4 Crucial Facts About Interest Rates on Parent PLUS Loans

Christy Rakoczy
April 27, 2020April 27, 2020Student Loan RepaymentFeatured, Parent Loans, Paying for College, Student Loans852Christy RakoczySEO
Updated on  April 27, 2020
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Private Student Loan rates starting at 0.94% APR

0.94% to 12.99% 1
VARIABLE APR

Visit Lender

2.00% to 12.35% 2
VARIABLE APR

Visit Lender

0.94% to 11.44% 3
VARIABLE APR

Visit Lender

1Important Disclosures for College Ave.

College Ave Disclosures

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.
 
This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. This informational repayment example uses typical loan terms for a first year graduate student borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.10% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $141.66 while in the repayment period, for a total amount of payments of $16,699.21. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 7/1/2022. 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.



2Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

3Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.49% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.19% APR to 10.14% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance 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.



  • Variable APR
Learn more about private student loan lenders.

Comparing student loan interest rates is important for parents who are helping fund their child’s college education. While the parent PLUS loan interest rate is 7.08% for the 2019-2020 year, parents might be able to find a lower rate on a parent loan from a private lender.

Since interest rates impact both your loan payments and the total cost of your loan, it’s crucial to research all your borrowing options. Read on to see how interest rates on parent student loans compare.

1. The parent PLUS loan interest rate is higher than the rate on 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 undergraduate and graduate students have lower interest rates than parent PLUS loans.

How much interest is on a parent PLUS loan as compared to other federal loans? Use the chart below to compare.

Interest rates for 2019-2020 Who can qualify for the loan
Direct Subsidized Loans 5.05% Undergraduate students
Direct Unsubsidized Loans for undergraduates 5.05% Undergraduate students
Direct Unsubsidized Loans for graduate students 6.6% Graduate or professionals students
PLUS loans 7.08% 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 interest rates are fixed

While the parent PLUS loan interest rate is the highest within 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 parent PLUS loan interest rates and costs, it’s crucial to consider fees, as well. For parent PLUS loans disbursed after Oct. 1, 2019 and before Oct. 1, 2020, there’s a 4.236% 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 offers, take fees into account to understand the total cost of each loan.

4. The interest rate on federal Direct parent PLUS loans are always the same

Because parent PLUS loans have relatively 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, SoFi is offering variable APRs from 1.89% to 11.98% and fixed APRs from 3.75% to 13.30% 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. Some lenders make this easy with an instant online preapproval based on a soft credit check. If you submit a full application, you’ll likely be subject to a hard credit inquiry, which could impact your credit.

Why it’s important to understand parent PLUS 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.

Rebecca Safier contributed to this article.

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How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

Variable APRDegrees That QualifyMore Info
0.94% – 12.99%1 Undergraduate
Graduate

Visit College Ave

2.00% – 12.35%2 Undergraduate
Graduate

Visit SallieMae

0.94% – 11.44%3 Undergraduate
Graduate

Visit Earnest

0.98% – 11.90%4 Undergraduate
Graduate

Visit Ascent

1.69% – 11.98%5 Undergraduate
Graduate

Visit SoFi

1.86% – 9.39%6 Undergraduate
Graduate

VISIT CITIZENS

Learn more about private student loan lenders.
Learn more about private student loan lenders.
1Important Disclosures for College Ave.

College Ave Disclosures

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.
 
This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. This informational repayment example uses typical loan terms for a first year graduate student borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.10% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $141.66 while in the repayment period, for a total amount of payments of $16,699.21. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 7/1/2022. 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.



2Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

3Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.49% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.19% APR to 10.14% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance 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.



4Important Disclosures for Ascent Student Loans.

Ascent Student Loans Disclosures

Ascent loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: AscentFunding.com/Ts&Cs

Rates are effective as of 07/01/2022 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes income-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates.

1% Cash Back Graduation Reward subject to terms and conditions, please visit AscentFunding.com/Cashback. Cosigned Credit-Based Loan student borrowers must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs are available for the most creditworthy applicants and may require a cosigner.



5Important Disclosures for SoFi.

Sofi Disclosures

UNDERGRADUATE LOANS: Fixed rates from 3.75% to 13.30% annual percentage rate (“APR”) (with autopay), variable rates from 1.89% to 11.98 % APR (with autopay). GRADUATE LOANS: Fixed rates from 4.75% to 13.30% APR (with autopay), variable rates from 2.59% to 11.98% APR (with autopay). PARENT LOANS: Fixed rates from 4.48% to 13.55% APR (with autopay), variable rates from 1.69% to 11.98% 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 06/17/2022.



6Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  • Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of July 1, 2022, the 30-day average SOFR index is 1.02%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the prime rate plus 9.00%.
  • Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.
  • Lowest Rate Disclosure: Lowest rates are only available for the most creditworthy applicants, require a 5-year repayment term, immediate repayment, a graduate or medical degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.