the top 6 lenders of 2018!
LenderRates (APR) 
Check out the testimonials and our in-depth reviews!
2.57% – 6.32%Visit Earnest
2.80% – 7.02%Visit Laurel Road
2.51% – 7.80%Visit SoFi
2.57% – 6.65%Visit CommonBond
2.75% – 8.69%Visit Citizens Bank
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.